Labor unions usually dread bankruptcy, and for good reason. Their pay, benefits and pensions typically suffer significant cuts, as airline and steel workers can attest. But for the United Automobile Workers union, Chrysler’s Chapter 11 case could turn out to be, if the company survives and thrives, the Cadillac of bankruptcies.

For example the UAW has received upfront protection from the Treasury Department for its pension plan and the fund that will take over responsibility for retiree medical benefits. Moreover, that fund, called the voluntary employee beneficiary association will control 55% of the equity in the new Chrysler once it emerges from bankruptcy, and hold a seat on the Chrysler board.

Of course, those hard fought gains, and the big ownership stake, could be worthless if Chrysler does not make it. And the company’s fortunes continued to sag in April, when sales fell 48 percent compared with the same month in 2008. Chrysler will also have to wait roughly two years or more for new cars designed by its partner, the Italian automaker Fiat, to show up in Chrysler dealerships.

But for now, even though Chrysler workers had to agree to lower pay and less generous benefits as part of the deal, the UAW appears to be enjoying relative safety in helping steer the course of the Chrysler bankruptcy.

Mr Ron Gettelfinger president of UAW said that "I am very comfortable. It's not like we are going into this bankruptcy fighting with Chrysler and Fiat and the US Treasury. We are going in there in lockstep to put our agreements in place."

Ms Mary Jo Dowd partner in the financial and bankruptcy restructuring practice at Arent Fox in Washington said that "This is extraordinary, truly extraordinary. I never would have thought a year ago that this would occur. These are truly unusual times."

But the UAW is also no ordinary union. Even though its membership at the Detroit automakers has shrunk to a quarter of its size in 1990, it still maintains tremendous influence in Washington, partly because of its heavy political contributions.

In the case of Chrysler, the Treasury is giving the VEBA a USD 4.6 billion note, payable over 13 years at a 9% interest rate, helping to fund roughly USD 10 billion in liabilities. The rest will be paid in Chrysler stock. Chrysler's pension plans will be preserved, with the help of USD 600 million from Daimler.

(Sourced from www.nytimes.com)