Monday, May 04, 2009

You Can't Fix Chrysler By Fiat...

I've attempted to stay out of the political mess for awhile now (mainly by not blogging), but this comic seems to summarize my latest view on the Presidential administration as of late. I've taken a wait-and-see approach when it came to President Obama. I actually liked many of the things he was saying early on because they actually sounded like ideas that were thought out and well-reasoned. He seemed to stress personal responsibility, parental help on education, a renewed focus on domestic issues that required common sense, not just money being thrown at them, etc.

I didn't necessarily enjoy how the media and a mass of people fawned all over him with the idea that he would answer their every heart's desire. I also didn't like the Republican response (equaled by the Democrats during the Bush administration) that everything the man says must be wrong and countered by an opposing idea. But, after all, that is American politics.

But as this comic sort of demonstrates, and as many people opposing Mr. Obama have "known", he has spoken one thing and done something different on a number of occasions. The most recent one that irked me was the restructuring of Chrysler. Fundamentally, I have no problem with letting that ship sink (I have owned two Dodge Stratuses and they both had major quality issues). When President Obama forced their hand into making the tough decisions quickly and decisively, something they should have been doing for the last several years, I applauded him.

However, what has come of the situation is disconcerting... Just before bankruptcy started last week, the government offered the major debtholders 30 cents on the dollar repayment and very little control over the company after the company exited bankruptcy. Perhaps that should have been enough for them seeing as how they made a poor investment and the government was offering them an out. But the government was trying to save this company, and thus it makes more sense to try to stay on-board and try to recoup their losses... Hopefully far above 30%. Some of these lending institutions noted that the only companies who were applauding the government's plan were those who were already given government money (TARP), whereas those who stayed out of the housing and credit mess were going to lose their hat over this deal. These untarnished groups called themselves the "Non-TARP Lenders to Chrysler." So they decided to say no to the deal feeling it wasn't a good one while noting there were strings being pulled on those companies who were already hand-tied by the government. One article snarkily stated that "the government in essence called the group's bluff - since lenders are worse off in bankruptcy than outside of it." Bluff?? This is no standard bankruptcy! (I'm no expert in business bankruptcy, but I seem to recall the fact that in a standard Chapter 11, most lenders get a first dibs in whatever is sold off.)

Let me to further demonstrate some of the stench eminating from this deal: The party posed to receive the largest portion of this whole deal just happens to be the group largely associated with the company's demise (outside of the old leadership's ineptitude): the United Auto Workers union! A 55% share to be exact. The same group who strongly supported Mr. Obama, and hundreds of other Democrats, on their way to office, I might add! Granted, some sources say that even a majority share of stock in the company won't get the UAW more than one seat at the board member table and hardly the ability to run the company, as seen in previous deals with United Airlines and other companies.

What's interesting here, however, is the fact that the greed of the union will cause it to almost immediately have to sell off its share of those stocks just to pay for the pensions and retirees' health benefits it tirelessly worked for over the last several decades. Many of those shares will be sold to Fiat, an Italian automaker who specializes in smaller, more fuel-efficient vehicles (which I'm ecstatic over after driving a 50 mpg turbo-diesel car in Wales for the Feast), who will take controlling share of the company and hopefully prop it back up into a respectable company once again. This isn't necessarily a sign of the Beast power rising as Germany has already tried to revive Chrysler, via the Daimler Group, and failed.

I may be stretching, but this all sounds metaphorical to me... Think about it: Political wranglings over greed and special interests of a mismanaged organization leading to failure, requiring help from a foreign conglomeration who won't be able to untangle the major issues that got them into the mess in the first place. Thus causing this foreign entity to eventually dismantle it, sell off the profitable parts and destroy the rest due to its unsupportable weight. Hmmm, that sounds like the predicament the U.S. is finding itself in. Okay, that's probably trying to read too much into it. :) Stay tuned to find out...

1 comment:

Lyndell said...

Cerberus private equity was also in the Chrysler mess. GM and Chrysler's problems are long in the making and won't be fixed in 90 days nor giving them 5 or 10 talents, er, more money.

BTW: I couldn't see the comic with that link.