The “new” General Motors exited bankruptcy court on Friday. With the help of the courts, and under the direction of the Obama administration, the company has shed nearly $130 billion in liabilities and created the framework for a vast increase in the exploitation of its workers.
The speed of the bankruptcy proceedings is remarkable. GM passed through the entire process is less than six weeks. One analyst called it “unprecedented, unbelievable, breathtaking.”
Bankruptcy court Judge Robert Gerber brushed aside a series of objections from retirees who will see their health care eliminated, along with asbestos and accident victims and other unsecured creditors. With the potentially profitable assets sold to the new GM, these obligations, along with a number of unwanted brands, will languish in bankruptcy court as part of the “old” GM.
The whole process was a travesty of legality and due process, demonstrating that when Wall Street wants something done, every institution of the American state snaps into line. The bankruptcy courts are supposedly a mechanism for mediating the different claims of various “stakeholders.” In the event, the court served as a rubber stamp for decisions that had already been made. The wealthy investors and banks will recover 100 per cent of their investments in GM debt, while workers and other claimants will end up with nothing.
The new GM is born out of a process of social devastation. The company will shed 27,000 more jobs in the US, bringing its total US workforce to 64,000. Thirty years ago the company employed over 618,000 in the US. At the beginning of last year, it employed 110,000.
An additional 14 plants will be closed, along with some 2,000 dealerships. GM is also shutting plants in Canada, bringing the total workforce there to 7,000, down from 20,000 in 2005.
The “new” company emerges from the rubble of closed factories and dealerships and the impoverishment of working class communities that depended on auto employment to fund schools, hospitals and other basic services, as well as the blighted lives of hundreds of thousands of workers and retirees.
As part of a deal negotiated with the United Auto Workers, workers who retain their jobs will have their wages frozen. A no-strike pledge through 2015 agreed by the UAW will facilitate further job, wage and benefit cuts, without the inconvenience of a contract vote. The company aims to replace all older workers with new-hires making $14 an hour.
In an indication of things to come, CEO Fritz Henderson declared Friday that he would employ the “intensity, decisiveness and speed” of the bankruptcy process and transfer it “to the day-to-day operations of the new company.”
UAW retirees, who have already seen their dental and optical benefits eliminated, will face sharp cuts in health care, enforced by the UAW. The UAW-run health care trust—the Voluntary Employee Beneficiary Association (VEBA)—will own 17.5 per cent of the new GM. Its assets will be insufficient to cover benefits owed to UAW retirees, but the UAW executives hope to grow rich from the 17.5 per cent of stock in the new company they will control.
More than 50,000 retirees who are members of the International Union of Electrical Workers and other non-UAW organizations face the immediate elimination of their health care, as they are not covered by the VEBA.
The downsizing of GM—along with Chrysler, which exited bankruptcy last month—will ripple throughout the auto parts industry and other industries, producing a wave of bankruptcies, plant closures, layoffs and wage cuts.
The restructuring of General Motors and Chrysler is the direct outcome of the policy of the Obama administration, the tool of the most powerful sections of the financial elite. The government conditioned loans to the automaker on securing this result, making explicit its demands for massive concessions from auto workers. Everything has been tailored to the interests of Wall Street, which was determined to transform the former auto giants into much smaller, but highly profitable, enterprises.
The US government will now own 60 per cent of GM, but the administration has repeatedly made clear that it has no intention of playing any role in the day-to-day management of the company.
This will be left to Henderson and the new chairman, Edward Whitacre, former CEO of AT&T, who was handpicked by the Obama administration’s auto task force. The Wall Street Journal quoted Karl Rove, former advisor to George W. Bush, calling Whitacre “very tough”—i.e., very dedicated to the interests of Wall Street.
The administration has said it hopes to quickly sell off its shares to private investors, who are set to make a killing.
The bankruptcy of General Motors, once the pinnacle of American manufacturing, is a stunning expression of the protracted and precipitous decline of American capitalism. The economic crisis that has overcome world capitalism is rooted in the decay of American capitalism. But the crisis precipitated by the money-mad speculation and fraud of the US financial elite has only increased its domination over the political system and every other official institution in the country.
The banks, utilizing the services of the Obama administration, are exploiting the crisis of their own making to plunder the national treasury and carry through a further dismantling of unprofitable industries, in order to divert even greater resources to the enrichment of the American financial aristocracy.
At the heart of this process is an assault on the living standards of the working class without historical precedent.
