Today’s Big Question

Today’s big question is will bond holders take an equity stake in GM or risk a severe hair cut in bankruptcy court. I have no particular experience in Corporate US bankruptcy law so I am hard pressed to see the angles. It strikes me though that given the union has already accepted a swap and the Government the Bond holders are in a precarious state as the major principles have agreed to make the swap. Yet in this ideological climate where the non-governmental financial sector in the US has a huge sense of entitlement and there still exists tremendous ideological support for a certain noblesse oblige in official quarters when it comes to private finance I just can’t come to good sense of what the bondholders know that the rest of us don’t.

Canadians have a particular interest in all this because both the feds and the provinces have stepped in to provide financial support and the unions at Chrysler in any event are posed to take it on the chin. I personally find a debt for equity swap appealing; or in the case of workers a concessions for equity alternative more appealing than the gun of bankruptcy court.

It does beg the question, from a strategic point of view, if the CAW would not be smart to be making a concessions for equity play so that in the event that Chrysler did end up in bankruptcy they would appear to have already been willing to take on the risk and cast the bondholders in a dim light.

In some corners workers taking equity stakes in a context in which they do not enjoy control is a sticky wicket. I am sympathetic to this position, but I think with a little savvy they could play their equity stakes for bigger control. And the sticky wicket argument assumes that if workers take a stake they end up over-identifying with the company and its future viability as a capitalist enterprise and thereby internalise the boss’ voice in their head. That is likely true, but they do so independent of an equity stake in times such as these. So the real question becomes are auto workers capable of running a car company? I think the answer is yes and further I think they are capable of running better car companies than management. Line workers in tandem with engineers could do incredible things from better product design to better assembly design.

There is the argument to be made that when workers take the step towards managing themselves they take a step towards managing their economy.  And I can’t help but think that workers with better sense of how things work at each stage of finance production and distribution would be a useful paliative to today’s malaise and the glib attitude of our ruling class.

Perhaps a more aggressive stance around the bargaining table would enhance the opportunities for workers self control and direction. Perhaps not…but that is the really big question for today.

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