The Chrysler Plan
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Tilted
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UAW Leaders Recommend Approval of Chrysler Deal
So, going forward, 90% of GM will be owned by the UAW and the U.S. government, and 90% of Chrysler will be owned by the UAW and Fiat.
Usually, when a parasite bleeds its host too much, the host dies, and so does the parasite. But, in this perverse, bailout-everything-that-moves world, when you try to bleed a company to death - the government makes sure it doesn't die, and actually gives the company to you. I wonder how hard it is to destroy a company when you actually own it?
So, going forward, 90% of GM will be owned by the UAW and the U.S. government, and 90% of Chrysler will be owned by the UAW and Fiat.
Usually, when a parasite bleeds its host too much, the host dies, and so does the parasite. But, in this perverse, bailout-everything-that-moves world, when you try to bleed a company to death - the government makes sure it doesn't die, and actually gives the company to you. I wonder how hard it is to destroy a company when you actually own it?
Tilted
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Fiat to Sign Chrysler Partnership Deal: Sources
We, the taxpayers, will agree to give Chrysler more money, if they can get the UAW and Fiat to agree to let them (Chrysler) give themselves to the UAW and Fiat. This is beyond crazy.
Just let Chrysler go, so that some other American auto companies have a better chance of prospering. At the very least, if we liquidate Chrysler, someone who actually believes in the viability of some of its parts enough that they are willing to put their own money into them, will put their own money into them. Maybe, that way, we will be able to extract some value from them so that their creditors get back some of what they are owed (without the taxpayer having to fork it over). That would be a much better alternative. But, I guess to the government, if they can't own Chrysler themselves, the next best thing is to make sure that the UAW and Fiat owns them.
This is getting exasperating. I'm really starting to wish that I didn't understand what is going on here, so that I could pretend that it isn't utterly abominable.
The clear winner here is Fiat - they are being given a ready made opportunity, without significant risk or capital investment on their part, to enter the American auto market and compete for a share of the low end of that market. It's a no lose proposition for them, and a no win proposition for the American auto industry. Not only is our government now in the auto business itself, it is also subsidizing the foreign competition for the American auto industry - unbelievable.
We, the taxpayers, will agree to give Chrysler more money, if they can get the UAW and Fiat to agree to let them (Chrysler) give themselves to the UAW and Fiat. This is beyond crazy.
Just let Chrysler go, so that some other American auto companies have a better chance of prospering. At the very least, if we liquidate Chrysler, someone who actually believes in the viability of some of its parts enough that they are willing to put their own money into them, will put their own money into them. Maybe, that way, we will be able to extract some value from them so that their creditors get back some of what they are owed (without the taxpayer having to fork it over). That would be a much better alternative. But, I guess to the government, if they can't own Chrysler themselves, the next best thing is to make sure that the UAW and Fiat owns them.
This is getting exasperating. I'm really starting to wish that I didn't understand what is going on here, so that I could pretend that it isn't utterly abominable.
The clear winner here is Fiat - they are being given a ready made opportunity, without significant risk or capital investment on their part, to enter the American auto market and compete for a share of the low end of that market. It's a no lose proposition for them, and a no win proposition for the American auto industry. Not only is our government now in the auto business itself, it is also subsidizing the foreign competition for the American auto industry - unbelievable.
Larry Gude
Strung Out
It'll be interesting to see how the UAW views profit and loss statements now that it is their P/L.
Tilted
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Chrysler Talks Seen on the Rocks as Deadline Looms
The key thing to note with Chrysler, is that we are talking about secured debt. So, these creditors would (or at least should) fair far better in bankruptcy proceedings than the GM bondholders would. They have more leverage and can demand better treatment.
If our government is intent on giving Chrysler to the UAW and foreign competition, it is likely going to have to kick in more money to buy off some of Chrysler's creditors. Either that, or it can assume that it will be able to exert pressure on the bankruptcy court to screw those creditors over, in an inappropriate way.
It makes no sense. Chrysler needs to be liquidated so that their good assets (Jeep?) can go to a deserving owner (i.e., whomever is willing to pay the most for them), and their debts can be paid as best as possible (and not by U.S. taxpayers).
The key thing to note with Chrysler, is that we are talking about secured debt. So, these creditors would (or at least should) fair far better in bankruptcy proceedings than the GM bondholders would. They have more leverage and can demand better treatment.
If our government is intent on giving Chrysler to the UAW and foreign competition, it is likely going to have to kick in more money to buy off some of Chrysler's creditors. Either that, or it can assume that it will be able to exert pressure on the bankruptcy court to screw those creditors over, in an inappropriate way.
It makes no sense. Chrysler needs to be liquidated so that their good assets (Jeep?) can go to a deserving owner (i.e., whomever is willing to pay the most for them), and their debts can be paid as best as possible (and not by U.S. taxpayers).
Tilted
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Indeed it will.
Larry Gude
Strung Out
That's one view. Another view would be that Chrysler needs to sell of their poor business's and focus on their good ones, Jeep, trucks, etc.
This is one of the key issues I am interested to see how it is addressed; government mandates, CAFE, the pressure to create green cars, etc.
Chrysler makes money, oddly enough, on the vehicles people want to buy.
Tilted
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That may be a viable option. It is hard to know how Chrysler, and in particular, its debt is constructed (e.g. which technical entities are tied to specific obligations).
