By on July 21, 2011

Video from Chrysler’s last “new day,” shortly after being bought by Cerberus in 2007

According to Chrysler Group’s latest 8K, filed with the SEC today

On July 21, 2011, Fiat North America LLC, a wholly-owned subsidiary of Fiat S.p.A. (collectively, “Fiat”), acquired beneficial ownership of the membership interests in Chrysler Group LLC (the “Company”) held by the U.S. Department of the Treasury (“U.S. Treasury”) and the Canadian government’s special purpose entity, the Canada Development Investment Corporation (“Canadian government”). Fiat acquired 98,461 Class A membership interests in the Company from the U.S. Treasury, representing approximately 6 percent of the fully-diluted ownership interest in the Company for cash consideration of $500 million. Pursuant to a separate agreement, Fiat paid $125 million to acquire 24,615 Class A membership interests in the Company from the Canadian government, representing approximately 1.5% of the fully-diluted ownership interest.

Pursuant to these self-funded transactions, Fiat became the owner of a majority of the membership interests in the Company. Fiat now holds 55.3% of the Company’s outstanding equity, or 53.5% on a fully-diluted basis, taking into account the occurrence of the third and final Class B Event described in the LLC Operating Agreement which is expected to occur by the end of 2011. The remaining equity in the Company is owned by the UAW Retiree Medical Benefits Trust, a voluntary employees’ beneficiary association trust (the “VEBA”).

That’s right, the United States taxpayers are now fully-divested from their “investment” in Chrysler, which is now a majority-owned division of Fiat. Once the EPA certifies that Dodge’s new Fiat-based compact car gets 40 MPG unadjusted combined (about 30 MPG in “window sticker” EPA mileage), Fiat will get another 5% of Chrysler’s equity, bringing its stake in the company to 58.3%. In a statement, the Treasury estimated the final cost of the bailout to be $1.3b (as it does not expect any meaningful recovery from Old Chrysler’s liquidation), although that does not include several taxpayer outlays, without which the rescue of Chrysler would not have been possible. By our math, the total bill for Chrysler’s rescue is closer to $4.7b.

So, after all the drama was it worth it? For now I’ll leave that one to the comment section… and history.

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60 Comments on “Chrysler Is Now Officially An Italian Company, Total Taxpayer Cost: $1.3b...”


  • avatar
    Morea

    We gave them Chrysler Corp, now they must give us Alfas, it’s only fair.

  • avatar
    Mullholland

    I’ll let you know November 7, 2012.

  • avatar
    SV

    If we end up with a consistently profitable Chrysler that has a lineup of genuinely attractive and reliable cars, then yes, it will have been worth it I think. Doubly so if they stop cyclically skirting bankruptcy every 10 or 20 years.

    • 0 avatar
      windswords

      1979 until 2009 is 30 years. Other than those two times there was no other time the company was close to BR. They lost money yes. But so did Ford, GM and AMC in the same time frame.

  • avatar
    bd2

    Beats the $6 Billion that just vanished in Iraq (and that’s not counting the billions wasted on building projects in Iraq that ended up being abandoned or poorly built).

    Still, I think the govt. could have done better if there hadn’t been such a rush to divest; Fiat has gotten Chrysler on the cheap.

    • 0 avatar
      MikeAR

      Actually, I saw an accounting of the Iraq loss at $18 billion. No one could say for sure but it could be that high. Given the way government, especially the agencies involved, handle money, I’m inclined to believe that figure.

      • 0 avatar
        HerrKaLeun

        what about all the veteran payments over the next years? How many soldiers were in Iraq (and Afghanistan…) and will need medical, psychological treatment for the years to come due to their stay in that region?

    • 0 avatar
      eldard

      Try 2.3 trillion

    • 0 avatar
      VanillaDude

      Comparing a federal government’s responsibility to fight a war to it’s improper role in meddling within the auto market so that it can waste $4 billion to sell Chrysler to the Italians is so incredibly stupid I shudder at your intelligence.

      Your comparison is so illogical and your premise is so ignorant it could only make sense to a child.

      You don’t have a clue what a federal government is constitutionally required to do, and what it is constitutionally required NOT to do.

      • 0 avatar
        mike978

        I am not going to enter into the argument except to say the Iraq war was not a constitutional responsibility. It was a choice.

      • 0 avatar
        VanillaDude

        Any US war is a constitutional responsibility reserved for our Federal government, regardless of political justification.

        Economic bailouts are definately not.

        The fact that we have a federal government that doesn’t acknowledge the difference, doesn’t make the comparisons more compatible.

  • avatar
    mjz

    If Chrysler and GM had been allowed to die, it would have devastated the economy, probably triggering a depression (if we’re not already in one) and it would have cost many more billions than the bailouts cost.

    • 0 avatar
      jkross22

      You say that with such conviction. Since it didn’t happen, though, there are no facts that support your assertion.

    • 0 avatar
      Dynamic88

      +1 We can’t wait for disaster just to see whether or not it comes. We have to head it off if we can.

    • 0 avatar
      Pch101

      If Chrysler and GM had been allowed to die, it would have devastated the economy, probably triggering a depression (if we’re not already in one) and it would have cost many more billions than the bailouts cost.

      That’s almost certainly true in the case of GM. One of the greatest fears about GM involved the credit default swaps — no one was sure what would happened in the event of an uncontrolled failure.

      But for Chrysler, it’s debatable. Chrysler was privately held and a smaller company, so there wasn’t as much at stake. The bonds were held by relatively few investors and there wasn’t as much debt, so there were lower odds of unintended consequences.

