Sen. Corker: The Auto Bailout Failed Over 3 Words

This morning on The Opening Bell I talked to Sen. Bob Corker about the failure last night to get the deal passed through the Senate. It is now dead as we know it, although the White House opened the door to access the TARP funds while we spoke to the Tennessee senator. This story is fraught with problems. If you allow them to fail, we will pay more in the long run. If you give them the money, you know they will need and ask for more.

To Corker's credit he negotiated some very important deal points.

1. Give existing bondholders 30 cents on the dollar to reduce their overall debt load.

2. GM's outstanding UAW VEBA deficit (Voluntary Employee Beneficiary Association) is $21 billion. He required the UAW to agree to take half or $10.5 billion of that payment in GM stock.

3. The existing wage levels would have to become commiserate with their counterparts at the Japanese and European automakers. He required a date in 2009 by which they would agree to decrease their wages to the standard levels across the globe.

4. The UAW had to agree to do away with payments to workers who were still receiving full compensation for up to four years even after their jobs ended.

On point No. 3 the UAW would not concede saying they were willing to live with the new wage changes in 2011 when their contract expires.

If you think about the fact that GM has a market capitalization of just $2 Billion dollars, it's amazing to look at the funds we are considering sending their way. On the other hand, the systemic risk may be greater than anyone of us realizes.

Stay tuned. Looks like Paulson will come up with the funds and the UAW will have to concede on the wage front if they want to survive. This is the last option they have and Treasury Secretary Paulson is not happy about doing this.

Take a look at the three words Corker said prevented this deal.