Chrysler to File for Bankruptcy

[Berkut]

No, I could not imagine they would use their equity stake to muck around with management decisions like pay and benefits.

I am sure if the new CEO comes along and tells them he is going to cut their salaries they will be all "OK, yous the boss Mr. CEO!"

And how exactly are they going to "muck around with management decisions" with a minority stake?  They'll get to nominate a minority of the board of directors, but otherwise they'll have no say over the operation of the company.

LOL, and who owns the bulk of the majority stake to oppose them?

Oh right, the US government. The ones who ahnded them that "minority stake" to begin with. The ones who ahve also sworn they won't involve themselves in the management of the company.

My disdain for the UAW is well know, but I would think even a fan of unions could see how screwed up this entire plan is.

[DGuller]

Not the first time, but I can understand your excitement since it worked so well the last time a European company owned Chrysler.

[Zanza]

Not the first time, but I can understand your excitement since it worked so well the last time a European company owned Chrysler.

Except this time it's not a European company with very deep pockets but rather a candidate for bankruptcy. I predict that Fiat-Chrysler will go bankrupt in the next three years or Fiat drops Chrysler again with the US government paying for everything.

[KRonn]

I really don't know whether to laugh, praise or cry over this stuff with GM and Chrysler. This isn't like the 80s when Chrysler was simply bailed out by the government, then got back on its feet, and paid off the govt/taxpayers. This is a whole sea change in the way these companies are run.

[Barrister]

No, I could not imagine they would use their equity stake to muck around with management decisions like pay and benefits.

I am sure if the new CEO comes along and tells them he is going to cut their salaries they will be all "OK, yous the boss Mr. CEO!"

And how exactly are they going to "muck around with management decisions" with a minority stake?  They'll get to nominate a minority of the board of directors, but otherwise they'll have no say over the operation of the company.

LOL, and who owns the bulk of the majority stake to oppose them?

Oh right, the US government. The ones who ahnded them that "minority stake" to begin with. The ones who ahve also sworn they won't involve themselves in the management of the company.

My disdain for the UAW is well know, but I would think even a fan of unions could see how screwed up this entire plan is.

But then your complaint is not with the UAW, but with the US government.  That complaint seems much more valid to me.  UAW may attempt to keep benefits and wages high but is still a rational actor and is not ging to drive the company into bankruptcy.  The US government though, since ever single Senator wants to have his say on the company, well I don't think they're so concerned...

[I Killed Kenny]

YUROPE OWNS THE USA!

Not the first time, but I can understand your excitement since it worked so well the last time a European company owned Chrysler.

I have no idea what you are talking about :p

[Berkut]

UAW may attempt to keep benefits and wages high but is still a rational actor and is not ging to drive the company into bankruptcy. 

But they've already done that. Why would I assume they would not do so again? They buy into the canard that if the company fails, it *certainly* can have nothing to do with their own salaries and bennies, or their lack of productivity - indeed, they *always* deserve more and more for less and less, by definition, so any failure is in spite of them, not because of them.

The UAW is going to look at this perfectly rationally - their goal will be to get as much money from the Fed as possible, for as long as possible. Which is their goal right now, and they are succeeding at it admirably.

Making good cars and returning a profit to the shareholders? Could not care less.

[Iormlund]

Making good cars and returning a profit to the shareholders? Could not care less.

To be fair I wouldn't care either about that if I were a blue collar worker at an auto assembly line. As an engineer, I can look at my finished work and take pride in it: "I've made this happen!". As someone who puts some bolts in the same place for years on end, I'd probably think much differently.

[Berkut]

Making good cars and returning a profit to the shareholders? Could not care less.

To be fair I wouldn't care either about that if I were a blue collar worker at an auto assembly line. As an engineer, I can look at my finished work and take pride in it: "I've made this happen!". As someone who puts some bolts in the same place for years on end, I'd probably think much differently.

Hey, I don't even have any problem with that - in fact, the *job* of the union rep is to take the best care of those he represents that he can, and get them the best deal possible, within the law.

Which is why the idea that they should (or would or will) somehow stop doing that is farcical. Hell, if I were a member of the union, I would be pissed if they did. They represent *me* not the shareholders.

Which is my point - a system where the people who repersent labor are in a position to dictate the operations of the company is bound to fail. Even if you love unions, you should be able to see that is the case.

It is like saying that we should let the defense attorney have a vote on the jury, or the DA for that matter.

[Barrister]

But they've already done that. Why would I assume they would not do so again? They buy into the canard that if the company fails, it *certainly* can have nothing to do with their own salaries and bennies, or their lack of productivity - indeed, they *always* deserve more and more for less and less, by definition, so any failure is in spite of them, not because of them.

