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The managed bankruptcy of GM and Chrysler: A model for the assault on Detroit
World Socialist Web Site ^ | March 19, 2013 | Jerry White

Posted on 03/19/2013 3:31:15 AM PDT by RedBallJet

With Michigan governor Rick Snyder’s appointment of a financial manager in Detroit, the working class in the city is about to be subjected to a financial dictatorship modeled on the savage wage and benefit cuts imposed by the Obama administration during its forced bankruptcy and restructuring of General Motors and Chrysler in 2009. Like the auto workers, the city’s public sector workers and residents will be forced to sacrifice their jobs, pensions and the needs of their families to pay for a financial crisis they did not create.

The script is the same. According to the politicians from both big business parties and the corporate-controlled media, Detroit is burdened with “unsustainable legacy costs,” i.e., the pensions and health care benefits owed to tens of thousands of retired municipal workers and their families. “Antiquated work rules” are preventing 11,000 city workers from working efficiently. The only way out is to hand the city over to “turnaround experts” ready to make “tough decisions.”

Even the personnel are the same. The emergency financial manager chosen by Governor Snyder is Kevyn Orr, a lead attorney for Chrysler during the company’s restructuring in 2009. Orr made $700 an hour during the bankruptcy, 50 times as much as the $14 an hour poverty wage that the Obama administration was demanding of newly-hired auto workers.

Orr played the leading role in in convincing the bankruptcy court to allow the automaker to shut 789 of its 3,200 auto dealerships—one quarter of its total—wiping out an estimated 37,000 jobs in cities and small towns across the US. The Detroit News reported Orr gave the dealerships less than a month to transfer unsold inventory to other dealers and close their doors. “The company is trying to be compassionate toward its dealers,” Orr told the court in June 2009.

Unlike General Motors—which gave 1,300 closing dealers nearly $600 million in wind-down payments and 18 months to sell unsold inventory—Chrysler took a much tougher line, the News wrote. “The automaker opted not to provide any wind-down payments to its dealers. When a lawyer for the dealers, Stephen Lerner, said Chrysler was acting in an ‘unconscionable’ fashion and orchestrated a process that was ‘less than fair to dealers,’ Orr didn’t give ground. ‘We’re not here to negotiate,’ Orr said.” Orr, who will take over on March 25, will be paid $275,000 to be the hatchet man in Detroit. Even though Michigan voters repealed the EFM law, a rewritten law will give him dictatorial powers to tear up union contracts, dump pensions and sell off public assets, from the water department, transit system and municipal zoo, to streetlights, garbage collection and the art museum.

Detroit could follow the pattern established by the bankruptcy court, which it split up GM into a “new GM”—where profitable assets remained—and an “old GM,” where the automaker dumped its unwanted factories, brands and other financial liabilities. A “new” Detroit, free of unwanted obligations, including the wages and benefits of its workforce, and forcing its citizens to pay higher taxes and fees for privatized services, would channel the bulk of its revenues to billionaire hedge fund operators who control the city’s municipal bonds and other debt.

“Would there be pain in a massive restructuring of the City of Detroit managed by outsiders, either an emergency manager or bankruptcy judge?,” Detroit Free Press columnist Tom Walsh gloated. “Of course—just as there was at GM and Chrysler. Jobs lost, wages cut, bondholders stiffed, credit ratings mangled for a while.

“There’s nothing pleasant about those things when they are happening, but once all the surgery is done and the tough medicine is swallowed—or forced, if necessary, into body cavities—there is hope for both survival and revival in Detroit.”

The question is, “survival” for whom? After the 2009 restructuring, the auto companies have been raking in record profits—$11 billion alone last year alone—enabling Wall Street investors and auto execs to make a killing, including Ford’s Alan Mulally, who pocketed $21 million last year.

This was paid for by auto workers forced to accept a 50 percent wage cut for new-hires, the continuation of a decade-long wage freeze and elimination of cost of living adjustment raises, 10-hour work days and a new schedule that destroys the health and family lives of employees. All of this, including a ban on strikes, was agreed to by the United Auto Workers union, which in turn was given billions in corporate shares of Chrysler and GM.

After accepting the position, Orr insisted the restructuring of the auto industry was the model for Detroit, saying, “Chrysler, GM and Ford are back with a bullet.” The only “bullet” was the one fired at auto workers and their families.

Like the Obama administration in 2009, Orr is threatening to carry out a “managed bankruptcy” of Detroit to extract unprecedented concessions from city workers. “I am hopeful to engage in fruitful and productive discussions without the need to resort to bankruptcy,” Orr said last Thursday, adding that, “One thing everybody needs to know, if you go into bankruptcy, Chapter 9 of the bankruptcy code is weighted toward the municipality.”

In other words, if the unions prove unable to force city workers to accept savage wage and benefit cuts, then the bankruptcy court will impose this and much more on workers, retirees and city residents. “I don't want to pull that cudgel out unless I have to,” Orr said. “I’d prefer to pursue a consensual resolution…Don’t make me go to bankruptcy court. You won’t enjoy it.”

