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Chrysler Bankruptcy: Political Payoff?

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According to reports, President Obama has forced Chrysler into the bankruptcy courts.

Obama claims he had no choice, that the lenders with a stake in Chrysler who refused to agree to the Administration's reorganization plan, which would have forced them to accept a two thirds write-down of the debt owed them by the company, forced the Administration's hand.  Among the holdouts were Oppenheimer Funds, Perella Weinberg Partners' Xerion Capital Fund, and Stairway Capital Management, although Perella Weinberg Partners, under what management termed “intense pressure from the White House," has agreed to accept the terms. The New York Times quotes Obama: “They were hoping that everybody else would make sacrifices, and they would have to make none,” Mr. Obama said of the creditors, among them several hedge funds and boutique investment funds. “I don’t stand with them.” The holdouts, however, countered with the very cogent argument that they are secured creditors, who, under US bankruptcy law, are entitled to being paid in full before unsecured creditors (in this case the UAW's Retirees Health Care Fund) are paid anything. They further argued that they were agreeable to taking a 60% writedown on the debt owed them for certain concessions, but that the Administration would not negotiate directly with them, preferring instead to deal only through J.P. Morgan Chase, which, as a recipient of TARP funds, is beholden to the White House, and therefore more pliable.

The bankruptcy plan proposed by the Administration will grant the UAW's Retiree Health Care Fund, the primary cause of most of Chrysler's financial woes, a 55% control of Chrysler, in exchange for the union's accepting company stock for 50% of what the automaker owes to the fund. For its part, the Administration agreed to lend the ailing manufacturer another $8 billion, above the $4 billion of taxpayer funds already provided it, and accept a role as a junior partner to the UAW, along with Italian automaker, Fiat, which will kick in its expertise in small car technology in exchange for a minority stake in Chrysler, reported to be 35%. Fiat is supportive of the bankruptcy plan because it will offer that company an opportunity to significantly prune its dealer network, which it sorely needs to do to remain viable itself.

The United Autoworkers, one of the nation's largest unions, has long been a major contributor to the Democratic Party and its candidates. It doesn't take a rocket scientist to see that the Administration's plan favors the UAW, which, ironically, is believed by many experts to be the principal reason for Chrysler's insolvency, thanks to the unbelievably generous concessions it has wrung from Chrysler management over the years.

According to The Wall Street Journal:

Fiat SpA Chief Executive Sergio Marchionne, seen as likely to take the helm of a restructured Chrysler, is counting on the bankruptcy process to move swiftly, allowing him to plunge into restructuring the troubled automaker. Over the next month, Mr. Marchionne will begin touring Chrysler plants and sifting through its other operations.

As majority shareholder, the UAW will have the largest block of voting shares in Chrysler, though only one seat on the manufacturer's board. It is difficult to believe that the union will play a silent role, either in the restructuring, or in the subsequent running of the company. Mr. Marchionne will undoubtedly be dogged at every step by union management, as they exercise the power over Chrysler and its management which has just been handed to them by the Obama administration in its eagerness to pay off a long-time, faithful political supporter.

One can only imagine what further concessions will be granted the UAW when Government Motors (GM) declares bankruptcy in the near future, as its Administration-puppet CEO has already predicted it will.

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About Clavos

Raised in Mexico by American parents, Clavos is proudly bi-cultural, and considers both Spanish and English as his native languages. A lifelong boating enthusiast, Clavos lives aboard his ancient trawler, Second Act, in Coconut Grove, Florida and enjoys cruising the Bahamas and Florida Keys from that base. When not dealing with the never-ending maintenance issues inherent in ancient trawlers, Clavos sells yachts to finance his boat habit, but his real love (after boating, of course) is writing and editing; a craft he has practiced at Blogcritics since 2006.
  • Bobby

    Turns out the real reason was Ford is involved. Ford and Fiat are partners in the Ka/500 microcar, and Fiat wants it coming. Ford has been in bed with Obama since the election season. Ford profits off this Chrysler seizure since they are partners with Fiat on the 500 microcar.

