Earlier this year, I filed a complaint with the Securities and Exchange Commission on behalf of autoworkers pointing out that GM and the UAW had failed utterly to warn GM employees of the risk of bankruptcy and its impact on the proposed VEBA health care plan.
The VEBA was supposed to be “bankruptcy remote” – secure against bankruptcy risk but it turns out that it is being used to help GM survive bankruptcy.
The SEC complaint was based on my research note, Proposed GM/UAW VEBA: House of Cards.
Sure enough GM is now, in essence, in bankruptcy.
And GM workers and retirees still do not know what will happen to their jobs, their pensions or their health insurance.
That is what the SEC exists for – to protect investors and GM sold the UAW a $4.5 billion convertible note without disclosing the risk of bankruptcy. If the UAW had understood what I laid out in the research note, they likely would have taken a different approach to bargaining last year.
Senator Corker, from Nissan, is proposing now that the cash flows into the VEBA be turned into even more worthless paper, GM stock. Of course, no evidence exists that existing GM bondholders will agree to this. In any case, the auto workers have ALREADY taken a huge hit – the convertible bond is now worth far less than its original face value.
Bankruptcy, whether prepackaged or not, whether or not with a bridge loan from the U.S. Government, is not the way to go. As I proposed in A Way Out for the Auto Industry the way forward is creation a new Public Trust Company that could issue long term low interest bonds to purchase the assets of the Big Three and manage them in the public interest.