GM union retirees frustrated, angry at bondholders

By Soyoung Kim
WARREN, Mich., April 16 (Reuters) - When hundreds of
retired auto workers packed the union hall in this working
class suburb earlier this week, there were more questions than
answers about the fate of General Motors Corp .
The only consensus was on one point: If the 100-year-old
industrial icon is pushed into bankruptcy, it will be GM's
bondholders, not its workers, who are to blame.
"Bondholders are the ones that hold things up. That's why
the union's holding up," said Pat Fagan, retiree chapter
chairperson for the United Auto Workers union Local 160, which
represents hourly retirees from a GM technical center.
Under the threat of a government-financed bankruptcy, GM is
under pressure to cut $28 billion of unsecured debt by
two-thirds and pay half of its $20 billion of funding still due
to a union healthcare trust in equity, rather than cash.
The debt restructuring has brought bondholders and the
union to a standoff. With a limited pie available, a bigger
recovery for bondholders would mean less for retirees.
Fagan, who retired in 1991 after 31 years with GM, said he
and other retirees were open to the restructuring of the
healthcare trust if it meant that GM could avoid bankruptcy.
The trust, the Voluntary Employee Beneficiary Association
(VEBA), was the centerpiece of a contract the UAW and GM
reached in 2007 that made the automaker more labor cost
competitive.
Those concessions and others in 2005 helped cut GM's
retiree healthcare liability by about 40 percent, justifying a
higher payout to the UAW, the union has said.
For their part, bondholders have never said, at least
publicly, they wanted parity with workers in their recovery.
"My feeling is that between bondholders and the UAW, if
they turn their claims over to equity, it will be OK in a few
years," said Mike Reilly, a 56-year-old retiree. "If GM
recovers and the stock goes up, then we are ahead."
But the UAW could not afford to make the concessions first,
fearing that bondholders would not budge from their positions
and drag the automaker into bankruptcy anyway, Reilly said.
"I'm not saying I'm going to starve tomorrow, but I don't
have enough money to continue," Reilly said.
Outside the union hall where a monthly membership meeting
was about to begin, Reilly asked a nearby retiree how much it
would cost to buy private health care if GM went bankrupt.
"It's at least $500 per person," Tom Puwal replied.
At least one large GM bondholder is bracing for bankruptcy
by reviewing which courts may be most favorable to bondholders,
according to a source familiar with the matter.
They are worried that if the case comes to the Eastern
District of Michigan, GM and the union would have a home court
advantage in Michigan and the issue may draw protests in
Detroit and inflame emotional confrontations.
On the third Wednesday of every month, about 100 GM
retirees from the UAW local gather for a membership briefing
and a catered lunch.
This Wednesday, with GM just 45 days from a deadline for a
sweeping restructuring or facing a potential bankruptcy, the
union hall was packed with more than 200 retirees fearful that
their future might go down with the automaker.
The meeting started with a video message from UAW President
Ron Gettelfinger assuring retirees that the union was trying
its best to protect the membership. It was followed by a
question-and-answer session.
"It's a tough meeting because everybody is concerned about
the bankruptcy threat that's going on," Fagan said.
"They're asking questions we can't answer. All we can do is
to pray that it doesn't happen," he said.
Meanwhile, Michigan Governor Jennifer Granholm said on
Thursday she was working closely with the Obama administration
to help federal officials understand the ripple effects of a
potential GM or Chrysler bankruptcy.
"The administration is paying attention, and is very very
concerned about the ripple effect not only in Michigan but all
of states," Granholm said.
(Reporting by Soyoung Kim; Additional reporting by Poornima
Gupta; Editing by Richard Chang)
Keywords: GM/BONDHOLDERS

((soyoung.kim@thomsonreuters.com; Reuters Messaging:
soyoung.kim.reuters.com@reuters.net; +1 313 967 1903))

Keywords: GM/BONDHOLDERS

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