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post #1 of 14 Old 05-02-2009, 06:22 PM Thread Starter
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Question UAW's 55% stake in Jeep and what it means

Great detail about what the UAW has, No doubt Obama just made unions that much stronger.....

http://www.mail.com/layoutengine.asp...iness&pageid=1

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UAW wins big Chrysler stake but can't run company

AP - Saturday, May 02, 2009 5:46:55 PM

By TOM KRISHER and DAVE CARPENTER

APThe United Auto Workers union would appear to be the big winner in the Chrysler bankruptcy saga, having exercised its considerable political muscle to win a 55 percent stake in the country's third-largest automaker.

But when you consider the 55 percent is in a company that lost $16.8 billion last year and has seen its sales drop by half, the victory seems less impressive. Especially since the union's stock must necessarily be converted at some point to cash to pay billions of dollars in retiree health care bills over the next 25 years.

Plus, the union's control in the boardroom will be limited. Despite the large stake, it gets only

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one seat on a nine-member board that will govern a new Chrysler-Fiat joint venture.

Yes, the union could still come out the winner at Chrysler and at General Motors Corp., which has offered the UAW a 39 percent stake as part of its own reorganization plan. But that depends on the iffy prospect of the companies making money again and their stock values sharply rising.

"I think it's a whole lot weaker than it appears," said Gerald Meyers, a University of Michigan business professor and former CEO of American Motors Corp. "I would say the UAW wouldn't want to get into the speculative game of the stock market. That's not reassuring to retirees."

Unions have in the past traded an ownership stake in a struggling company for wage cuts or other money-saving steps. For the most part the deals, such as an employee stock ownership plan at UAL Corp., parent of United Airlines, have worked well at first, only to fall apart when economic times grew tough, with labor and management fighting as profits declined.

The UAW started making concessions during 2007 contract negotiations and that helped in negotiating the stakes they stand to gain now. At the time, both GM and Chrysler had huge labor cost disadvantages compared with Japanese automakers, mainly because they have far more retirees and had agreed to pay their health care bills.

For GM, the health care tab is projected to total $46.7 billion over the lives of about 350,000 retirees and spouses. At Chrysler, it's $10.9 billion for around 82,000 retirees.

So to unload the costs, the companies persuaded a reluctant UAW to take billions in cash to set up trust funds called voluntary employees beneficiary associations, or VEBAs, to pay the bills starting next year.

But the U.S. auto market went bad and both automakers ran out of cash. Enter government financing and the Obama administration, which engineered the Chrysler-UAW deal. Chrysler has now formed an alliance with Fiat, and the government will finance what it hopes will be a quick Chrysler bankruptcy. Chrysler plans to close five more factories and shed thousands more workers as it slims down and resets to build Fiat-designed fuel-efficient cars in North America.
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The UAW spent nearly $5 million in independent expenditures to promote Obama's campaign, according to the nonpartisan Center for Responsive Politics, and some Chrysler debtholders contend that the union was unfairly rewarded for that support. Secured creditors were offered roughly 30 cents on the dollar for $6.9 billion in debt. A few balked and the deal fell apart late Wednesday, triggering Thursday's bankruptcy filing.

The UAW's reward, though, could turn out to be punishment if the stock price doesn't rise.

"What's happening at Chrysler and GM is not employee ownership in any recognizable way," said Corey Rosen, founder and executive
director of the nonprofit National Center for Employee Ownership. "The employees don't own any part of Chrysler or GM, it's the health trust, and they're going to sell that stock as soon as they can. It's more like somebody saying 'I can't pay the money I owe you, so take some stock and you can sell it.'"

That's exactly what the union intends to do, its president Ron Gettelfinger said Friday in an interview with National Public Radio.

"The VEBA's going to be stressed in order to pay the benefits. So what we will need to do ... is as soon as we possibly can, to start selling these shares," he said.

Fiat is a likely buyer for at least part of the UAW shares, should they gain value. Under its deal with Chrysler, the Italian automaker takes an initial 20 percent stake in exchange for small-car technology. That can rise to 35 percent as goals are met, and Fiat has options to bring its stake up to 51 percent.