  • The Supreme Court today issued an unsigned order lifting the stay on the sale of Chrysler.

    To obtain a delay, or stay, someone must show that at least four of the nine justices find that the issue raised is serious enough to warrant hearing a full appeal and that a majority of the court will conclude the lower court decision was wrong.

    “The applicants have not carried that burden,” the court said.

    Just goes to show that there ain’t no use trying to guess what the Supremes are up to until it actually happens.


  • It’s like reading tea leaves; the only thing reasonably certain is that Justice Ginsburg (or the Court) will issue a subsequent order. It seems that the Court may intend to do something substantive, and that if it does it will order a briefing schedule. On the other hand, today’s order may just have been a way for the Court to get a little more time to decide what it wants to do. Since the Justice Department argued in its pleadings sent to the Court that if a stay were granted the sky would fall, that the U.S. economy would die and that life on earth as we know it would cease, I assume that Justice Ginsburg (a) was aware of that position and (b) decided that the sale should not be allowed to go forward immediately anyway. A betting man might put a (very) few bucks on the sale being delayed for quite some time and not ultimately being allowed to go forward.

    The next order may provide some additional hints; however, unless it revokes the stay and allows the sale to go forward immediately, it will probably be months before there is a really useful hint as to what the Court will ultimately do.


  • Clavos

    Does the granting of the stay have some meaning in terms of where the Court might be headed in regard to the Chrysler sale?

  • Justice Ginsburg of the U.S. Supreme Court just put a hold on

    the sale of bankrupt automaker Chrysler LLC to a group led by Italian carmaker Fiat SpA . . . pending further order of the undersigned or of the court. . . . Her order made no mention of when briefs in the appeal would have to be filed or whether the Supreme Court would hear the underlying legal challenge to the sale.

    Indiana pension funds and consumer groups had asked the Supreme Court on Sunday to stop the sale of Chrysler while they challenged the deal.

    The Obama administration had opposed such a stay. Grant of the stay may not mean that the Court intends to decide the merits of the pending bankruptcy litigation. However, had the Court denied the stay, any chance of that would have been extremely remote.


  • CommonSensical

    Clavos, please do not post my last comment. Thanks.

  • Bliffle

    “I’m not exactly certain how’s one to think about “privatizing the government.””

    That’s easy. For one thing we see right at the ends of our noses that when the financial corps found themselves going broke they crooked their fingers and summoned the government (at that time under Bush) to inject trillions into their companies. And the government complied, as if they were servants. That we see the new admin doing exactly the same thing is witness to the pervasiveness of the corps ownership of the government.

    Indeed, one must conclude that the government has been privatized by the corps.

    Therefore, the government has been reduced to taking wealth from citizens to deliver it to corps. Government has become the tax collector of the corps. It’s neo-feudalism.

  • One of the best pieces I have yet read by George Will. Should be a required reading for everyone.

    It’s this “blurring” that I find most disconcerting. Political and economic decisions must issue from different quarters. I’m also concerned about his appraisal of the politicians. Don’t they see they’re doing their country a great disservice. I’d be willing to accept the present state as a temporary measure; I am afraid, however, that it promises to be much more than that – a permanent arrangement to the detriment of all concerned.

    If there’s one point I would oppose this administration, it’s the possibility that that’s precisely what they have in mind. And this, if anything, should be the rallying cry of all Americans, regardless of their political persuasion.

    Again, I can only hope that what we’re seeing right now is but an attempt to remedy the abuses in the past in order to start with a clean slate. But if it viewed, instead, as an opportunity to remake the society after a wholly different image, then we’re indeed in a bad shape.

    Again, great article, Clavos.

  • Clavos

    Here’s a somewhat oblique “response” to your comment, Roger.

    Oblique AND bleak — in the picture it paints.

