Treasury Preparing for Chrysler Bankruptcy. The UAW announced that a settlement agreement has been reached with Chrysler, Fiat and the U.S. Treasury Department. When Chrysler’s Feb. 17 viability plan was rejected, President Obama gave Chrysler workers and the company a second chance, union officials said. This concessionary agreement, while painful, takes advantage of this opportunity.
The settlement agreement, subject to ratification by UAW members at Chrysler, meets the requirements of U.S. Treasury Department loans to the company. It includes modifications to the union’s 2007 collective bargaining agreement and the Voluntary Employee Beneficiary Association (VEBA) trust.
Peter Morici, an economics professor at the University of Maryland, and keynote speaker at NADCA’s upcoming Metalcasting Government Affairs Conference remarked that the treasury plan could affect the wallets of taxpayers. “The Treasury plan reportedly preempts the bankruptcy judge by guaranteeing worker pensions and retiree health care benefits. Similarly, this sets a dangerous precedent for General Motors and Ford.” Morici stated.
Morici further commented, “Obama’s favoritism toward the union in these negotiations is a clear example of political expediency imposing grave economic costs. Specifically, Chapter 11 makes the potential deal with Fiat to provide small car designs to be built in Chrysler factories much less likely. Hence, the company that emerges from Chapter 11 will be much smaller than the one that would have emerged through the task force’s mediation, because the company that emerges from bankruptcy may not have small cars to make at a time when the market wants them. More of Chrysler’s car assembly plants will be permanently shuttered.”
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