Summary of Corker proposals the UAW rejected

Jackson Baker, the accomplished senior editor of the Memphis Flyer provides us with the draft “Corker plan”, which was still open to enhancements and proposed “specific conditions on the Detroit 3 automakers to ensure these companies make the necessary changes that would allow them to be viable and competitive for the long-term while protecting any taxpayer investment. A responsible plan should have far more accountability and preserve strong competitive jobs across our country.”

Following are changes it proposed: Comments in parenthesis are mine.

1)Debt Load Reduction (bond holders would have to write off approximately 400 million of their 600 million in prior loans made to Detroit. They would receive stock only in exchange for their losses. If the stock doubles they would still most likely have net losses from their original loans and unpaid interest.)

2)Wage Cost and Work Rule Competitiveness (foreign car makers in the US make more cars with 240,000 workers than the UAW creates with 340,000 members whose work rules defy productivity. UAW members receive far more than the workers of foreign car makers in total compensation from benefits and wages)

3) Changes to VEBA Payments (Half of the cash commitment Detroit has to the VEBA would be paid in stock. If the stock doubles, the VEBA would probably be ahead)

4)Elimination of Jobs Bank and Supplemental Unemployment Benefits (These are arguably the result of “mistakes Detroit management made 20 years ago” which Carl Levin as a captive of the UAW failed to recognize at the time and which he refuses to give voice to now, willing only to say the mistake was not to increase fuel efficientcy “among others”.  Utter political hypocrisy.)

Begin Corker Summary:

First, the legislation would require that participating companies reduce their outstanding unsecured debt obligations by at least 2/3rds by forcing bondholders to accept an equity swap or debt for debt and equity swap. At current levels, the companies have unsustainable debt loads and cannot have long-term viability without significant reductions. Government money would be wasted if it were to come in on top of existing debt holders with no reductions on outstanding debt.

Second, in an effort to make these companies more competitive with foreign automakers that operate in the United States, the legislation requires that the “all-in” labor costs and work rules of the Detroit 3 be immediately brought on par with companies like Nissan, Toyota and Honda as certified by the Secretary of Labor.

Three, the legislation would require that changes in payments to the UAW VEBA accounts occur to help the liquidity and cash-flow of the automakers. Specifically, it would require that at least half of any scheduled payment be made in stock.

Four, any compensation (outside of customary severance pay) that occurs for workers who have been fired, laid off, furloughed, or idled is immediately terminated. This will allow the companies to accurately size their workforce and not continue to be saddled with the labor costs associated with programs like the JOBs Bank and other arrangements that force continued pay–even when no work is going on.

Funding will immediately go out to companies but they must achieve a reduction in debt load by March 15, 2009 and then additional funding for UAW agreements in place by no later than March 31, 2009.

Failure to adhere to any one of these conditions by any such date will result in the requirement that the company file bankruptcy under Chapter 11. (End Corker summary)

This seems reminiscent of the refusal of Arafat to accept the Israeli offer of a peace settlement during the Clinton administraton. Instead he decided to start the “intifada” because it was better for the Palestinian people. While that was not true then or now, his choice certainly preserved his corrupt rule.