Micbael Perelman wirtes: >> I never knew about that law. I do know many cases in which labor >> contracts were abrogated & none when permission was denied. >> >> Am I missing something?
The applicable law is 11 USC Section 1113. I googled away and here was the first link: http://www.unitedafa.org/res/b/res/2_1113_summary.asp., which provides a nice summary in the context of a union informing its members of the progress of the UAL bankruptcy. There have been some law review articles discussing the empirical effects. I could send you some cites if you want. The big picture here is that the restriction on abrogating union agreement applies in chapter 11 (reorganization), but not chapter 7 (liquidation). Just as the best leverage for an insolvent company is the threat to turn over the keys to its lender, an insolvent company may be limited in its ability to abrogate its labor agreements, but it can always threaten to convert to chapter 7 if the union doesn't play ball. I have said several times, and you don't have to believe me but it is true, employees are officially and unofficially a protected class of creditors in bankruptcy cases. The major constituencies go out of their way to try and protect employees from the effects of the reorganization process (to the extent practicable). Firing employees, or cutting wages and benefits, is a lot harder practically and emotionally than stiffing a vendor/landlord.bondholder. In fact, the failure to proactively address labor expenses is probably the number one mistake businesses (especially small businesses) make when they start to face financial difficulty. The auto industry is relatively sui generis in the sense that the labor and retirement obligations are such a large share of the operating expense structure. There is simply no way to adequately restructure the balance sheet without modifying the labor and retirement obligations: no modifications, then no auto industry in which revenues exceed costs. David Shemano --- Original Message--- To: "David B. Shemano" <[EMAIL PROTECTED]>, "Progressive Economics" <[email protected]> From: "Perelman, Michael" <[EMAIL PROTECTED]> Sent: 12/08/2008 5:56PM Subject: RE: RE: [Pen-l] Re: GM >> >> >> Michael Perelman >> Economics Department >> California State University >> michael at ecst.csuchico.edu >> Chico, CA 95929 >> 530-898-5321 >> fax 530-898-5901 >> www.michaelperelman.wordpress.com >> >> -----Original Message----- >> From: [EMAIL PROTECTED] >> [mailto:[EMAIL PROTECTED] On Behalf Of David B. Shemano >> Sent: Monday, December 08, 2008 9:54 AM >> To: Progressive Economics >> Subject: RE: RE: [Pen-l] Re: GM >> >> Michael Perelman writes >> >> >> Getting back to Jim's point about protecting contracts, the treatment >> of >> >> GM workers is another example of an attempt to abrogate contracts. >> >> Randomly picking Michael's comment among others to respond to, as I have >> stated multiple times on this list, union contracts are uniquely >> protected under the Bankruptcy Code, which, after all, is precisely >> about abrogating contracts. The Bankruptcy Code essentially grants >> companies an absolute right to "reject" (i.e. stop performing under) >> their contracts. Uniquely, there is a specific Bankruptcy Code >> provision that restricts the ability of a company to reject a labor >> agreement -- the company must demonstrate that it has exhausted good >> faith bargaining efforts and that the equities favor rejection. As a >> practical matter, not an easy thing to do -- the company must >> essentially convince the bankrputcy judge that the company will have to >> liquidate if it can't revise the labor agreement. >> >> Regarding GM, the bondholders are going to inevitably take a massive >> haircut, as will the unions. The only question is how much money the >> existing GM constituencies (management, labor, bondholders) can suck out >> of the taxpayer before the haircut takes effect. >> >> David Shemano >> >> >> _______________________________________________ >> pen-l mailing list >> [email protected] >> https://lists.csuchico.edu/mailman/listinfo/pen-l >> _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
