William J. Holstein

Is Obama Going to Put the Screws to the UAW?
April 15, 2009--So far, President Obama and his automotive task force run by New York investment banker Steve Rattner have fired Rick Wagoner as chairman and chief executive officer of General Motors and put major pressure on the holders of GM bonds to accept shares and perhaps some cash in exchange for the bonds. In effect, they’re being asked to accept pennies on the dollar for their investments, and they’re not happy about that.

In other words, we can now see what Obama has done toward management and toward bondholders--but his intentions toward the United Auto Workers remains a mystery. When is he going to call Ron Gettelfinger at the UAW and demand concessions from him?

As everyone knows, the UAW played a key role in delivering five Midwest states to Obama last November and helped him win the presidency. Is Obama going to take an even-handed approach and now also exact a price from the UAW? Ron Gettelfinger had more to do with making GM’s cost structure uncompetitive than Rick Wagoner did. Why does he still have a job? Or is Obama going to go soft on the union for obvious political reasons?

This is an exquisitely difficult balancing act for Obama, and one reason why I suspect the administration is not serious about pushing GM into any form of formal bankruptcy. Once that happens, and a bankruptcy judge takes over, the UAW is exposed to drastic changes in its contracts with GM. What kind of a payback would that be from Obama to the UAW?

If GM can stay out of bankruptcy, as the company wants and as I have advocated, we could have the best of all worlds—a bankruptcy-like settlement without actually going into legal bankruptcy, which could be a legal miasma from which GM never emerges. But getting that done will require Obama to put some form of painful pressure on the UAW. Or there will be howls of outrage about a political payback.