It’s certainly good that in a restructure Chrysler (or GM), the UAW will have an expanded ownership stake. It means that the union — far from just leeching off capital — will now be on both sides, with an incentive to see the firm thrive.
However, we’re still surprised by how things went down — that the Obama administration would pressure senior debt holders to give up their claims and then publicly scold them when they didn’t give in.
Many, including us, were legitimately concerned about the future ramifications of trampling bondholders when it’s politically expedient or when there’s a union involved.
Felix Salmon thinks it’s all sensible, and that of course the UAW should be given priority:
When Detroit raised debt capital in the past, its lenders weren’t operating on the assumption that they would be paid off in full before the UAW got a penny — and if they were, they were being foolish in the extreme. The UAW, after all, is necessary for the continued existence of the company: they’re doing the equivalent of putting new money in to the operation, in the form of their labour going forwards. I don’t see the creditors offering to put up any new capital.
The UAW is necessary for the continued existence of the company? Sure, skilled labour is absolutely necessary for the continued to existence of the company, but let’s not conflate workers and the United Auto Workers. The so-called transplants have done just fine with skilled, non-unionized workers.
And this idea that the UAW is doing the equivalent of “putting in new money” has to be a joke. It has to be. For one thing, most of what the union does is force unnecessary labour onto the company. And industrial labour is hardly the same as “new money” that could just be reallocated somewhere else if the union doesn’t get the terms it likes. Where else are these workers going to go?
Look, auto workers aren’t unskilled robots that will all just one day be replaced by machines or shipped overseas. There’s nothing more obnoxious than the attitude that these workers are expendable or that the future of the industrial Midwest is for everyone to become a “knowledge worker”, while the gruntwork that gets shipped overseas.
But if we’re thinking about the future, we’d much rather ensure that the notion of bondholder seniority and the rule of law is preserved rather than ensuring that institutions of industrial workers known as unions are preserved.