Skip to main content

Truth Squad: Did government give automakers to UAW, Fiat?

By the CNN Wire Staff
updated 2:41 AM EST, Thu November 10, 2011

(CNN) -- In Wednesday night's Republican presidential debate in Rochester, Michigan, former Massachusetts Gov. Mitt Romney said the federal government played too much of a role in saving automakers General Motors and Chrysler.

He said he would have preferred a private bankruptcy process rather than the U.S. government giving billions of dollars in loans and taking a stake in the companies in 2009.

Romney said after President George W. Bush's administration kicked off a process of loaning money to the automakers, President Barack Obama's administration eventually adopted a position close to his own, which was to have the companies go through bankruptcy. But he criticized the government's influence in the process, saying it essentially gave General Motors to the United Auto Workers, and Chrysler to Italian automaker Fiat.

The statement: "They gave General Motors to the UAW, and they gave Chrysler to Fiat." -- former Massachusetts Gov. Mitt Romney.

The facts: In 2009, both General Motors and Chrysler went into bankruptcy to restructure after receiving billions of dollars in federal loans.

As General Motors emerged from bankruptcy in July 2009, the U.S. Treasury took a 60.8% stake in the company in return for a $50 billion bailout. A trust established to fund health care benefits for UAW retirees -- not the UAW itself -- took a 17.5% stake. The Canadian government took a 12.5% stake, and unsecured bondholders were given a 10% share.

The trust fund came about as part of GM's restructuring. The UAW essentially agreed to shift responsibility for retiree health care costs away from GM to the union-controlled trust fund, consisting of company stock rather than cash.

Stock for the post-bankruptcy GM was available for public trading starting in November 2010. As of August, the U.S. Treasury still owned about a third of the shares, with the UAW fund owning about 12.8%, according to Fortune.

After Chrysler went into bankruptcy in 2009, a new Chrysler Group emerged, with Fiat owning a 20% stake in a deal brokered by the U.S. government, which took an 8% stake. A majority stake -- 55% -- was owned by a UAW retiree trust.

Fiat increased its stake over time, up to 53.5% by this July when it bought the last of the U.S. Treasury's shares. Union-controlled trust funds controlled 46%.

Verdict: Misleading. A UAW benefits fund -- not the union itself -- owns a part of GM. Another UAW benefit fund and Fiat took stakes in Chrysler, which -- like GM -- was on the verge of collapse.

CNN's Jason Hanna contributed to this report.

ADVERTISEMENT
ADVERTISEMENT