In 2009, Obama held the threat of bankruptcy and liquidation over the heads of auto workers. After working with the UAW to blackmail workers to vote for historic givebacks, the White House threw GM and Chrysler into bankruptcy anyway.

The city unions, just like the UAW before them, have signaled their willingness to impose deep concessions, only asking that bondholders also take some losses too in order to give the appearance of equal sacrifice. “What we are hoping for is that there must be concessions for more than just the work force, that those who hold bonds or debt also take a haircut,” said Albert Garrett, president of Council 25 of the American Federation of State, County and Municipal Employees (AFSCME), which bargains for 3,000 city workers, according to the Wall Street Journal .

City unions are reportedly seeking the establishment of a retiree health care trust fund just like the Voluntary Employees’ Beneficiary Association or VEBA operated by the UAW. Such a payoff to the unions—in exchange for imposing the dictates of the banks on their members—is the type of “consensual agreement” both Orr and the union bureaucracy can live with.

The “revival” of Detroit has nothing to do with improving conditions for ordinary workers any more than the revival of the auto industry did. On the contrary, it means securing the profits of the corporate financial elite through the pauperization of the working class. Every section of the political establishment—from Obama and Snyder to Orr, Mayor Bing and the Democrats on the City Council—functions as nothing more than debt collectors for Wall Street.


TOPICS: Business/Economy; Government; News/Current Events; US: Michigan
KEYWORDS: automakers
Rick Snyder for President!
1 posted on 03/19/2013 3:31:15 AM PDT by RedBallJet
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To: RedBallJet
The World Socialist Web Site?

Like the auto workers, the city’s public sector workers and residents will be forced to sacrifice their jobs, pensions and the needs of their families to pay for a financial crisis they did not create.

Sure, those poor unfortunate municipal workers and UAW workers at Chrysler and GM) didn't create this mess. Their unions did. The political party that their unions installed in power and kept in power did.

2 posted on 03/19/2013 4:00:05 AM PDT by Bryan
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To: RedBallJet

Detroit needs to be flushed down the toilet. Union thugs have destroyed the auto industry, just like the German workers socialist party union destroyed Germany. If there was ever a law in need, it is one banning unions from their extortion racket of forced membership.


3 posted on 03/19/2013 4:02:27 AM PDT by Neoliberalnot (Marxism works well only with the uneducated and the unarmed.)
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To: RedBallJet

I prefer we just nuke Detroit from orbit.


4 posted on 03/19/2013 4:03:34 AM PDT by PapaBear3625 (You don't notice it's a police state until the police come for you.)
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To: RedBallJet

Amazing how someone can be 100% wrong and yet make it sound good to low info people. Everything in this article falls apart on slight examination.


5 posted on 03/19/2013 4:06:37 AM PDT by Graybeard58 (_.. ._. .. _. _._ __ ___ ._. . ___ ..._ ._ ._.. _ .. _. .)
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To: RedBallJet

“After the 2009 restructuring, the auto companies have been raking in record profits—$11 billion alone last year alone—enabling Wall Street investors and auto execs to make a killing, including Ford’s Alan Mulally, who pocketed $21 million last year.”

Does that line of complete BS never get old?

Let’s see, Ford got how much of a bailout - oh that’s right - none.

They’ve made how much profit since he took over? Oh that’s right, several hundred times Mulally’s salary.

And of course, the critics on this subject aren’t biased at all in their criticism based on which political party people donate to?

That’s why their were no basketball, football, or baseball players on losing teams that made $21 million last year.

There were no movie stars that made bomb movies last year that also made $21 million last year.

And there were no useful idiot/liberals that made $21 million dollars last year (Glooomberg, the Clintoons, etc)

Criticism of salary has ENTIRELY to do with where your money goes in the political spectrum, and NOTHING to do with reality.


6 posted on 03/19/2013 4:11:22 AM PDT by I cannot think of a name
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To: RedBallJet
Like the auto workers, the city’s public sector workers and residents will be forced to sacrifice their jobs, pensions and the needs of their families to pay for a financial crisis they did not create.

Hores Hocky! The people DID do this by continually electing people that would do NOTHING. Zero simpathy here.

7 posted on 03/19/2013 4:14:33 AM PDT by Freeport (The proper application of high explosives will remove all obstacles.)
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To: RedBallJet

The scary part is that the “tough decisions” are being made by one of their own, not by a conservative.

When you see the socialists start splitting, you know violence is soon to follow....mostly against their own who speak out against those in power.


8 posted on 03/19/2013 4:23:28 AM PDT by Erik Latranyi (When religions have to beg the gov't for a waiver, we are already under socialism.)
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To: RedBallJet
Yep, the “World Socialist Web Site”

No mention of Barf Alert or any other purgative disclaimer of source.

RedBallJet
Since Feb 23, 2013

OK, we will see how long this lasts.

9 posted on 03/19/2013 4:26:11 AM PDT by Texas Fossil
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To: RedBallJet
Welcome to FR, you SOCIALIST TROLL!

Now get you worthless butt back to Hell where it belongs!

10 posted on 03/19/2013 4:38:35 AM PDT by Redleg Duke ("Madison, Wisconsin is 30 square miles surrounded by reality.", L. S. Dryfus)
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To: Neoliberalnot

>>Detroit needs to be flushed down the toilet. <<

It has already happened.