  • I second Clavos, especially as regards the second point. Very interesting and insightful. I’m not exactly certain how’s one to think about “privatizing the government.” The “obvious” meaning would be to run the government “as a corporation”? How? In a similar manner that, say, prisons are being run (on behalf of the government) as private concerns? The “hidden” meaning may simply be a matter of corporate influence within the sphere of what should be political decisions; and we’ve had that all along. So the “intended” meaning may be a matter of degree – a kind of marriage or merger between government and business, which is to say, the notion of Corporate Statism taken to the limit.

    Either way, both polar opposites offer a very bleak future. The makings of (or the blueprint for) the NWO?

    What do you think, Clavos?

  • Clavos

    I think it’s terrible that Obama would use his state power to manipulate private companies in favor of union contributors. I think it’s terrible that corporations would demand (and get) tribute from the State while holding the economy hostage.

    I agree — on both counts.

    What I see happening is a schism in the Corporate Statist establishment between those seeking to socialize corporations and those seeking to privatize the government

    That’s an interesting (and insightful) point, bliffle. I think you’re right, but I wonder whether the schism may not be somewhat one-sided in favor of the socializers, if for no other reason than that the greater power would seem to lie with those holding the reins of government.

    Regardless, it’s a provocative observation. I need to think more about it.

  • Bliffle

    I think it’s terrible that Obama would use his state power to manipulate private companies in favor of union contributors. I think it’s terrible that corporations would demand (and get) tribute from the State while holding the economy hostage.

    What I see happening is a schism in the Corporate Statist establishment between those seeking to socialize corporations and those seeking to privatize the government. We’ve breached many walls between corps and the state. The sham of private/public partnerships is starting to bite us (as it has in other societies before us).

    It may be too late to back off and separate state from business.

  • Clavos


    That’s a cogent article, I saw it earlier. Thanks for linking it here.

    I’ve noticed that over the past few days there have been a number of articles, published in a variety of venues, talking about the issue of Mr. Obama’s behavior vis-a-vis the Chrysler bankruptcy.

    I’m pleased that my article was one of the earliest on this issue to appear anywhere.

  • Clavos

    Ahem. My bad.

  • Clav,

    The link in my #36 works for me. Here it is again.


  • Clavos


    Re your #36. There appears to be a link missing?

  • Bliffle, you say,

    It certainly appears that the Obama administration is arbitrarily putting the interests of the UAW ahead of interests of certain ‘preferred’ investors, but this is simply a case of ‘turnabout is fair play’ since previously the interests of those certain investors were arbitrarily put ahead of the UAW.

    I’m not aware of the “arbitrary” nature of any prior bankruptcy or other proceedings involving the UAW and current holders of preferred stock in Chrysler. Perhaps you will elaborate.

    Although “turn about is fair play” may have some visceral appeal here for some, I nevertheless question the wisdom of having that concept whimsically and prospectively replace the rule of law. If it is to replace it, it might be well to add a section to the U.S. Code substantially as follows:

    “All laws will hereafter be construed and applied based on the concept of ‘turn about is fair play’ depending on the past, and the anticipated future, political contributions and other support from the parties.”

    This would, at least, provide a small element of consistency and therefore of predictability. However, it could easily be found objectionable by those who think that the “turn about is fair play” model should be applied, for example, in favor of members of various historically disadvantaged groups despite any failure on their part to make munificent political contributions. It is also possible that the concept should be applied only in some cases, rather than in all. The proposed statute embodying “turn about is fair play” doubtless needs a bit of work. Well, no matter.

    Cf Comments 102, 105 – 106, and 108 – 115 here.

    Alternatively, maybe the Technorati Monster should be put in charge and allowed to do whatever it thinks best.


  • This article presents the Chrysler bankruptcy debacle in an interesting context. The first paragraph presents this hypothetical twist:

    “Imagine if President George W. Bush used strong-arm tactics to bend the law to favor a politically connected company with $1.2 billion in assets, including a private golf course. What if that company’s political action committee had spent $13 million in the previous election, including more than $4 million to elect him?”

    Worth reading and considering.


