The End of Chrysler

This is one damn mess and it's going to get worse. Now that this corpse of a car company is in bankruptcy, terrifyingly bad decisions are being made by the Obama administration. Most offensive is that the senior secured debt holders (such as Oppenheimer Funds), who should be at the top of the receiving end, have had their arms twisted to settle for less, much less. Ridiculed as financial scavengers and parasites by the president, their corporate bond holdings were reduced to pennies on the dollar. That this doesn't get challenged in court will surprise me.

And guess who gets 55% of the newly emerged Chrysler... the UAW! Apparently the unfunded pension obligations that would have vanished under a typical bankruptcy are now worth over half of the equity in the new corporation. Of course, the UAW performed a lot of heavy lifting for Obama's election and this is the apparent reward.

Don't forget, Uncle Sam gets a slice of the reissued stock. I guess that for the billions we will waste on this colossal mistake, we as taxpayers should be grateful. I'm not. The first 8 billion from the TARP money we loaned Chrysler will never be repaid. That's a given. So is the unfortunate reality that Chrysler will be on the tit of the US Government for years to come.

That egregious outcome, alone, will prevent me from ever purchasing a Chrysler product again. I wonder how many other Americans agree with my viewpoint.

Speaking of repayment, or the lack thereof, how does Chrysler make any money once out of bankruptcy? Their passenger cars are poorly made and unpopular. Even the Chrysler 300, a reasonably good looking sedan, is getting long in the tooth - it was introduced in 2004 as a 2005 model - now 5 years old. About all they have going for them are the minivans, Dodge trucks and Jeep franchise. Will buyers have any confidence that these brands are still viable... even with the US Government standing behind their warranties (how that's going to work is any body's guess)? Fiat, who built such unremarkable cars that they had to leave the American market in 1984, is volunteering technical and manufacturing expertise. For no cash investment, they are getting a minimum of 20% stock and most likely, the unenviable task of managing this newly emerged Frankenstein of a car company. Oh, and they also have to manufacture a 40-mpg automobile in America... most likely the Fiat 500 I mentioned in an earlier post. How many American workers will they need for one bombed-out plant in Detroit to build an Italian automobile?

All that, in an automobile market that has yet to recover any sales momentum in the current economic downturn. Where is there any chance for success in this boondoggle?

Perhaps it is unfair of me to ridicule the efforts some good people are putting forth to save an American icon. So I offer this plausible alternative. Chrysler goes into bankruptcy just like hundreds of other companies over hundreds of years have, and takes it chances. No more bailouts. No phony partnerships. No disregard for the lawful obligation of debt.

That's the formula to save another American icon: Capitalism!