Topic: Government to buy 50% of GM, UAW seeks 55% of Chrysler In Ottawa: Watching U.S.

[toolatecrew]

http://www.theglobeandmail.com/servlet/story/LAC.20090428.RAUTOS28ART2306/TPStory/International

The latest proposal offered up by GM - now subsisting on loans provided by Washington - would see the U.S. government hold 50 per cent of the company if it accepts a debt-for-equity swap. The United Auto Workers union would hold another 39 per cent of GM, if it agrees to allow a new health-care trust fund to be financed with GM shares.

Ottawa is watching the GM deal closely and is also looking at taking an equity stake.

In a separate deal, the auto workers union would eventually own 55 per cent of a restructured Chrysler under an agreement reached by the union and the auto maker, according to a summary of the arrangement. The revised Chrysler-UAW contract says that Italian automaker Fiat Group SpA eventually will own 35 per cent of a restructured Chrysler, with the remaining 10 per cent stake divided between the U.S. government and secured lenders, mostly banks and hedge funds.

This is huge. Especially Chrysler. UAW would own a CONTROLING interest.

There is good and bad to this. I'm not sure what to think.

Good: Saves the companies and jobs from dissapearing.
If Union becomes shareholders (major shareholders) then if they can get their heads around it it would make sense that more than any time in history Union decsions would be made with the sucess of the COMPANY in mind. Share prices go up..good for UAW. Share prices down for UAW. WOuld you go on strike if you knew it would make your OWN share prices go down? If an increase in vacation makes profits go down and your own shares go down do you vote for it?

Bad:
Conflict of interest. Who does the Union represent? The best interest of individual workers or the major stockholder in the company?
What about Ford? UAW is would be a majority owner in their competitors. If ford employs UAW workers who are majority stakholders in a competior isn't that a major issue?
Government ownership can only mean bad things.

Thoughts

[carcrazy]

The question is, are the Government and the union going to have voting power? Board seats? I know the percentage own might warrant that, but is this how it's going to be in the end?

What raises a question for me is the paragraph below:

"GM Canada is negotiating with Ottawa to secure a $3-billion bridge loan to carry it until the end of May, and the company said the two sides are "close" to agreement. It is also looking for $7.5-billion in long-term loans from Ottawa and the province of Ontario to keep it alive until North American car sales pick up. "

It seems like the assumption here is that the sales will pick up significantly in the next couple of months? 

[DockMan]

Bad:
Conflict of interest. Who does the Union represent? The best interest of individual workers or the major stockholder in the company?
What about Ford? UAW is would be a majority owner in their competitors. If ford employs UAW workers who are majority stakholders in a competior isn't that a major issue?
Government ownership can only mean bad things.

Thoughts

I can only agree with the Bad portion....there is no good that will come of Union ownership of one company, a major stake in company number two and no stake in company number three.....all of which exclusively use the same labour union as their employee representatives. I really hope that if the government is stupid enough to push this through than the courts will hopefully come up with some anti-trust act recourse to kibosh this cockamamie scheme.

After all: "Grub first, then ethics" - Bertold Brecht

Union ownership is a very, very bad idea unless they would agree to cede their right to representation of Ford employee's.

[inco]

It could be an interesting change to see how they would handle the challenge - profits versus protection. Maybe we will see it play out and learn that sometimes change works. Yeah, right.

[ovr50]

Whoa, what news is this....!!! 

I can't wait for the reaction of our foremost blind-faith GM boster to rationalize the US Govt controlling GM Corp, and thus controlling GM Canada. Since this poster has never a good word to say for govt (having described "govt" as thieves, slime balls, stupid, etc, etc), it should be interesting to see reactions to this new development. 

As to the union controlling Chrysler, it "could" work theoretically, but is fraught with areas where problems can occur.

May you live in interesting times........

[safristi]

...."may u live in interesting times"   a chinese saying ,,,,and they may yet eat Gm/Chryslers lunch...............this is all to bizarre................where did it come from...........

[mmret]

[99 Silver]

This is an insane idea in my opinion.  It could only work as a relatively short term strategy to get the company stabilized and then prepare it for sale.

Too many conflicts. UAW controls Chrysler yet bargains with Ford.  The union would need to convert it's shares (held for the health care trust) to cash to fund health care costs.

Think of this angle.  The CAW will not have equity, but will have the UAW as an owner in negotiations!  The Canadian government might foolishly throw money at this thing and wind up at best a minority equity partner with interests at odds with the UAW and the US government.

When you look at the GM numbers it really gets goofy.  They want a $10.5B loan and are expecting to retain 5,500 jobs in Canada - a cost of $1.9M per job which is ridiculous in my view.  What about the other struggling industries in Canada - are they going to do anything approaching $1.9M per job to save them?

If it were my decision, it would be for bankruptcy, and keep the government and unions out.

[dorin]

UAW != CAW

The CAW is screwed.  

In principle I like the idea of the workers getting some ownership of the company, but in this case unless the CAW also gets a seat at the owners' table I think the UAW will be even more likely to sacrifice Canadian jobs for US ones.

edit: It looks like 99 Silver beat me to the punch in seeing how Canada is set to get screwed under this agreement.

[Sir Osis of Liver]

After the mess created by the self-aggrandizing MBA's, right-wing ideologues, and corporate welfare whores, I'm perfectly willing to let government and the unions give it a go. They certainly couldn't do worse.