  • Is the “Digg” icon missing up there so I can digg it, or is that a glitch. My previous comment was posted twice because Technorati Monster escaped again.

  • All I want is for the 75,000 mile/7 year warrantee on my ’04 Sebring Convertible to be honored.

  • Some contracts are necessarily broken when a company goes belly up and can’t meet all its obligation, so to be falling in situations such as these on “the sanctity of contract” clause (or credo) is somewhat circular or self-serving – depending on the arguer’s intent. Chrysler made a pitch, and the investors bought it (the so-called “cross-section” of America):

    “These creditors, by the way, represent something of a cross-section of America: the University of Kentucky, Kraft Foods’ retirement fund, the Bill and Melinda Gates Foundation, pension funds, teachers’ credit unions, and so on.”

    And if they’ve done so on the assumption that there was no risk involved (going by Chrysler’s promises), then they were fools.

    The article is a political exhortation on behalf of the multi-nationals at the expense of other creditors, as is Clavos’s defense of the article – and there’s nothing wrong with that as long as we recognize it as such; and so is Bliffle’s counter-argument. Political disputes usually are over values, and each sides does its best to marshal the best argument possible.

  • Clavos

    ‘anyone else’ in this context means anyone already in line.

    Now you’re trying to have your cake and eat it too, bliff.

    Previously you said the seniority of ther bondholders didn’t count because those who came after would supersede them; now, you say it won’t count because those who precede them will have priority.

    Your arguments are far more flawed than that article’s.

    Laughably so.

  • Bliffle

    Here are a couple of direct quotes from Clavos’ citation to CBS news:

    “During its slide, Chrysler borrowed money from lenders and in return signed a contract promising that as so-called senior creditors, they’d get paid before anyone else if the company went under.”

    ‘anyone else’ in this context means anyone already in line. They can’t promise the future.

    “A normal bankruptcy filing would be straightforward. Senior creditors get paid 100 cents on the dollar. Everyone else gets in line.”

    Impossible if the assets don’t amount to enough money to pay 100 cents on the dollar.

    The cited article is too flawed to be taken seriously. It’s just a political exhortation.

  • Clavos

    I read the citation, which is in the POLITICS section, not the business section or the economics section.

    Which is where it should be; the issue long ago transcended business or economics; it became political when the White House stuck its nose into it.

    Nobody is placed first in the liquidation line forever.

    And none of them are asking to be. In fact, the holdouts are among the most recent lenders.

    And nobody is guaranteed 100% of their money back:

    And they aren’t asking for 100%. As the article notes, they are willing to settle for 50%, but are only being granted 5 to 9% by the White House proposal.

  • Bliffle

    I read the citation, which is in the POLITICS section, not the business section or the economics section. That’s because the article is partisan politics.

    They advance the sacristy of contracts, but there is no such thing. Contracts are revoked and nullified and even re-negotiated every day. Only a very naive businessman would think that a contract he holds is sacred. A contract IS a good arguing point, however, and can often be used to engage the other party in expensive litigations,as we see the courts are filled with.

    The BoD is the supreme law of a corporation, and when the corp faces an existential threat extraordinary measures are called for and the Board would be remiss not to use them in the fight to survive.

    Anyway, the article is wrong. Nobody is placed first in the liquidation line forever. And nobody is guaranteed 100% of their money back: that is impossible to promise.

  • Clavos

    Lest anyone still retain illusions as to the depth of the White House’s role in the Chrysler debacle, here’s a statement, published today in an article from CBS News, from Thomas Lauria, who heads up the bankruptcy practice of the White & Case law firm:

    that he was threatened by Steven Rattner, the White House’s auto task force chief. (A White House spokesman denies making any threats.)

    “…I represent one less investor today than I represented yesterday,” Lauria said on a Detroit radio show. “One of my clients 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. That’s how hard it is to stand on this side of the fence.” Lauria said that his clients were willing to compromise on 50 cents on the dollar, but the government offered them only 29 cents.

