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Labor & Government Takeover Chrysler   April 30th, 2009
This just keeps on getting stranger       

 
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Just when you think we can't get into stranger territory, we do.

Investors that had loaned Chrysler billions of dollars had the selfish gall to ask for 40 cents back for every dollar they had loaned rather than the 29 cents the government was offering.

Instead, President/Acting Chrysler CEO Obama insulted the bondholders and sent the matter to bankruptcy court where, apparently, the union (that invested no money) gets 55% of the company, Fiat (that's investing no money) gets 20%, the U.S. Government (that's loaned billions of dollars) gets 8%, Canada gets 2%, and bondholders (who've invested $6.9 billion) get nothing.

The new Chrysler is a four-headed mutant partially owned by two governments, the United States (8 percent) and Canada (2 percent). It will be run by an Italian automaker, Fiat Group SpA. Fiat will pour its fuel-efficient technology into U.S. factories owned by fuel-hogging Chrysler to pump out vehicles whose sales will be financed by GMAC...

Auto industry experts warned that Chrysler bond holders and dealers could fight bankruptcy proceedings, delaying the restructuring for months and possibly years.

"This is just nuts," said William Holstein, author of "Why GM Matters: Inside the Race to Transform and American Icon." "They don't know what they're talking about."...

Also, the government would appoint four of the members of a new six-member board of directors. Fiat would start with a 20 percent share and would be unable to acquire majority ownership until all outstanding U.S. loans were repaid...

The Obama White House set three benchmarks for Fiat to expand its ownership of the new company.

-- Provide Chrysler with European distribution of its current product line

-- Transfer its fuel-efficient technology to Chrysler's U.S. factories

-- Manufacture a 40-mpg vehicle under the new Chrysler brand name


So the union, having invested nothing, is now management to the tune of 55%--no word yet on how the union can be management and negotiate with itself on behalf of the union members.

Those entities that have invested the most money get little (U.S. Government) or nothing (bondholders).

The automobile manufacturer Fiat isn't willing to spend any money on this but gets 20%.

And even though the U.S. Government is only receiving 8% ownership, it gets to select 4 out of 6 (66%) members of the board of directors and will continue to pile money into the operation during bankruptcy proceedings. But that's ok because even though 8% is a raw return on "our" investment, the administration isn't interested in money. They're interested in using our money to control the company the way they want to (see below, re: 40mpg).

The good news is that Chrysler gets to sell its American cars to Europeans that don't want them while Fiat will get to sell its European cars to Americans that don't want them.

And while this new Chrysler-Fiat-U.S.-Canada-Union monstrosity is run by a lopsided Obama-controlled board of directors, the environmental lobby has a voice, too, by the mandate of the introduction of a 40mpg car to the U.S. market. Which is really why I think the Obama administration is using our money to prop up the company.

Boy, it just gives me a warm fuzzy feeling to know that someone was smart enough to come up with this amazingly insightful solution to the problem of not selling enough cars. What could possibly go wrong?

I have this nagging feeling that Chrysler is our new Amtrak. Meanwhile, I think I'm in the mood for a Ford Mustang.

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