Marvin Gandall writes: >> ----------------------- >> Something is up, as Daniel Davies says. The airlines are losing money, and >> bankruptcy in these cases is seen as a cheap and easy way of drastically >> slashing their present and future labour costs by having the bankruptcy >> judges, pressured by the companies and their creditors, strip employee >> collective agreements at the same time company pension obligations are >> transferred to the Pension Benefits Guaranty Corporation. It is a raw means >> of shifting responsibility for corporate failures from the directors and >> shareholders and lenders - where it belongs - to the workers and the >> taxpayers.
I think this is a fundamental misunderstanding of the underlying economic and legal reality. Let's assume that the bankruptcy laws did not permit a corporation to "reject" (i.e. refuse to perform under) a collective bargaining agreement and/or pension agreement. (BTW, it is not easy to reject such agreements in bankruptcy. The corporation is first required to make a good faith proposal that is rejected by the union/retirees, and then demonstrate that the balance of equities favors modification.) If the corporation is required to perform under the agreements, but the agreements render the corporation unprofitable, the corporation can simply choose to liquidate. The assets will be sold off (either together or piecemeal) to other corporations who will be under no obligation to assume any of the obligations of the liquidated corporation. Even if the rules are changed to require the acquiring corporation to assume the union/pension obligations, it is possible that no buyer will appear. In other words, if the union/retirement benefits are not economical for whatever reason, at the end of day, the benefits are only worth what they are really worth. Corporations fail for a lot of different reasons. Only ideological blindness will prevent you from acknowledging that a contributing cause of corporate failure can be a union that is too successful. It happened to the steel industry, and it is happening to the airline and auto industries. The union/retiree benefits were negotiated in a different economic environment and those agreements are coming back to haunt the corporations, which means they are now necessarily haunting the unions. Going back to the larger point, bankruptcy is essential to any well-ordered economic system, because the potential reality acts to moderate and rationalize the economic participants (or at least most of them most of the time). David Shemano