    In the same article,Clifford Asness, managing partner at a $20 billion hedge fund named AQR Capital Management, which is one of the creditors accused by last week by Obama of “Endanger[ing] Chrysler’s future by refusing to sacrifice like everyone else,” had this to say, “the president’s attempted diktat takes money from bondholders and gives it to a labor union that delivers money and votes for him.”

  • Great point, bliffle. For all my thinking about it, this never really occurred to me. Rather than competing in the market place and earn their way to the top, they each started to view one another as targets – hence mergers and acquisitions and their globalization.

  • Bliffle

    The Invisible Hand was destroyed 30 years ago as Tyro Execs discovered that they didn’t have to make the corp successful FIRST to become successful and rich themselves. In fact, they targeted successful companies where they could enrich themselves fabulously while destroying the corp itself.

  • Bliffle, the whole invisible hand you mention in 23 went out the window with the bailouts.


  • Bliffle

    “…The bondholders are legally entitled to preference, however they may have attained that status,…”

    Not exactly. Only if one issue of preferred stock was issued. Seldom the case as a corp matures.

    Successive issues of preferred are called something like “Preferred issue B” or “preferred issue C”, etc., and successive issues pre-empt the lead position in the liquidation queue.

  • Bliffle

    “…he’s not acting in the best interests of either the corporation …”

    But nobody actually acts in the best interests of the corporation!

    The premise of the Free Market system is that when each party acts totally in self-interest then benefits to the corporation will follow.

    It’s the good ole’ “invisible hand”!

    Is it not so?

  • Clavos

    Good recap of the Chrysler’s financial contretemps over the past several decades, bliffle, but it doesn’t refute my points that:

    The bondholders are legally entitled to preference, however they may have attained that status, and:

    Obama, by giving the UAW a preferential majority stockholder stake is simply repaying their substantial contributions to the party and to his own campaign; he’s not acting in the best interests of either the corporation nor, especially, the taxpayers, who are footing the bill for the $12 billion being handed gratis to Chrysler, and by extension the UAW.

    For the record, the UAW gave the Dems a total of $25 Million between 1989 and 2008, but even so, was far from the biggest labor donor to the party, that slot belongs to AFSCME, The American Federation of State, County, and Municipal Employees (the bureaucrats), with a total of $40 Million.

  • Bliffle

    It certainly appears that the Obama administration is arbitrarily putting the interests of the UAW ahead of interests of certain ‘preferred’ investors, but this is simply a case of ‘turnabout is fair play’ since previously the interests of those certain investors were arbitrarily put ahead of the UAW.

    Historically, when the management of Chrysler defended against salary demands of employees they diverted immediate rewards into deferred rewards by creating retirement plans and medical benefits. At that time these liabilities (which were unfunded, the supposition being that Chrysler would always be making suitable profits that could pay into the funds later, a risky proposition) were ‘preferred’, i.e., they were first in line in case of bankruptcy.

    But, with the passage of the time and the various dips in the auto industry, Chrysler had financial problems and turned to investors for support. In each case they had to sweeten the deal offered to capitalists by offering new equity on a ‘preferred’ basis, i.e., putting the investor first in line at liquidation.

    Indeed, when the USA bailed out Chrysler with a debt-for-equity deal thirty years ago they made the US Treasury ‘preferred’ (along with other smart demands, which we would do well to imitate now) which paid off well for the treasury.

    Thus, the new investors elbowed aside the old investors, whose objections were weak since denying ‘preferred’ status to new capital would probably cause a ruinous liquidation. Notice that old investors get pushed back in the line, too, unless, of course, they pony up new money to be part of the preferred class.

    How can they do that? Well, the Board Of Directors are the supreme law of any corporation. They can do anything they want to do, make any offer they want to make. Plenty power. Which is what leads to all the games and wars and finagling that goes on in the BoD.

    Every citizen should make themselves familiar with this stuff since it is at the heart of our economic system. They should teach it in the schools. TV should explain/reveal it in the dramas and soap operas that flood the airwaves (I think they are in too much hurry to get to the juicy sexy parts of corporate shenanigans). I had hopes for “Dallas” at one time, until it degenerated into standard soap opera.

