Economics USA: Autos: GM again slated for bankruptcy as Obama preferential treatment for UAW takes effect

Circumstances force President Obama to choose between bondholders and UAW retirees' health fund in the Chrysler automaker's current meltdown. The President's preferential option for elite proletarian health funds (the blue-collar aristocracy) over other claimants upon Chrysler, conditions our expectations regarding his moves on General Motors. Obama's siding with the UAW's preferential treatment in the Chrysler case, should he remain consistent in his treatment of one company and the other, bodes ill for the other, General Motors--which now may be closer to bankruptcy.

May 4 (Bloomberg) -- General Motors Corp. may be more likely to end up in bankruptcy based on the Obama administration’s willingness to place Chrysler LLC into court protection to safeguard union health-care benefits.

With GM and its biggest bondholders at odds over resolving $27 billion in unsecured claims by a June 1 deadline, the Chrysler model indicates that President Barack Obama may resort to bankruptcy to end any impasse over that debt, said Martin Fridson, chief executive officer of New York-based credit investment firm Fridson Investment Advisors.

Ford is doing fine. Why should Chrysler not go into bankruptcy; it, like GM, has played the fool and succumbed to many years of overcompensation of its unionized workers. The union has been irresponsible. The company did not resist certain of the union's exorbitant demands; the company also played the fool in other respects, including its anti-environmental car production generally. In the end, Chrysler came up short as a business. Let it die as businesses do, perhaps.

Chrysler filed for protection April 30 after the U.S. was unable to persuade secured lenders to swap $6.9 billion in claims for $2.25 billion in cash. A union retiree health-care trust was offered a 55 percent stake in Chrysler.

“This confirms the fear, which right along has been that the Obama administration is more sensitive or beholden to the unions than the bondholders,” Fridson said. “It makes it clear that GM bondholders aren’t likely to be able to work out anything outside of bankruptcy.”

I can't weep for the bondholders either, whether Chrysler or GM. Those bondholders also made grievously bad business decisions, holding bonds in companies they knew were in deep dodo for some time.

Should not the vaunted rules of the market, apply to all concerned?--GM, Chrysler, UAW, and bondholders. The moral itch in this situation is simply that the UAW itself nor its pension and health-care funds as such are not identical to the retirees who will, in some cases, most desperately need their expected insurances for old-age health needs.

In contrast, have the elites of the funds, the UAW, GM, Chrysler, and the bondholders got inadequate health insurance? Of course, they don't. Well, let them eat cake!

--EconoMix