I just do not like this: Although unions usually dread bankruptcy, for the U.A.W. Chrysler's filing could turn out to be the Cadillac of bankruptcies.

From The New York Times:

Labor unions usually dread bankruptcy, and for good reason. Their pay, benefits and pensions typically suffer significant cuts, as airline and steel workers can attest.

But for the United Automobile Workers union, Chrysler’s Chapter 11 case, which began in New York on Friday, could turn out to be — if the company survives and thrives — the Cadillac of bankruptcies.

The U.A.W., for example, has received upfront protection from the Treasury Department for its pension plan and the fund that will take over responsibility for retiree medical benefits.

Moreover, that fund, called the voluntary employee beneficiary association, or VEBA, will control 55 percent of the equity in the new Chrysler once it emerges from bankruptcy, and hold a seat on the Chrysler board. [If, Sid needs to add, everything goes according to the administration's plan, which it well may not.]

[T]he U.A.W. is also no ordinary union. Even though its membership at the Detroit automakers has shrunk to a quarter of its size in 1990, it still maintains tremendous influence in Washington, partly because of its heavy political contributions.

Because the union agreed to negotiate, it was made a partner, with the government and Fiat, in developing the plan to restructure the company.

In contrast, other companies often use bankruptcy as a way to gain leverage over labor, so that they can lower their costs. Workers at Bethlehem Steel, United Airlines, Delta Air Lines and US Airways lost all or most of their traditional pension benefits when those employers sought bankruptcy protection in this decade, though some of the shortfall was covered by the federal government. Retiree health care coverage was also cut.
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From a Wall Street Journal editorial:

President Obama's broadside against bankers [Thursday] illustrates better than any argument ever could that bankruptcy court, and not the political arena, is where Chrysler belongs. Yesterday's filing isn't the end of the U.S. auto industry, or even necessarily of Chrysler, and it offers the best chance to protect all parties under the rule of law.

"I don't stand with those who held out when everyone else is making sacrifices," Mr. Obama nonetheless declared, blaming what he called "a small group of speculators" for the car maker's Chapter 11 filing. To hear the President tell it, you'd never know that Chrysler had borrowed, and since frittered away, the $6.9 billion that it owes to those "speculators." The Administration had only offered $2 billion to those secured creditors as part of its proposed restructuring for the car maker. So it's hardly a surprise that many lenders would rather take their chances in bankruptcy court.

Chrysler's finances can now be restructured in a less political atmosphere in the New York courtroom of federal Judge Arthur Gonzalez. This is how the Chrysler collapse should have been worked out last December, when the auto maker first went looking for taxpayer cash. Treasury could have saved the $4 billion it lent the car maker at that time [and which Sid adds the government is forgiving, believe it or not], to which we can now add another $8 billion that Mr. Obama promised yesterday to keep the company going.

It's especially rich for Mr. Obama to blast the creditors for seeking "an unjustified taxpayer-funded bailout" while offering the UAW a 55% majority stake in Chrysler. He also praised the large banks that hold most of the Chrysler debt and supported the government plan. But of course J.P. Morgan and the other big banks are also recipients of billions of dollars in taxpayer cash and have a strong interest in playing nice with their creditor, Uncle Sam Obama.

The Chrysler creditors at least represent teachers, pensioners and retirees, among others. The Administration is advancing its own social and political agenda through its ever-deeper entanglement with Chrysler and General Motors. That explains why the government is giving 55% of the new Chrysler to the UAW's retiree-benefit trust, a junior creditor, while those ahead of the trust in line get a mere 30 cents on the dollar.

A senior Treasury official described the decision to give majority ownership to the union's health-care trust as simple pragmatism -- that keeping the union happy is essential to the long-term health of the car maker. A skeptic might respond that this is precisely the kind of political-business calculation that helped to drive Detroit's auto makers into this ditch.

Meanwhile, over at Detroit's other ward of the state, General Motors, [t]he GM drama will play out in the coming weeks before an end-of-May deadline, and it may also end up in bankruptcy court if Treasury doesn't make a better offer to creditors. That would be painful, but an independent judiciary is also the place where the rule of law and sound financial judgment can best prevail. That will ultimately serve taxpayers best as well.