The Obama administration’s bailout of the United Auto Workers is the gift that just keeps on giving for the crony capitalists who run GM, which will always and forever be known as Government Motors at our house.
First, the Obama administration intervened and crafted special rules for the GM bankruptcy that cost the taxpayers about $30 billion and screwed bondholders in favor of UAW pension funds to the tune of billions. Those bondholders were, for the most part, state and municipal pension funds and private 401K funds.
The UAW also got control of one third of the company.
And then there was $10 billion in rollover tax credits that nobody ever talks about. The “old GM” had accrued losses that counted as tax credits on a one-for-one basis. In a traditional bankruptcy those tax credits would be wiped out. The Obama administration made sure that the UAW’s GM got to keep those in their engineered bankruptcy. Most analysts don’t add that $10 billion to the losses on Government Motors stock that the taxpayers were hit with.
Today, we get to highlight billions more in favors to Government Motors from the bankruptcy court.
A federal judge handed General Motors a multi-billion-dollar reprieve Wednesday, ruling that the company could not be sued in hundreds of death and injury claims related to the defective ignition switches that are estimated to have killed more than 80 people.
According to Judge Robert Gerber, GM’s government-overseen bankruptcy and reorganization in 2009 shields it from liability for actions the company had made previously, despite claims by the families of people injured or killed by the ignitions that GM had been misleading the court at that time about the ignition-switch woes in older, smaller cars.
Government Motors built tens-of-thousands of defective cars that killed at least 80 people. In any bankruptcy, when a company reorganizes and form a new company, the new company generally has no liability for the actions of the previous, now bankrupt, firm.
This particular case is a, or should have been, a special case.
Judge Gerber wrote in his 138-page opinion that while dozens of people at GM knew about the ignition-switch problem and chose to conceal it from the public and not issue a recall as the judge said the law required, there was no such misconduct by GM’s bankruptcy attorneys.
Executives at GM knew about the faulty switch that was killing people. Executives at GM withheld the information from the public, and their bankruptcy attorneys, over the course of the bankruptcy. The law required the release of that information. The law required a recall.
Because the attorneys weren’t told, there was no misconduct, and the claims are gone. It just depends on the meaning of “is.”
OK, we’ll grit our teeth and live with that. How about the executives at Government Motors who knew about the problem and willfully chose to withhold the information. Will they be prosecuted? Will they be taken to civil court for negligence?
We certainly hope so. But we doubt it. This is,after all, the Age of Obama.
Judge Rules Bankruptcy Shield Protects GM from Lawsuits
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