Even with the stock, the union won't have much say in the Chrysler boardroom. The trust gets just the one board seat, and it has to vote its shares "in accordance with the direction of the independent directors on the Chrysler board," according to a summary of the UAW's contract concessions.

Owning 55 percent of a company doesn't mean you're managing or even significantly influencing it. Three big employee groups at Chicago-based UAL Corp. agreed to wage cuts and work rule changes in 1994 in exchange for 55 percent of UAL's stock and board seats.

It worked for a year or so. Management introduced task force teams and invited employees into strategy sessions aimed at lowering costs. But the sense of partnership soon unraveled as the employees learned that stock ownership didn't translate to real power or even an ability to sway the board. The employee stock ownership program was eventually eliminated during UAL's Chapter 11 restructuring, in 2003.
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Employees of Tribune Co. also got majority ownership as part of the 2007 deal that made multibillionaire investor Sam Zell chairman and CEO. But they also shouldered a good deal of the risk -- without control, or even board representation. The future of Tribune's ESOP is highly tenuous with the Chicago company now in bankruptcy court.

The UAW for years had a seat on the boards of Chrysler and DaimlerChrysler AG -- Chrysler's previous owner -- but had little to show for it, said Harry Katz, dean of the Cornell University School of Industrial and Labor Relations. "That never connected down to the shop floor," he said.

Unlike European unions, the UAW has shied away from boardroom power plays, instead exercising its will at the bargaining table, he said.

Katz said the UAW, through the stock it will get, has gained power relative to management, but it doesn't mean as much when there are no profits to divvy up.

The union was able to preserve base wages and rich health benefits, which is remarkable even though it had to make other concessions, Katz said. He noted that workers represented by the UAW fared far better than nonunion employees at other companies that have entered bankruptcy protection, such as defunct Houston-based energy company Enron Corp.

------

Dave Carpenter reported from Chicago. Associated Press Writer Sam Hananel in Washington contributed to this report.

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post #2 of 14 Old 05-02-2009, 07:30 PM
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nice to see the actual cause of the demise of these companies now has a large stake in one, unions are a leech that need to be burned off. im sure one of the first things they will vote in is something like a one day work week and double their salary and benefit packages. sure would be nice if my tax dollars were not going towards them, they got more than enough when I bought the cummins and then the jeep.
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post #3 of 14 Old 05-04-2009, 03:57 AM
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I suppose at some point in the future they will start jacking their hourly rate and benefits up. But this time Fiat will probably send their boy "Vito" around to straighten things up. Of course the selection of Jeep colors will change with the addition of Marinara Red, Garlic White and Purple Wine. And don't forget the tires........we know how they'll sound when they go flat.

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post #4 of 14 Old 05-04-2009, 06:03 AM
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I love the ignorant line of thinking stating that having 55% really doesn't mean as much as it sounds because the company might not do well......

well, let's look at that. They had no stake at all to begin with, will lose their jobs entirely if it fails anyway, so exactly how are they in any peril?

I think it's interesting the twist is being put that they seem to be taking a risk by owning 55% of a company the .gov has said it will not let fail, but the people who fronted the company and kept it going are asked to take $0.29 on the $1.00 just for investing in the company to begin with..... people who had a secured position.

the amount and the how that this whole Treasury deal from the end of last year continuing this year amounts to screwing those that were responsible and did what they were supposed to and simply awarding those that screwed the pooch
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post #5 of 14 Old 05-04-2009, 06:47 AM
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amen... I was a homebuilding construction manager for ryland homes, the media and the government wants everyone to feel sorry for the homeowners for supposedly getting screwed by the mortgage companies for giving them a a r m loan when they were explained what it was and had to sign documents that they understood the stipulations of their loans, all they were doing was gambling that inflation would drive up the value of their homes and they planned to sell them before the a r m ballooned. as for the mortgage company's, they knew what they were doing and knew the market would bust real soon so when it did happen they get a government bail out? and to top it off they were not forced to reconcile all of their loans, wtf? it was funny how all these people could afford these loans before their rates went up, as for the other group of investor homeowners that bought expecting inflation would bring them riches, the market tanks and they walk away, give me a break, america has become blind and stupid thanks to the media and the politicions screwing us americans out of us being allowed to vote for things that our mone and government does, now we blindly vote people in that we feel have our best interest at heart, yeah right. our founding fathers knew this would happen and is the reason that they stated that being a politicion should only be a part time job and they should have a separate career or otherwise they will loose the sense of reality of the republic, our nation. well now look, they seem to have hit the nail on the head there.
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post #6 of 14 Old 05-04-2009, 10:17 AM
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Just heard on fox news something interesting. one of their guest commented on the fact that if this was a "real" bankruptcy, then no one would know ahead of the fact what anyone group is to gain from the results. Obama guaranteed the union 55% and other benefits prior to the bankruptcy and threatened the investors who didn't go along with his offer. one law firm has made the accusation public and a representative will be their guest either today or tomorrrow. can't wait to see what the bankruptcy judge has to say about the pretrial deals.