Joe Kishore
Showing posts with label GM Bankruptcy. Show all posts
Showing posts with label GM Bankruptcy. Show all posts
Saturday, July 11, 2009
Wednesday, July 8, 2009
GM Bankruptcy: Treating Retirees As 'Road Kill'
In the name of “restructuring” to protect “shareholder value”, General Motors, with the blessings of the Obama administration and Wall Street is going full throttle to get rid of its workers and retirees who served the company well for a lifetime. It's another sordid saga of sacrificing the workers' hard-won rights and benefits at the altar of profitability. There's a lesson to be learnt by Indian workers who will face a similar fate if the Congress government's labour "reforms" are rammed through parliament.
A judge in New York City on July 5 approved the sale of General Motors assets to a new company, 61 per cent owned by the US government, opening the way for the auto company to emerge from bankruptcy. GM filed for bankruptcy protection June 1, the largest such industrial failure in US history, following a similar move by Chrysler April 30.
The ruling, by Judge Robert E. Gerber of the US Bankruptcy Court, is less a legal decision than a ruthless business measure taken as part of the restructuring of the auto industry in the interests of Wall Street and the corporate elite. The Obama administration, with the full complicity of the United Auto Workers (UAW), is presiding over and driving this process at the expense of tens of thousands of auto workers, their families and entire communities.
The bankruptcy plan has already meant the destruction of 21,000 additional jobs at GM, the closure of a dozen or more of its plants and the elimination of 2,600 GM dealerships.
Gerber’s approval of the asset sale, following three days of hearings and in the face of hundreds of objections, means that the deal between GM and the US Treasury may be consummated as early as Thursday, one day before the deadline set by the government. The Obama administration had made clear that it did not intend to provide another penny to the auto maker after July 10.
In addition to the US government, the Canadian government will own 12 per cent of the new firm, with the UAW, through a retiree health-care trust, controlling 17.5 per cent, and other unsecured creditors getting another 10 per cent. The Obama administration has committed some $50 billion to the restructuring. Administration officials have repeatedly explained they intend to take no part in the day-to-day management of the company and would like to sell the government’s stake in the new GM at some point in 2010.
Under the sale plan, the auto maker’s profitable assets—including the Buick, Cadillac, Chevrolet and GMC brands—would be sold off to the new GM, “while assets and liabilities deemed to be a drag on the automaker would be left behind in bankruptcy.” (Washington Post)
In rejecting the claims of product-liability claimants and others, Gerber declared, “Bankruptcy courts have the power to authorise sales of assets at a time when there still is value to preserve—to prevent the death of the patient on the operating table.”
Lawyers representing the claimants had argued that the new company should be responsible for lawsuits arising from accidents involving GM cars before the company entered bankruptcy. GM management only recently accepted, under pressure from a number of state attorneys general, the principle that the new company should be required to take claims from future victims.
The GM bankruptcy process has been a stark demonstration of whose interests prevail within the US political and judicial system.
Gerber ruled in late June against General Motors’ retired salaried workers who wanted to see the creation of a special committee to represent their benefit issues. As part of the restructuring plan, GM will continue paying the 122,000 retirees’ health care and life insurance benefits for the moment, but the benefits are expected to be slashed and retirees will be forced to pay a far larger share of their costs.
GM attorney Harvey Miller argued that the company had always had the right to alter the salaried retirees’ benefits and the creation of a committee “would simply add more costs.”
Gerber also ruled against a request from an unofficial committee of individuals with asbestos-related claims to appoint a “tort czar,” according to the Associated Press, “that would oversee all future claims against the old GM, not just those related to asbestos.” While secured lenders—all major Wall Street banks and financial institutions—will be paid the $6 billion they are owed, unsecured creditors, like the asbestos victims, will see little, if anything.
On July 1, hundreds of retirees from GM plants whose bargaining agent was the International Union of Electrical Workers-Communications Workers of America (IUE-CWA) picketed the courthouse in lower Manhattan where the hearings were taking place to protest the likely eventual elimination of their health care and insurance benefits.
Lawyers for 50,000 retired IUE-CWA, United Steel Workers and International Union of Operating Engineers members asserted in court that GM was attempting to evade its legal responsibilities to these workers by pursuing bankruptcy under Section 363 of the Bankruptcy Code, which provides almost no benefit protection, as opposed to Section 1114.
The IUE-CWA claimed that a deal was worked out more than a year ago, ratified by its members, creating a GM-funded Voluntary Benefit Employee Association (VEBA). On January 9, 2009, a company lawyer informed the IUE-CWA that the auto maker would not live up to the deal.
