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April 28, 2009

The UAW Is About To Become One Of The Biggest Automakers

This is really getting strange.

Under a debt restructuring plan, the UAW is going to become a 55% stakeholder in Chrysler.

The United Auto Workers union’s retiree health-care fund will own 55 percent of Chrysler LLC in exchange for cutting in half the automaker’s $10.6 billion cash obligation to the trust, people familiar with the matter said.

...Instead of contributing $8.8 billion to a retiree health- care trust, Chrysler will give the union trust shares of the company and a promissory note for $4.59 billion that will be paid in installments with 9 percent interest until 2023, one of the people said. This reduces the up-front cash Chrysler would have had to pay under its 2007 contract agreement with the Detroit-based union.

The union’s equity in Chrysler is valued at $4.2 billion. If it can sell the shares for more, the Treasury would get the difference, one of the people said.

Yesterday GM announced a preliminary restructuring plan that would be similar in that instead of paying into a health care fund would result in the union owning 39% of the company, while the federal government owned 50%. The remaining stock would be owned by bondholders who get the short end of the stick.

There used to be a joke that the organizations formally known as the Big 3 were health insurance companies that made cars on the side. Now it's the truth.

It's amazing that the people who created this mess are going to wind up owning the companies they screwed (Yes, management helped. A lot.).

On the upside, it will be fun to watch the UAW negotiate with itself.

More: "Joshin" in the comments asks a great question...

So does this mean that Ford is going to have to negotiate with their competitors?

The one company that is financing itself is now competing with its workforce and their business partner, which just happens to be the US government. It's a brave new world boys and girls.

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posted by DrewM. at 05:05 PM

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