[dorin]

After the mess created by the self-aggrandizing MBA's, right-wing ideologues, and corporate welfare whores, I'm perfectly willing to let government and the unions give it a go. They certainly couldn't do worse.

 

I for one have no problems with the US gov't and the UAW running GM from a business standpoint.  I'm just concerned about GM's Canadian presence.

[Sir Osis of Liver]

After the mess created by the self-aggrandizing MBA's, right-wing ideologues, and corporate welfare whores, I'm perfectly willing to let government and the unions give it a go. They certainly couldn't do worse.

 

I for one have no problems with the US gov't and the UAW running GM from a business standpoint.  I'm just concerned about GM's Canadian presence.

Definitely a concern for both Chrysler and GM.
A lot of dealers are pretty marginal operations at the best of times.

Really depressing time to be a car guy....

[articsteve]

Condensed version:  

A senior Canadian official said Ottawa is also looking at taking an ownership stake in GM

GM Canada is negotiating with Ottawa to secure a $3-billion bridge loan to carry it until the end of May, and the company said the two sides are "close" to agreement.

It is also looking for $7.5-billion in long-term loans from Ottawa and the province of Ontario to keep it alive until North American car sales pick up.

Total loans in 2009 (minimum) 10.3 BILLION

GM said it expects to reduce its unionized work force to 4,400 by 2014

HOPELESSLY ABSURD, but a good back door for Federal tranfers to Ontario because the eventual numbers will 3 or 4 times that amount by 2014.

  to the all other provinces.  

[Snowman]

  The USSA..... Please commence goose-stepping. Just imagine the reaction when the American start paying higher taxes….read my lips.

[articsteve]

A lot of dealers are pretty marginal operations at the best of times.

Really depressing time to be a car guy....

Not for the one's selling those boring "appliances".  

Dealer's PRIMARY concern is with their lenders.  Banks are going to rip most domestic dealer's a new one by demanding their homes, cottages, investments, and the most coveted of all squirrel holes; the WIFE's sig.  

For dealers, loans get personal
Lenders' terms putting retailers' assets on the line
Cautious lenders have raised the stakes for dealers if General Motors or Chrysler LLC files for bankruptcy: At risk are the personal assets of many dealers. Lenders that provide inventory credit lines have required more than half of U.S. dealers to guarantee the loans personally, according to the National Automobile Dealers Association

Automotive News

[Sir Osis of Liver]

A lot of dealers are pretty marginal operations at the best of times.

Really depressing time to be a car guy....

Not for the one's selling those boring "appliances".  

Toyota sales are down 30+%, they just lost $6.7B this quarter. This obviously has had no effect on dealers.

[johngenx]

Look at The big Three over the last 25-30 years.  What has management accomplished?

1. Massive losses.
2. Complete loss of consumer confidence.
3. Bloated product lines ironically lacking compact car goodness.
4. Massive bonus schemes and salaries based on nothing, meaning giant pay-outs regardless of performance.

To be fair, all three firms have made serious gains in the very recent times, but only in terms of quality, and not anywhere near close in terms of products.

How can UAW and Government ownership do worse?

As for employee ownership, what is "communist" about that?  Many excellent companies offer ownership possibilities.  It's a great incentive for people to "invest" other than their money...

[barrie1]

There has been many cases where employees have taken over as owners of companies no matter wether they are Unionized  or not and have been very successful in turning the sinking ship around. The Canadian Gov will have some form of agreement on ownership with the 2 companies that they loan money to. The CAW has never taken orders from the UAW and thats why they are seperate entities as they have been caught selling the Candian side out before in past years. That was when they were still all one Union so we Canadians left from being under their umbrella and have been much better off since without them. They went as far as to try and claim our Union Halls years ago when the seperation occurred after we had paid for them to begin with.  Its still cheaper to build cars here then it ever has been in the US except possibly in the Southern States where they ban all Unions and pay very low wages. 

[articsteve]

Toyota sales are down 30+%, they just lost $6.7B this quarter. This obviously has had no effect on dealers.

Sales are down 25% actually, but who is counting.      Although 2008 were record sales.   New car sales down, but service department up.  

Canadian Toyota dealers are the GOLD standard in new car franchises.  BMW second.   Dennis DesRosiers posted a list somewhere on the net.

last year Toyota had 239 dealers and sold more vehicles than both Chrysler, with 454 dealers, and Ford, with 443 dealers. Ford and Chrysler dealers may still have been profitable but obviously the average Toyota dealers, with through-put about twice that of both Chrysler and Ford, are much more profitable.

http://www.canadianautodealer.ca/index.php/Columnists/Dealer-numbers-to-drop.html

Since your knowledge of the retail car business is zip your simplistic statement is understandable.  Car dealers don't care what they sell as long as they have a sustainable return on investment and that their store has a strong market value.  For the store to have a strong market value the brand must be perceived to be strong.  Toyota is just that.  Strong.

Who knows what Toyota Motor's annual operating loss will be.  Toyota has been stock piling parts for the last three months, supporting tier 2 and 3 suppliers and have not cut their core staff.  I suspect that costs.  They have enormous financial resource and the Bank of Japan.  This is a war of attrition and the Japanese have won this one.  

[barrie1]

Read the Globe ansd Mail and get the real truth.  They are at the unemployment offices in japan for a reason and its not for drawing wages at all from the Toyota Company.