In court IUE-CWA lawyer Tom Kennedy pointed to remarks made by a top member of Obama’s Auto Task Force, Harry Wilson, under cross-examination July 1. “We told GM to cut two-thirds, Wilson said; we told them to figure out how to do it. On June 4, Treasury rejected a 62 per cent cut. The additional 5 per cent taken out to meet the task force’s 67 per cent target represents $400 million in the [non-UAW] retirees’ benefit programs, Kennedy said.” (Youngstown Business Journal)
In a bitter press release, the IUE-CWA accused Obama’s Treasury Department of treating the retirees as “road kill.”
GM attorney Miller explained cynically that while the “new GM” needed the UAW to function, it didn’t need the other unions, whose members worked in plants that were no longer operating. Under questioning, GM CEO Fritz Henderson testified that he “expected” the non-UAW retiree health care benefits would be dropped by the new company. In response, Kennedy pointed to an email Henderson had sent the Obama task force’s Steven Rattner lobbying to keep GM executive retirement benefits.
Gerber rejected the IUE-CWA objections along with all the others.
The Washington Post noted, “Throughout the court proceedings, the government and GM were repeatedly questioned about why they chose to assume certain assets and liabilities while rejecting others.
“In response, government and GM officials said the only measure was whether or not the assets and liabilities would support the commercial viability of the new GM.”
Underlining the political character of his decision, Gerber rejected the claim that the US government had been overbearing in negotiations to restructure the car maker. “The US Treasury, in making hard decisions about where to spend its money and make New GM as viable as possible, made business decisions that it was entitled to make,” he wrote.
Elsewhere in his decision, Gerber declared, “The only alternative to an immediate sale [of GM assets to the new company] is liquidation—a disastrous result for GM’s creditors, its employees, the suppliers who depend on GM for their existence, and the communities in which GM operates.”
The decline of General Motors has already been an unmitigated disaster for auto workers, suppliers, dealerships and entire communities. The continued private ownership of the automobile industry, or government control on behalf of corporate interests, only holds more of the same in store.
The UAW apparatus, which hopes to prosper by operating the VEBA retiree health-care trust, merely reported on its web site—with obvious pleasure—that the Bankruptcy Court had “issued its ruling approving the proposed restructuring, and the UAW Retiree Health Settlement Agreement.”
The media campaign to convince auto workers that the judge’s decision will save GM and their jobs began as soon as the ruling was issued. The Detroit News lost no time in claiming, “The sale will preserve hundreds of thousands of GM jobs in North America, and around the world, and bolster a reeling network of auto industry suppliers.”
It will do no such thing. The sale will trigger a new round of plant closures and demands for concessions. With global auto sales plummeting, profitability can only be restored at GM and its rivals by impoverishing workers to insure the investments and profits of corporate executives and financiers.
David Walsh
A judge in New York City on July 5 approved the sale of General Motors assets to a new company, 61 per cent owned by the US government, opening the way for the auto company to emerge from bankruptcy. GM filed for bankruptcy protection June 1, the largest such industrial failure in US history, following a similar move by Chrysler April 30.
The ruling, by Judge Robert E. Gerber of the US Bankruptcy Court, is less a legal decision than a ruthless business measure taken as part of the restructuring of the auto industry in the interests of Wall Street and the corporate elite. The Obama administration, with the full complicity of the United Auto Workers (UAW), is presiding over and driving this process at the expense of tens of thousands of auto workers, their families and entire communities.
The bankruptcy plan has already meant the destruction of 21,000 additional jobs at GM, the closure of a dozen or more of its plants and the elimination of 2,600 GM dealerships.
Gerber’s approval of the asset sale, following three days of hearings and in the face of hundreds of objections, means that the deal between GM and the US Treasury may be consummated as early as Thursday, one day before the deadline set by the government. The Obama administration had made clear that it did not intend to provide another penny to the auto maker after July 10.
In addition to the US government, the Canadian government will own 12 per cent of the new firm, with the UAW, through a retiree health-care trust, controlling 17.5 per cent, and other unsecured creditors getting another 10 per cent. The Obama administration has committed some $50 billion to the restructuring. Administration officials have repeatedly explained they intend to take no part in the day-to-day management of the company and would like to sell the government’s stake in the new GM at some point in 2010.
Under the sale plan, the auto maker’s profitable assets—including the Buick, Cadillac, Chevrolet and GMC brands—would be sold off to the new GM, “while assets and liabilities deemed to be a drag on the automaker would be left behind in bankruptcy.” (Washington Post)
In rejecting the claims of product-liability claimants and others, Gerber declared, “Bankruptcy courts have the power to authorise sales of assets at a time when there still is value to preserve—to prevent the death of the patient on the operating table.”
Lawyers representing the claimants had argued that the new company should be responsible for lawsuits arising from accidents involving GM cars before the company entered bankruptcy. GM management only recently accepted, under pressure from a number of state attorneys general, the principle that the new company should be required to take claims from future victims.