    As for political alliances, one can hardly doubt that previous capital investors failed to back their favorites and make their interests forcibly known to those politicians as well. Indeed, they would have been remiss not to.

    So this article is basically ‘much ado about nothing’. Clavos is simply exploiting the pathetic ignorance of BC auditors to advance a political position.

  • Clavos

    Here’s a cogent editorial followup from The New York Times about the Chrysler deal, which says in part:

    Chrysler workers’ concessions, similar to those granted earlier this year at Ford Motor, form the basis of a prenegotiated labor agreement with the new Chrysler, people involved in the negotiations said.

    Chrysler’s pension liability will shift from the defunct company to the new one, these people said, and workers will continue to have a lucrative contract.

    Despite the concessions, Chrysler’s most senior workers, like those at Ford, still have healthy wages and benefits; bountiful health care coverage, at least until it is adjusted; and subsidies to help bolster unemployment benefits they receive while plants are closed, as they will be at Chrysler for weeks until the sale is final.

    That carryover is unusual, Ms. Dowd said, since the buyers of assets in bankruptcy cases normally try to purchase them free and clear of their existing liabilities.

    It also means the union will not have to come to terms with Fiat once it takes over the company, or risk having its contracts abrogated.

    As I pointed out in the article, the UAW is getting a real sweetheart of a deal; a reward for its unflinching (and financially generous) support of the Democratic Party, and in particular of Mr. Obama.

  • Doug Hunter

    “I understand that The Law prefers to pay off the Capitalist class at the expense of workers.”

    It makes sense if you forget the size of the company. Equity partners are simply the owners. The owners borrow money for the business. In the event of bankruptcy you pay off the debt, not divide assets among the owners to keep, or hand out the money to your favorite employee. The law makes sense and without it, it would cripple the ability of businesses to borrow money. People with hundreds of millions or billions would still be rich and even more barrier to competition so they still win.

  • Because their union gave more to the Democrats than anyone else.

    End of story.


  • art

    $12 billon government capital injection divided by Chrysler’s 54,000 employees = $22,000 per employee. Why do they deserve so much more to save their jobs than America’s 3-million, and growing, unemployed?

  • Clavos

    Word is that Fiat is expecting to get Opel out of this deal somehow, which is fascinating since Opel is owned by GM.

    Well since Obama will be running both Chrysler and GM, he shouldn’t have too much problem giving Opel to Fiat.

    My Dad had a Spyder, back in the 60s. It was a POS.

  • Word is that Fiat is expecting to get Opel out of this deal somehow, which is fascinating since Opel is owned by GM.

    I’m just glad I can count my Dodge truck as the third Fiat I’ve owned along with my old 124 Spyder and 131 Station Wagon.


  • Clavos

    Yes it does, Ruvy, and it’s one that is quite appropriate to the article when it’s is used to modify “money.”

  • Ruvy

    Just thought I’d remind you folks – fiat has a meaning other than a brand of car. Just reminding myself what a really old fart I am, I guess….

  • Clavos

    Any portrayal of FIAT as a producer of antiquidated junk is just nonsense from the uninformed…

    Hmmm. Did someone say that?

  • Clavos


    Nice pun!

    I am reminded of the old admonition: “Hire a teenager, while they still know everything.” These days, that extends to the thirty-somethings and even into the…oh, hell — never mind.

  • FIAT cars are, in fact, excellent. I’ve spent a lot of time in Europe, and know, have owned, and rented FIAT and Alfa Romeo cars. The technology and quality is very good, the style is fantastic, and If you thought having more small cars in America will be a boring hell, then you’ve never driven a FIAT.
    Forget what your college roomate told you in 1974, most of the problems arose from US safety and emissions regs, dealer issues in the US, and Russian steel which the company unfortunately obtained in a deal for a factory there. I myself had a 1978 FIAT 131 sedan that was the most enjoyable economy car you could imagine… still on the road 30 years later, too.