The UAW is going to look at this perfectly rationally - their goal will be to get as much money from the Fed as possible, for as long as possible. Which is their goal right now, and they are succeeding at it admirably.

Making good cars and returning a profit to the shareholders? Could not care less.

Given that the UAW has agreed to some rollbacks of wages and/or benefits it seems they do appreciate that those wages and benefits are contributing to the financial problems Chrysler is facing at the moment.

While I agree the UAW isn't going to be concerned about the amount of profits for shareholders, but they certainly could care about Chrysler being a profitable company.  They know a money-losing Chrysler isn't going to get federal bailouts forever.

[Barrister]

Which is my point - a system where the people who repersent labor are in a position to dictate the operations of the company is bound to fail. Even if you love unions, you should be able to see that is the case.

It is like saying that we should let the defense attorney have a vote on the jury, or the DA for that matter.

Except that there are examples of successful woreker-owned companies.  There are reasons why lots of companies encourage employee stock ownership.  Volkswagen seems to be doing pretty well.

And your example of the jury is a good one.  The prosecution and the defense don't get a vote on the jury itself, but they have a vote on who gets into the jury.


It just seems like you have a giant blind-spot about unions, and UAW in particular.  There's plenty to not like about this deal, but you seem to say that any deal that gives the union an equity stake is always guaranteed to fail.  I don't think the evidence supports that assertion.

[Berkut]

I am saying that there is no reason to give the union an equity stake, and doing so is evidence that this isn't really about Chrysler, it is about the UAW and the Obama  administration looking out for them, rather than the American taxpayer.

And I am quite certain I have guaranteed nothing - but I see no reason to believe that giving UAW, the organization that has used its political muscle to drive the US auto industry into the ground, is somehow going to turn around and save it.

There might be a blind spot here, but it certainly is not mine. Is whatever structure that Volkswagen enjoys similar to that which we are proposing for Chrylser? Is that the model Obama is using? If so, I would love the hear more about it, but I don't think that is the case.

All unions are not bad, but we are not talking about all unions - we are talking about the one union that is a casebook example of everything that is as bad as it can be about unions.  This is the second time I've been accused of being iratioanlly anti-union, on the basis that I oppose the unions we are talking about.

But what do you expect - we aren't discussing the unions that work fine, in healthy industries, are we? We are talking about the UAW and the US auto industry, which is an utter and complete disaster, and in the other thread the various New York State public employees unions, which are partially responsible for the state being on the path to bankruptcy and are grossly over-compensated by any objective measure. They are not similar in any way, other than that they are both examples of how fucked up unions can be, and we would not be talking about them except that they are both great examples of their respective flaws.

[Zanza]

Which is my point - a system where the people who repersent labor are in a position to dictate the operations of the company is bound to fail. Even if you love unions, you should be able to see that is the case.

The German corporate governance code for stock corporations (e.g. Volkswagen, Daimler, BMW, Porsche) necessitates that 50% of the supervisory board members are worker's representatives. The other half represents the stock owners. However, the stock owners always have the president of that board who acts as a tie breaker, i.e. 50%+1 vote. While the supervisory board does not interfere with daily operations it still chooses the CEO and other management board members and must agree with strategic decisions (such as opening a new plant, big aquisitions). So having workers representatives (usually mostly union bosses) on the supervisory board does not necessarily make an economic enterprise unviable.

[DGuller]

The German corporate governance code for stock corporations (e.g. Volkswagen, Daimler, BMW, Porsche) necessitates that 50% of the supervisory board members are worker's representatives. The other half represents the stock owners. However, the stock owners always have the president of that board who acts as a tie breaker, i.e. 50%+1 vote. While the supervisory board does not interfere with daily operations it still chooses the CEO and other management board members and must agree with strategic decisions (such as opening a new plant, big aquisitions). So having workers representatives (usually mostly union bosses) on the supervisory board does not necessarily make an economic enterprise unviable.

I've heard of this before.  I'm curious, how does it work out in practice?  Does it lead to some unique German problems in corporate governance?

[Zanza]

Except that there are examples of successful woreker-owned companies.  There are reasons why lots of companies encourage employee stock ownership.  Volkswagen seems to be doing pretty well.

Volkswagen isn't owned by its employees. At least not more than a few percent (like a lot of listed companies I guess). The majority owner (50.6%) is Porsche (two very rich families), 20% is owned by the state of Lower Saxony which thanks to a law has a blocking veto (usually you only have that 25% of the equity) in strategic decisions.