Saturday, May 2, 2009
Obama Forcing Chrysler into Bankruptcy
President Obama's unprecedented move to force Chrysler into bankruptcy leads the New York Times to call it "yet another extraordinary intervention into private industry by the federal government." The new Obama "lease" on Chrysler's future will cost US taxpayers $3.3 billion in up-front bankruptcy bridge financing and another $4.5 billion in exit financing. That up-front financing may not last if bankruptcy proceedings drag out. Under the deal, Chrysler won't beginning selling Fiat-designed cars until 2011. The company will the United Auto Workers holding a 55 percent stake in the firm!! The government would appoint four of the members of a new six-member board of directors, and Fiat would start with a 20 percent share - and would be unable to acquire majority ownership until all outstanding US loans were repaid. Many analysts are wondering how Chrysler would function in the short-run. "We've never done this in America — to have a union having majority control," Holstein said. "If (current CEO) Nardelli is out and Fiat's not in management control, who is running the company? The US government? The Canadians? Is it a labor and government coalition? I mean this is brand new territory and historically governments and unions don't do well managing companies." Don't forget about General Motors, Obama will be forcing deeper cuts there while the government becomes the controlling shareholder. He will also be overseeing the radical downsizing of G.M.’s work force as he is trying to reverse rising unemployment. Didn't he just read off the teleprompters that he has been busy creating hundreds of thousands of new jobs??!! Sounds to me like this administration continues to destroy economic value all over this coutry of OURS!!
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UDATE!! It is being reported that Steven Rattner, the White House’s auto task force chief, “directly threatened” to wreck the reputation of the investment firm Perella Weinberg Partners if it continued to oppose the Obama administration’s reorganization plan. This isn't a report by an unknown, low level individual, rather by a senior person, well known and respected - Thomas E. Lauria, the White & Case lawyer representing the handful of hedge funds calling themselves the Committee of Chrysler Non-Tarp Lenders.
ReplyDeleteMr. Lauria said that Perella Weinberg “was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight.” Later, in an interview with ABC News, he identified Mr. Rattner, the head of the auto task force, as having told a Perella Weinberg official that the White House “would embarrass the firm.”
Sounds like strong-arm tactics to me ... dirty politics! Let's watch as this plays out in court!!