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post #7 of 14 Old 05-05-2009, 11:23 AM
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The non TARP lenders are fighting back.
http://www.bloomberg.com/apps/news?p...B5A&refer=news

May 5 (Bloomberg) -- Chrysler LLC’s plan to auction most of its assets to an entity managed by Fiat SpA is unfair because it prevents creditors from using their claims to make a non-cash bid, a group of secured lenders told a bankruptcy judge.

The group, calling itself Chrysler’s non-TARP lenders, in reference to the Troubled Assets Relief Program, said the proposed auction chills bids from other parties, and would prevent a so-called “credit bid” from its group.

Under a credit bid, parties use debt to buy a company. The group also seeks to block the proposed sale to an alliance led by Fiat, as well as a request by the U.S. automaker for approval of a $4.5 billion Treasury loan to finance the reorganization.

“The proposed sale is not an arms’ length bargain but rather is tainted by government domination and control,” the group said in court documents. They said in a footnote that a requirement that any competing bid put down 10 percent of the purchase price in cash “appears designed specifically,” to prevent the non-TARP group from making a credit bid for the company using the full amount of their secured claim.

The group also objected to rules that would require all competing bids be subject to the same terms as the proposed transaction with the government and Fiat. Because bids need to be made in a week under the proposed timeline, there isn’t enough time for parties to make due diligence required for a competing bid.

Death Threats

The non-TARP group asked U.S. Bankruptcy Judge Arthur Gonzalez not to reveal the identities of its members, even after the judge asked yesterday that they do so. A lawyer for the group, Thomas Lauria, has said members who have been identified have received death threats.

In their request, filed today in Manhattan court, they said some members joined the group only with the promise of anonymity, and would leave if they were forced to reveal their identities.

“Denial of this relief will force several of these lenders to surrender their legal rights and agree to the government’s illegal plan,” lawyers for the group wrote. The request alleges that the U.S. government is subverting federal bankruptcy law through forcing lenders to agree to a reorganization that repays unsecured creditors ahead of some secured creditors.

A call to one of Lauria’s partners, Gerard Uzzi, wasn’t immediately returned.

Secured Lenders

The group has pitted itself against secured lenders that agreed to the Fiat deal, including JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley and Goldman Sachs Group Inc., saying they had conflicts of interest because they had also accepted TARP funds, the group said.

The secured lenders that back the sale have about 90 percent of a $6.9 billion Chrysler loan that the government wants to slash to $2 billion, according to Peter Pantaleo, an attorney for JPMorgan Chase.

The four largest banks hold $4.83 billion of the debt, or about 70 percent, while the smaller lenders that have signed onto the cash offer have $1.41 billion and the dissenting group holds $666 million, a person familiar with the holdings said. lenders would be revealed “promptly.”

Some of the dissenting lenders have already been identified, including OppenheimerFunds Inc., Perella Weinberg Capital Management LP’s Xerion hedge fund and Stairway Capital Advisors. Perella withdrew its objection last week.

The new company would be owned by the United Auto Workers, Fiat, the U.S. Treasury and the Canadian government, Chrysler has said. Fiat’s 20 percent stake could be increased to 35 percent if the company meets certain milestones, the company has said.

Bankrupt companies in which lenders have proposed credit bids as a way to reorganize include Lenox Group Inc., a china and gift maker. A credit bid was also used in the bankruptcy of the Tropicana casino in Atlantic City, New Jersey. Investor Carl Icahn and other investors made a $200 million credit bid for the company, subject to competing offers.

