Why doesnt Chrysler cancel its UAW contract since it is filing bankruptcy?

When you file bankruptcy all of your contracts become null and void. So why isnt this the perfect time to get rid of the UAW's contract and pension expenses? That would have to help them become more profitable. Why in the world these auto makers ever agreed to these contracts is beyond my understand. Did they have Pee Wee Herman as their negotiator.

In the article I read it said a new company would be formed and that company would by the assets of Chrysler and also the union contracts. Who in their right mind buys a union contract?

Also, could some one please explain how the UAW ends up with 55% of the "New Chrysler". Did they pay off some of Chryslers debt? If anything Chrysler should be given 55% of the UAW.

Because they own Chrysler debt(bonds).

Thanks for the info. What is the dollar amount of bonds they owned? I am assuming it is a lot since all the other creditors took pennies on the dollar.

Ok I looked for Chrysler debt that the UAW owned. I found nothing. All I found is that the UAW was going to write a 4 billion dollar NOTE to its own health care trust fund. Darn, I need to start my own union. I want to be able to buy stuff with a note that is secured by my own existence.

reply to post by justsomeboreddude


That's basically what you do when you sign a mortgage note, credit card application, car loan, etc.

reply to post by inthesticks


Yeah but if i dont pay the bill to a mortgage or a car loan they come and take it. They cant take anything when you wrote a note to yourself. Plus I cant write one for 4 billion.

It is "my understanding" that part of the deal was that chrysler would maintain it's retirement and healthcare expenses.

I believe it was a concession to the unions who gave up some $$$$ also.

I also believe this was told and ok'd by Fiat group.

Not sure of the whole deal but employees always get paid ahead of creditors and bond holders in a corporate bankruptcy. I assume the UAW takes possession of the largest chunk of Chrysler because they manage the pension fund.

You don't really want Chrysler to stop paying the promised pensions and retirement moneys to people who worked there and earned it do you?

I would definitely say to renegotiate from this point going forward. If they want to be a successfully company ever again ditch the union.

Just a note:

Bankruptcy does not always mean cancellation of all debts. It can take many forms, including protection from creditors while restructuring your debts.

It depends on your final goals.