Saturday, May 2, 2009

NYT on the Shocking Chrysler/Obama Bailout Proposal

Even NYT seems to be shocked by the terms of the proposed Obama restructuring plan that ignores rule of law and shovels everything to the UAW:

Labor unions usually dread bankruptcy, and for good reason. Their pay, benefits and pensions typically suffer significant cuts, as airline and steel workers can attest.

But for the United Automobile Workers union, Chrysler’s Chapter 11 case, which began in New York on Friday, could turn out to be — if the company survives and thrives — the Cadillac of bankruptcies...

“I’m very comfortable,” Ron Gettelfinger, the U.A.W.’s president, said Friday on National Public Radio...

“This is extraordinary, truly extraordinary,” said Mary Jo Dowd, a partner in the financial and bankruptcy restructuring practice at Arent Fox in Washington. “I never would have thought a year ago that this would occur. These are truly unusual times.”

Asked if he could recall any other union that fared as well, David L. Gregory, a labor law professor at St. John’s University, replied: “Nobody’s even close.”

But the U.A.W. is also no ordinary union. Even though its membership at the Detroit automakers has shrunk to a quarter of its size in 1990, it still maintains tremendous influence in Washington, partly because of its heavy political contributions...
The NYT suggests, however, that the UAW will face a tightrope if Chrysler fails after restructuring.

Not for a minute. Obama will pump money into his get out the vote UAW election machine whenever it needs it.

1 comment:

  1. We've all heard of "the Greenspan put", the moral hazard impact this had on Wall Street. Some folks even think this stuff had more than a little impact on the economic crisis du jour.

    Are we seeing a whole new frontier for moral hazard being pioneered here? Collective bargaining has moral hazards when federal bailouts are available to protect employee benefits. Labor unions will have less incentive to take the financial solvency of their bargaining partners into account. The net result of all this is likely to be more bankrupt businesses.

    Exactly how this is supposed to help workers is not exactly clear.