When a promise is just words....

President Obama is talking tough on the auto industry issues. According to the NYT report,
"President Obama delivered an ultimatum to General Motors and Chrysler on Monday, telling them to adopt radical changes in short order or face bankruptcy — a move that came after a series of somber discussions in which he concluded that a controlled bankruptcy might be the best way to reorganize the two ailing auto giants. In the end, the president decided to throw the companies a short lifeline. He gave G.M. 60 days and Chrysler one month to avert bankruptcy and restructure on their own. But during that period, Mr. Obama warned on Monday, the automakers will have to drastically reshape their businesses in a way that experts say will severely shrink them. For G.M., the president’s decision means not only the loss of its chief executive, Rick Wagoner, who was forced out as part of the deal, but also some tough negotiations with the United Automobile Workers and bondholders, who have thus far balked at the company’s demands. Now the union will be asked to make even bigger concessions on a new wage and benefits contract and health benefits for retirees. The bondholders will most likely be forced to accept a deep discount on the price of their debt as well as agree to take G.M. stock in lieu of debt repayments."

One can understand bond holders taking a bath. After all, bond holders risk their principal for a return. Suppliers also take a risk when selling and receiving IOUs. But the retirees who worked at GM were promised pensions and/or health insurance. While Rick Wagoner and other management personnel shovel away millions (Rick is getting $23 million in payments after getting fired) the retirees are asked to take on a burden when they are no longer working. Obama is in fact encouraging this breach of promise, saying that the automakers have to be lean. He has not said that management needs to be hacked and paid a lot less, but has said that, in effect, the workers have to agree to lower wages.
The moral fabric of the country is being ripped apart. More frustration, and violent reactions, are to be anticipated.