Can they strip out brand assets and sell them as entities not encumbered by the associated debt? If they can't, then the individual brand assets may have negative value and won't interest any buyers. Would they have to sell actual physical assets? Do those assets have any value above that which they are used to secure?
How much total debt does Chrysler have, and when is it due? Is there enough there there to raise enough money to pay that which is due in the near term, and allow them to keep operating long enough to make profits? Or, is there no calculus whereby they can raise enough cash to pay the debts which are currently due, so that their creditors won't force them into bankruptcy anyway?
Tilted
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CNBC is now reporting that the Administration has indicated that the Chrysler talks have collapsed, and that bankruptcy proceedings are iminent. Of course, the Administration seems to be placing the blame on the secured debt holders who wouldn't agree to the terms, while the other parties (e.g. the UAW, Fiat) were willing to agree to the terms.
Of course they were, they weren't being asked to take a screwing. They were getting good deals, considering the situation. I would expect the party that was getting the shaft, taking into account the entirety of the situation, would be the one to balk at the deal.
This Administration has some audacity - not just for trying to ramrod these screwings through - but then for suggesting that the people who refused to willingly accept the screwings, are the ones to blame for Chrysler going to into bankruptcy. They are not - they are the ones who seemed to be negotiating in good faith - which is something that can not be said of the government in this matter.
Now, the question is - will this Administration try to compromise the bankruptcy process, so that certain debt holders get screwed anyway, to the benefit of its political allies?
Of course they were, they weren't being asked to take a screwing. They were getting good deals, considering the situation. I would expect the party that was getting the shaft, taking into account the entirety of the situation, would be the one to balk at the deal.
This Administration has some audacity - not just for trying to ramrod these screwings through - but then for suggesting that the people who refused to willingly accept the screwings, are the ones to blame for Chrysler going to into bankruptcy. They are not - they are the ones who seemed to be negotiating in good faith - which is something that can not be said of the government in this matter.
Now, the question is - will this Administration try to compromise the bankruptcy process, so that certain debt holders get screwed anyway, to the benefit of its political allies?
Larry Gude
Strung Out
Dude, what is this 'can they' business?
Can the federal government force it's way into banking? Insurance? Can the federal government provide warranty coverage on cars? There is no 'can or can not. It's all about 'what WILL they do?' now.
UAW, proud new owners of ALL the problems, now get to decide if work rules that pay people to sit on their ass is a good idea. They get to evaluate the relative value of old, inefficient plants and processes that show up like this
(123,456,789) on financials and decide what to do about it.
They get to start looking at models that are losers. They party is over. Now, they gotta decide. My view is, that with Uncle Sam providing the muscle they can damn well do what they please BUT they will have to face the music that, at some point, they will have had to chosen well.
Unless, of course, Obama just lets them mandate that we, the people, have to buy whatever they want to sell us.
Larry Gude
Strung Out
I do not see how, at this juncture, Obama can let Chrysler go into bankruptcy. If they shed costs and come back and look good, that is the death knell for GM/UAW/White House motors.
They can NOT let them get into bankruptcy and tear up UAW contracts.
nachomama
All Up In Your Grill
Obama administration official: Chrysler will file for bankruptcy now that negotiations with creditors have collapsed
CNN.com - Breaking News, U.S., World, Weather, Entertainment & Video News
CNN.com - Breaking News, U.S., World, Weather, Entertainment & Video News
Tilted
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You're right. But, I thought we we're talking about viable options outside of a context wherein the federal government was controlling the situation - you know, in a context where things like rule of law and contract integrity still have import, and have to be considered.
I realize that such a discussion is mostly an abstract theoretical exercise at this point, but I was trying to work within that context.
Larry Gude
Strung Out
You're right. But, I thought we we're talking about viable options outside of a context wherein the federal government was controlling the situation - you know, in a context where things like rule of law and contract integrity still have import, and have to be considered.
I realize that such a discussion is mostly an abstract theoretical exercise at this point, but I was trying to work within that context.
That may be a hate crime these day. I'd be careful, there. I only wish this was funny.
Isn't this just freaking amazing?
Larry Gude
Strung Out
Wow. Interesting.
Tilted
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I'm trying to find a citation and the text of the statement released by 'an administration official'. It is one of the more disingenuous statements that one could hear.
I'll translate to what it really meant. WARNING: I'm going to use graphic language, which I rarely do. But, this situation has gotten rather exasperating, and this is the best way that I can think of to express what was really said - minus the Administration's spin.
Translation of the statement:
'All of the people to whom we offered blow-jobs, agreed to take them. But the evil secured debt holders, whose anuses we offered to shove baseball bats up, refused because they are unreasonable and greedy. If you want someone to blame for this bankruptcy, it is them.'
I'll translate to what it really meant. WARNING: I'm going to use graphic language, which I rarely do. But, this situation has gotten rather exasperating, and this is the best way that I can think of to express what was really said - minus the Administration's spin.
Translation of the statement:
'All of the people to whom we offered blow-jobs, agreed to take them. But the evil secured debt holders, whose anuses we offered to shove baseball bats up, refused because they are unreasonable and greedy. If you want someone to blame for this bankruptcy, it is them.'
Larry Gude
Strung Out
I'll believe it when it's done.
Tilted
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I agree - the fact that the original statement which announced this development was mostly just overt PR rhetoric, might lead one to believe that there is on-going negotiation.
Are they or aren't they?!?!?!?!