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GM Bondholders Treated Unfairly as Union ‘Extorts,’ Corker Says

GM Bondholders Treated Unfairly as Union ‘Extorts,’ Corker Says

 

By John Hughes

May 5 (Bloomberg) — General Motors Corp., cutting costs to avoid bankruptcy, offered a better deal to a United Automobile Workers health fund than to bondholders, Senator Bob Corker said in an interview.

GM has offered bondholders 10 percent equity to give up $27 billion in unsecured claims. The union fund would get as much as $10 billion in cash and a stake of as much as 39 percent in return for waiving GM’s $20 billion in obligations to a retiree medical fund.

“It’s my understanding that the reason for that is their concerns that if they don’t give the UAW this, they will strike,” Corker, a Tennessee Republican, said today. “I just find that to be a surreal point of view.”

The UAW and GM management have contributed equally to the “sad state” the automaker is in today, Corker said after a briefing with the Treasury’s chief auto adviser, Steve Rattner. Now, “in essence, the UAW through threat of not coming to work, can extort 39 percent of the company.”

“It points to the bent of this administration,” Corker said. “My guess is there are plenty of folks in the country that would love to participate in those jobs at good wages not to extort the company for ownership.”

GM and its U.S. union are set to resume talks May 7 on a cost-cutting contract as the automaker pushes to meet a June 1 government-imposed bankruptcy deadline, people familiar with the process said.

Spokesmen at GM, Treasury and the UAW weren’t immediately available to comment.

To contact the reporter on this story: John Hughes in Washington at jhughes5@bloomberg.net

Last Updated: May 5, 2009 12:12 EDT
 

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