    Any portrayal of FIAT as a producer of antiquidated junk is just nonsense from the uninformed… and they make midsized cars, trucks, and commercial vehicles too- not just little 500s.

    IMO, they are going to surprise a whole lot of people.

  • Clav,

    Well, yes. But we old farts must now doff our hats and bow as the parade passes us by. A nation of laws was good while it lasted, but apparently it is time to Moveon.


  • Clavos

    M a rk,

    I understand that The Law prefers to pay off the Capitalist class at the expense of workers. Whose law is it, after all?

    Be that as it may, but I recall reading somewhere that ours is a system of laws, so until we change the system to something else (or change the laws themselves), the secured lenders are correct (and lawful) in their stance.

    I do keep in mind the 500,000,000 idea.

  • M a rk

    The point is, the lenders have secured notes, which under the law, are preferential, and they rightfully are insisting that they be paid before any deals are made with the UAW.

    I understand that The Law prefers to pay off the Capitalist class at the expense of workers. Whose law is it, after all? Maybe this flu will become a real killer and knock off a few percent of the population…employment problem solved.

    Remember to remember: 500,000,000 or Bust!

  • Clavos

    The impact would depend on how the liquidation was structured; for example, the Jeep division would likely be sold off in toto, because it’s viable and profitable, but I don’t think any details have been worked out for that scenario.

    The Administration might be trying to “save jobs;” they owe the UAW, as I pointed out in the article, however, the saving of jobs in the scenario of a bankruptcy is marginal at best, since Chrysler’s problems stem from obligations to retirees, who aren’t working anyway, so saving active jobs has already been relegated by the Administration to a secondary position vis-a-vis the retirees Fund.

    The point is, the lenders have secured notes, which under the law, are preferential, and they rightfully are insisting that they be paid before any deals are made with the UAW.

    Obama will of course insist that his intent is to save jobs, but my point is that, with the deal he’s proposed, in reality he’s trying to pay back the union for its support at the expense of Chrysler’s secured lenders and the taxpayers. Unless he offers a bankruptcy plan under which the company can get out from under the payouts to the retirees, the bankruptcy scheme is doomed to failure anyway because Chrysler’s financial obligations will not be sufficiently lessened.

    The bottom line is that this bankruptcy proposal is doomed to failure down the line, but first the company’s preferred lenders and the taxpayers will be screwed some more.

  • M a rk

    How would a liquidation impact the workforce compared to this ‘restructuring’. Sounds like the administration is hoping to save jobs.

  • Clavos

    M a rk, the principal sticking point seems to be that the lenders are more in favor of a liquidation of Chrysler, which they assert would mean considerably better payout than the government is offering. According to this WSJ article, the payout would jump from 15 cents on the dollar offered by the Administration to up to 70 cents in a liquidation.

  • M a rk

    Clavos, you report that the Funds, “…argued that they were agreeable to taking a 60% writedown on the debt owed them for certain concessions…”

    Do we know what these concessions were?

  • Ruvy


    The AFL-CIO formula of “more” has been the nemesis of intelligent business management in the United States for decades. It killed off the newspaper industry, and is now killing off the auto industry.

    Ironically, the Obama administration is forcing down the UAU’s throat the very strategy it should have been pursuing 50 years ago, a strategy of seeking control of the voting shares AND the board of directors. By the way, that strategy was pursued successfully in Germany and worked for many years – until the Germans annexed East Germany. East Germans were used to pretending to work while the government pretended to pay them. Now, former East Germans are just plain dysfunctional in the German economy and are dragging it down all the time. The West Germans got what they wanted – and it went all wrong….

    Are you beginning to enjoy these constant ironies popping up all over the place? The United States finally seems willing to enact universal health care – and is too broke to pull it off? The United States reaches out its hand in friendship to Iran – only to have the Persians spit at it.

    I know you don’t believe in G-d – but for my money, G-d has one nasty sense of humor.