I'm sure if I spent enough time I'd be able to find the precise detail of the proposed Plan of Reorganization to permit Chrysler to quickly escape bankruptcy. But at this point, it seems clear that the secured lenders--those that thought they were pretty much at the top of the heap in the capital structure, right behind the government -- will only be getting 29 cents on the dollar and a kiss goodbye. There's been little detail published, but presumably the unsecured creditors, including the suppliers, leaseholders, suppliers of services, and so forth will take a similar deal or even less.

But what about the other major stakeholder in Chrysler--the UAW? Here's what I've been able to determine from reading the national press...

The UAW threw all new employees under the bus and agreed to substantially lower hourly wage rates and benefits for those yet-to-be-hired. When will that benefit Chrysler? Long after the current UAW officers are retired and the current muckety-mucks in the Fed are long gone, I'd guess...years in the future.

I've read nothing about any substantial wage cuts agreed to by the UAW for existing union members. Certainly nothing that will bring the UAW workers even close to the lower wages and benefits of the non-union people making foreign brands in U.S. plants.

The UAW made a big deal about abandoning the benefit whereby laid off workers get paid a substantial portion of their wages even when laid off. It used to be 95%, as I recall. That sounded good, but recent press coverage says that the workers laid off from virtually all the Chrysler plants closed as the result of the Chapter 11 filing are collecting 80% of their straight-time pay. And they're complaining about it! I saw one UAW member interviewed on TV complaining, "...they cut my layoff benefit to only 80%, but my cost of living stays at 100%. That's not fair." That sounds like a pretty sweet deal to me--and not very much of a "give back" by the UAW at all.

The UAW has agreed to take Chrysler common stock as a portion of the funding of the new VEBA trust, which is supposed to fund retiree health insurance benefits. It turns out that the VEBA, run by the UAW, will own 55% of Chrysler as the result. But then in a Wall Street Journal article today, the plan also includes certain unidentified cash contributions to the VEBA required from the "new" Chrysler.

Have the retiree pensions or health benefits been reduced as a part of the UAW's contribution as a stakeholder? Not at all from any of the articles I've read. Chrysler retirees still count their UAW insurance as "primary" and Medicare as "secondary" even after age 65. If you didn't have to pay any premiums or co-pays and have ridiculously low deductibles, wouldn't you?

So what conclusions can be reached from all the current press coverage of the bankruptcy? It sure seems to me that the secured lenders are being required to do almost all the heavy lifting to make the Chrysler Plan of Reorganization work. The Plan being pushed by the Fed leapfrogs the UAW over the secured lenders, regardless of their credit and security agreements. The Fed-induced Plan abrogates both commercial as well as bankruptcy law.

The UAW has chipped in virtually nothing other than the wages and benefits to be paid to future workers. Of course, those wages and benefits will be subject to upward negotiation the minute Chrysler's chart changes from a flat line to a few occasional bumps of positive cash flow. That applies to the funding plan for the VEBA as well. What is part of the Plan of Reorganization to permit Chrysler to escape Chapter 11 becomes fully negotiable again, once the bankruptcy referee bangs the gavel and puts the kids back out in the schoolyard.

I don't think it's just because I'm a retired banker/lender that this plan doesn't seem very fair to me. Is it "fair" that a UAW retiree who worked all his life with the expectation of promised pension and benefits be required to take a haircut on those benefits even though he had nothing to do with the sad financial condition of his former employer? No, not really. But is it any less fair that a lender who made a secured loan to Chrysler with the expectation that the bankruptcy law protected their position in the pecking order of creditors, only to find that the government made their credit and security agreements not worth the paper they're written on--before the question of their position in the bankruptcy is even presented to a judge?

It makes me wonder how much pressure the Fed put on the banks that lead the secured lending facility to accept the (the Fed's) Plan proposal. Has it escaped anyone's attention that the lenders who were resisting the proposal were all hedge funds or mutual funds and not subject to Fed supervision and regulation? I think I can hear the threats now--"...take the 29 cents on the dollar or get ready for a whole lot of stress on your stress test and a whole lot more regulation from us. If you don't cooperate, we'll own even more of your bank than we do now. Either cooperate or suffer the consequences. Don't complain about the UAW owning Chrysler--if you don't cooperate, you'll be holding your shareholder's meetings at the Treasury building, because we'll own you. Besides, how many voters can you deliver anyway?"

A simple question might be...if you were a bank or a lender of any kind, would you extend large amounts of credit, even if very comfortably secured and documented with rock solid credit and security agreements, to a large company whose employees are heavily unionized and members of a large national union? At least for the next generation of bankers, the answer is likely to be "never again". If the banks won't lend to such companies because of this experience, who does that leave as the lender of last resort to such large companies?

Wait! I just looked in the mirror and I think its ME! (And as another taxpayer, YOU as well!)

Comments?