11 posted on 03/19/2013 4:46:55 AM PDT by freedumb2003 (Establishment Republicans don't like that totalitarian thing unless it is THEIR totalitarian thing!)
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To: Freeport

I have no sympathy for these people. They weren’t crying about when Big Zero robbed the GM of it’s pensions and gave it to the UAW. phock ‘em... it’s called Karma.


12 posted on 03/19/2013 4:48:48 AM PDT by strange1 ("Show the enemy harm so he shall not advance" Sun Tzu The Art of War)
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To: Springman; cyclotic; netmilsmom; RatsDawg; PGalt; FreedomHammer; queenkathy; madison10; ...
Think I'll take a pass on Rick Snyder for president.

Fiscal issues are the least of Detroit's problems and are the easiest to solve. Wait till the bill comes due in Chicago or LA and then we'll see a fiscal disaster. The real issues of Detroit are foundational (Family faith etc).

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Weekly/biweekly Michigan legislative action thread
13 posted on 03/19/2013 4:51:17 AM PDT by cripplecreek (REMEMBER THE RIVER RAISIN!)
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To: Redleg Duke
?????

Maybe he didn't follow our tradition of adding a "barf alert" to announce in the headline that he disagrees with the premise of the article, he did follow up with " Rick Snyder for President! ". Also his other posts look good.

Hold your fire unless you have more evidence that he is a socialist troll.

14 posted on 03/19/2013 4:51:29 AM PDT by KarlInOhio (Choose one: the yellow and black flag of the Tea Party or the white flag of the Republican Party.)
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To: RedBallJet

Another lesson learned in “Economics 101: There Ain’t No Such Thing As A Free Lunch”

Sweet.


15 posted on 03/19/2013 5:00:45 AM PDT by moovova
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To: RedBallJet

Question: What is wrong with Detroit?

Answer: 15 Billion in liabilities. Divide 15 Billion by 700,000 people and get the amount of debt each resident owes to the city.

Conclusion: Now you now why Detroit is in financial trouble.


16 posted on 03/19/2013 5:05:21 AM PDT by fatboy (This protestant will have no part in the ecumenical movement)
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To: Bryan

Right on target, Bryan.

“Sure, those poor unfortunate municipal workers and UAW workers at Chrysler and GM) didn’t create this mess. Their unions did. The political party that their unions installed in power and kept in power did.”

I know I’m preaching to the choir here, but the article reminds me of something I read a while back that shed some light for me on how Rome went from a Free Republic to a dictatorship:

http://www.nationalreview.com/articles/288949/rome-redux-michael-auslin

The more things change, I guess...


17 posted on 03/19/2013 5:47:43 AM PDT by Unc1e_Ivan (People sleep peaceably at night only because rough men stand ready to do violence on their behalf.)
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To: RedBallJet

“the city’s public sector workers and residents will be forced to sacrifice their jobs, pensions and the needs of their families to pay for a financial crisis they did not create.”

“Detroit is burdened with unsustainable legacy costs, i.e., the pensions and health care benefits owed to tens of thousands of retired municipal workers and their families.”

LOL. Contradicts itself in first two paras.


18 posted on 03/19/2013 5:49:36 AM PDT by fruser1
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To: Bryan

Like the auto workers, the city’s public sector workers and residents will be forced to sacrifice their jobs, pensions and the needs of their families to pay for a financial crisis they did not create.


I fully agree with you. These parasites sucked on the government and union teat until it ran out of liberal milk.

The people (animals) of Detroit are reaping the rewards of Socialism and Fascist rule. They pooped a huge pile in the street, now let them lay in it.


19 posted on 03/19/2013 6:04:20 AM PDT by DH (Once the tainted finger of government touches anything the rot begins)
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To: RedBallJet

Maybe Detroit should seize 10% of everyone’s bank account that lives in the city for starters. . ?
Its gotta start somewhere.


20 posted on 03/19/2013 6:54:53 AM PDT by ▀udda▀udd (>> F U B O << "What the hell kind of country is this if I can only hate a man if he's white?")
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To: ├čudda├čudd

>>Maybe Detroit should seize 10% of everyone’s bank account that lives in the city for starters. . ?<<

Hey, there is no need for radical solutions!

6% should do...


21 posted on 03/19/2013 7:01:00 AM PDT by freedumb2003 (Establishment Republicans don't like that totalitarian thing unless it is THEIR totalitarian thing!)
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To: ├čudda├čudd
Maybe Detroit should seize 10% of everyone’s bank account that lives in the city for starters. . ?

Nah, they'll go after those who live in the more affluent suburbs.

22 posted on 03/19/2013 7:03:36 AM PDT by dfwgator
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To: RedBallJet

Appears you are a proglodyte troll. I fear your degenerate comments are soon to be jotted.


23 posted on 03/19/2013 7:45:27 AM PDT by Neoliberalnot (Marxism works well only with the uneducated and the unarmed.)
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To: Freeport

Culture(s) of corruption 101!


24 posted on 03/19/2013 10:16:21 AM PDT by RedBallJet
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