The union, with uncharacteristic aggressiveness, took on the media.
The United Auto Workers Union yesterday told United States Representatives and Senators that recent news stories, editorials and op-eds about the restructuring plan at General Motors have a number of “inaccurate assertions” about the shares of equity in a New GM that will be distributed after it emerges from bankruptcy.
TheDetroitBureau.com has reported that the U.S. Treasury Department had revised an offer to angry, holdout bondholders, who claim that they are not being fairly treated in General Motors Corporation’s revised viability plan that gave them 10% of the new company to settle more than $27 billion in debt. Bondholders say the UAW is getting a better deal.
Treasury now challenges bondholders to accept the 10% stake in a reorganized GM as originally proposed by GM, and eventually another 15% of the new company will be offered by way of stock warrants.
The U.S. government will receive an initial allocation of 72.5% of the equity in the new company.
The UAW in its latest lobbying and p.r. push wanted to be sure that everyone understood that the bondholders not only will receive an initial allocation of 10% of the equity, but thee are now warrants that can result in their receiving “substantially more.”
What the union also clearly wanted to underscore was that the Trust Fund (VEBA) established to provide medical benefits to retirees will receive an initial allocation of 17.5%, with warrants representing the potential for an additional 2.5%. However, union claims the warrants issued to the retiree Trust fund have “terms far less advantageous” than those issued to the bondholders.
The union — with uncharacteristic aggressiveness — took on the media establishment: “Some recent news reports and opinion columns, including an editorial by the Washington Post on May 26th, have asserted that the division of equity is somehow unfair to bondholders because the retiree health-care fund will be receiving a 39% stake in GM, while the bondholders will only get 10%. As indicated above, this is simply NOT accurate. The retiree health-care fund will not receive, and indeed was never offered a 39% stake in GM. We would respectfully suggest that the Washington Post should have determined what the facts were, instead of issuing an inaccurate editorial based on rumors,” said Alan Reuther, Legislative Director of the UAW.
He went on to say that retirees’ health care claims have repeatedly been compromised, through concessions that were agreed to by the UAW in 2005, 2007, and now again in 2009. “As a result of the most recent concessions, retirees will incur substantial, immediate reductions in their health care benefits. When the retiree health care fund assumes responsibility for providing these benefits on January 1, 2010, it may be forced to make further significant reductions in health care coverage, depending on the value of the stock received by the fund.”
Reuther concluded, “In contrast, many bondholders purchased their bonds at sharply discounted rates. As a result, they are being asked to sacrifice a smaller portion of their claims.”