The GM bankruptcy process has been a stark demonstration of whose interests prevail within the US political and judicial system.
Gerber ruled in late June against General Motors’ retired salaried workers who wanted to see the creation of a special committee to represent their benefit issues. As part of the restructuring plan, GM will continue paying the 122,000 retirees’ health care and life insurance benefits for the moment, but the benefits are expected to be slashed and retirees will be forced to pay a far larger share of their costs.
GM attorney Harvey Miller argued that the company had always had the right to alter the salaried retirees’ benefits and the creation of a committee “would simply add more costs.”
Gerber also ruled against a request from an unofficial committee of individuals with asbestos-related claims to appoint a “tort czar,” according to the Associated Press, “that would oversee all future claims against the old GM, not just those related to asbestos.” While secured lenders—all major Wall Street banks and financial institutions—will be paid the $6 billion they are owed, unsecured creditors, like the asbestos victims, will see little, if anything.
On July 1, hundreds of retirees from GM plants whose bargaining agent was the International Union of Electrical Workers-Communications Workers of America (IUE-CWA) picketed the courthouse in lower Manhattan where the hearings were taking place to protest the likely eventual elimination of their health care and insurance benefits.
Lawyers for 50,000 retired IUE-CWA, United Steel Workers and International Union of Operating Engineers members asserted in court that GM was attempting to evade its legal responsibilities to these workers by pursuing bankruptcy under Section 363 of the Bankruptcy Code, which provides almost no benefit protection, as opposed to Section 1114.
The IUE-CWA claimed that a deal was worked out more than a year ago, ratified by its members, creating a GM-funded Voluntary Benefit Employee Association (VEBA). On January 9, 2009, a company lawyer informed the IUE-CWA that the auto maker would not live up to the deal.
In court IUE-CWA lawyer Tom Kennedy pointed to remarks made by a top member of Obama’s Auto Task Force, Harry Wilson, under cross-examination July 1. “We told GM to cut two-thirds, Wilson said; we told them to figure out how to do it. On June 4, Treasury rejected a 62 per cent cut. The additional 5 per cent taken out to meet the task force’s 67 per cent target represents $400 million in the [non-UAW] retirees’ benefit programs, Kennedy said.” (Youngstown Business Journal)
In a bitter press release, the IUE-CWA accused Obama’s Treasury Department of treating the retirees as “road kill.”
GM attorney Miller explained cynically that while the “new GM” needed the UAW to function, it didn’t need the other unions, whose members worked in plants that were no longer operating. Under questioning, GM CEO Fritz Henderson testified that he “expected” the non-UAW retiree health care benefits would be dropped by the new company. In response, Kennedy pointed to an email Henderson had sent the Obama task force’s Steven Rattner lobbying to keep GM executive retirement benefits.
Gerber rejected the IUE-CWA objections along with all the others.
The Washington Post noted, “Throughout the court proceedings, the government and GM were repeatedly questioned about why they chose to assume certain assets and liabilities while rejecting others.
“In response, government and GM officials said the only measure was whether or not the assets and liabilities would support the commercial viability of the new GM.”
Underlining the political character of his decision, Gerber rejected the claim that the US government had been overbearing in negotiations to restructure the car maker. “The US Treasury, in making hard decisions about where to spend its money and make New GM as viable as possible, made business decisions that it was entitled to make,” he wrote.
Elsewhere in his decision, Gerber declared, “The only alternative to an immediate sale [of GM assets to the new company] is liquidation—a disastrous result for GM’s creditors, its employees, the suppliers who depend on GM for their existence, and the communities in which GM operates.”
The decline of General Motors has already been an unmitigated disaster for auto workers, suppliers, dealerships and entire communities. The continued private ownership of the automobile industry, or government control on behalf of corporate interests, only holds more of the same in store.
The UAW apparatus, which hopes to prosper by operating the VEBA retiree health-care trust, merely reported on its web site—with obvious pleasure—that the Bankruptcy Court had “issued its ruling approving the proposed restructuring, and the UAW Retiree Health Settlement Agreement.”
The media campaign to convince auto workers that the judge’s decision will save GM and their jobs began as soon as the ruling was issued. The Detroit News lost no time in claiming, “The sale will preserve hundreds of thousands of GM jobs in North America, and around the world, and bolster a reeling network of auto industry suppliers.”
It will do no such thing. The sale will trigger a new round of plant closures and demands for concessions. With global auto sales plummeting, profitability can only be restored at GM and its rivals by impoverishing workers to insure the investments and profits of corporate executives and financiers.
David Walsh
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