The case is In re. Chrysler LLC, 09-50002, U.S. Bankruptcy Court, Southern District of New York (Manhattan)
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post #8 of 14 Old 05-05-2009, 12:38 PM
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did ya'll hear obama and tiny tim geitner talking about closing the loopholes for offshore accounts this morning. tiny tim says yeah we we're going after the people who won't pay their taxes. EXFAWKINGCUSE !! The epitomy of hipocrosy. and the latest is if you have money in your 401k which is invested in certain funds or realestate you won't be able to withdraw it. WTF America, WTF!

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post #9 of 14 Old 05-05-2009, 01:53 PM
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did ya'll hear obama and tiny tim geitner talking about closing the loopholes for offshore accounts this morning. tiny tim says yeah we we're going after the people who won't pay their taxes. EXFAWKINGCUSE !! The epitomy of hipocrosy. and the latest is if you have money in your 401k which is invested in certain funds or realestate you won't be able to withdraw it. WTF America, WTF!
you want to close a loophole that allows people to get a tax break by banking offshore, fine, I don't agree with it, but whatever...that doesn't mean that people are breaking the law...its part of the law or they couldn't do, don't accuse them of anything or paint them as lawbreakers...wtf?

Second, not withdrawing YOUR money from YOUR 401k if its invested in certain stock, what kind of crap is that? Could you post up some more information on that, I hadn't heard of that...

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post #10 of 14 Old 05-05-2009, 05:42 PM
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yoda, the 401k crap aired this afternoon with sheppard and he was interviewing their financial analyst stuart varney. stuart was talking about people that had 401k with investments in certain funds and real estate. i just went to the fox website and tried a search but couldn't find anything. I'm very sure we will be hearing more on this. this doesn't affect me. i rolled over my 401k into my IRA back in 01 when i retired. but if they can do that to someone's 401k then they can do to me with my IRA. the offshore loophole stuff does not only affect corporations and rich people. there are a lot of everyday joe's who have their money there because of relaxed tax and better interest on deposits. why would a corp./individual not do this. they are being taxed to death over here as are the rich and joe schmeaux. this schat burns my arse. Goosfraba, Goosfraba................

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post #11 of 14 Old 05-06-2009, 01:04 PM
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Now they can go on strike against then selves
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post #12 of 14 Old 05-06-2009, 10:34 PM
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yoda, the 401k crap aired this afternoon with sheppard and he was interviewing their financial analyst stuart varney. stuart was talking about people that had 401k with investments in certain funds and real estate. i just went to the fox website and tried a search but couldn't find anything. I'm very sure we will be hearing more on this. this doesn't affect me. i rolled over my 401k into my IRA back in 01 when i retired. but if they can do that to someone's 401k then they can do to me with my IRA. the offshore loophole stuff does not only affect corporations and rich people. there are a lot of everyday joe's who have their money there because of relaxed tax and better interest on deposits. why would a corp./individual not do this. they are being taxed to death over here as are the rich and joe schmeaux. this schat burns my arse. Goosfraba, Goosfraba................
the bad thing is, I think we can expect taxes to continue to go up whether direct or indirect, because with the war on terror the last 8 years, and all the new domestic spending the last 3 months, we are getting to dangerous levels on the deficit and debt...which means, cut govt. programs or raise taxes...

I can't see the current administration wanting to do either...but something has to give I would think...

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post #13 of 14 Old 05-07-2009, 08:56 PM
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since the UAW is in the pocket of chairman maobama (or is moabama in the pocket of the UAW?).....the gubment will surely continue to toss money in the direction of chrysler, or at least use more corrupt tactics to benefit chrysler now.....

the only good part about this might be that, since the UAW actually has some stake in the company, their un-checked, mafia ways might have to change if the want the company to succeed....considering the UAW is the main culprit in chrysler failing.....

the other possibility is that ron stinkyfinger is raking in so much money off of the actual union WORKERS, so he doesn't give a sh!t about the company, or the workers (which i don't believe for a second that he does) he will rake in the dough as long as he can, then flip the UAW and chrysler the bird and walk away a billionaire.....
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post #14 of 14 Old 05-07-2009, 09:12 PM
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they already have had many of their loans forgiven by the government...

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