      I suspect that in Chrysler’s case, the biggest problem was the underfunded pensions, which were short by $9 billion. (For all of those complaints and whining about their retiree costs, Detroit did a pretty lousy job of actually paying for them.) A bailout offered the chance of getting back at least some of the money, while a Chapter 7 bankruptcy would have produced huge losses that would not be recoverable by any means.

      • 0 avatar
        windswords

        At one point Chrysler had funded it’s pensions in full. Then came Daimler…

        Those who say Chrysler was small and the impact on the economy would be negligible forget the 140,000 dealership employees. They all couldn’t sell Hyundai’s and Kia’s if they wanted too.

      • 0 avatar
        Pch101

        Those who say Chrysler was small and the impact on the economy would be negligible forget the 140,000 dealership employees. They all couldn’t sell Hyundai’s and Kia’s if they wanted too.

        The SAAR would be the same, regardless. If Chrysler had disappeared, their absence would have helped the remaining dealerships and the competing automakers, including Ford and GM. The sales would have been shifted to other brands and lots, and at least some of that staff could have followed those sales to other dealerships. In my view, that wasn’t much of a reason to keep Chrysler going.

      • 0 avatar
        windswords

        No. The SAAR wouldn’t have been the same. This is not a fungible commodity like oil. You can’t do a finger snap and replace 1.5 million vehicles. What you would have had is a rise in car prices as demand on the remaining makers increased. This would lead to *some* dealers sales and service people being hired by the remaining stores, but only some. Most businesses would play it smart and keep their headcount as low as possible. Then once the prices increased sales would tail off until an equilibrium was reached – brought in part by increased production by other makers, but even that would not happen right away either for the same reasons as above – 1.5 million units are not built overnight. Also some suppliers would have gone under as they were already on the edge.

      • 0 avatar
        Pch101

        You can’t do a finger snap and replace 1.5 million vehicles.

        There is an abundance of supply capacity in the NAFTA zone. A Chrysler liquidation would have shifted the demand to that capacity.

        In the alternative, if the brands were as valuable as you claim, then those and some of the factories could have been purchased at a steep, deep discount from the bankruptcy trustee in a Chapter 7 liquidation (yes, take your five cents on the dollar and screw yourselves, bondholders!), and operated by others.

        There was no need to preserve the Chrysler product line, and what little of it that was of value could have been parted out for pennies to interested takers, who could have had their purchases financed by Uncle Sam for less than he ultimately paid the bondholders. The reasons to bailout Chrysler were more psychological (we had had enough major failures already at that point) and political (the cost to the PBGC, etc. could have been enormous), but not because we needed the cars. Those incentives were high for a reason.

      • 0 avatar
        VanillaDude

        There was a better, quicker and simpler way of handling this situation. Instead of doing that we allowed politicians to decide. Since they believe they are superior to us, and believe they can spend your money better than you, they stepped in and wasted $4 billion dollars of your money.

        The fact is, what has been done since 2009 by the Federal government has made our economy worse. Like a 19th Century doctor, this Adminstration bled and covered us in leaches instead of letting us mend on our own. Instead of speeding up our economy, the bankrupted us further.

        The last three years is proof enough. These people are worse than doing nothing at all.

    • 0 avatar
      eldard

      It would have been devastating to Walmart since that’s probably where union fatasses shop.

    • 0 avatar
      rnc

      Don’t know about the devastation of the economy I know that b/t unemployment, medicaid, foodstamps, large number of old timers filing for disability insurance, loss of property taxes on the communities and states the factories were located in (not to mention the collapse of the small businesses that those chryco workers supported) $7.4 billion isn’t all that much.

      When compared to New Orleans or Galvaston, hey lets rebuild a cities that are guarenteed to be destroyed again, sortof seems like a wise investment.

  • avatar
    HerrKaLeun

    so they get 5% for free because they sell a 30 mpg car? Who was negotiating that deal for the government???

  • avatar

    The U.S. exit ends a 30-month involvement of two administrations in saving the company from collapse, beginning with the Bush administration’s decision to bail out Chrysler with $4 billion in December 2008. (That last part is something the tea party types seem to forget.)

    • 0 avatar
      carveman

      “With today’s closing, the US government has exited its investment in Chrysler at least six years earlier than expected,” said Assistant Secretary for Financial Stability Tim Massad, in a statement. 1.3 Billion flushed down the toilet and the bond holders were outright robbed. Yep sounds like Democratic economics to me. New car coming and the first criteria is it won’t be anything touched by the UAW of their ilk,

      • 0 avatar

        Funny I thought George Bush was a republican???? 1.3 Billion flushed down the toilet? If you think that then you should blame Bush – it was after all his idea. But then again that might not fit within the Faux News-inspired skew that you’re hoping for.

      • 0 avatar
        jkross22

        sbourne

        For Bush, 1.3 billion is pocket changed compared to the cost of Medicare Prescription plan part D and the $250 B Highway bill so larded up with crap that you couldn’t tell what was real and what was bs.

        Bottom line is that neither party has any interest in reducing spending… it’s just which pockets will the money go to. The Tea Partiers are an odd amalgamation of conservatives, right wing religious nuts, bigots and grass roots individuals with genuine frustration with gov’t waste, but they have no political party.

      • 0 avatar
        MikeAR

        Again with the Faux News thing, there are two of us here who have harped on the same thing. If you say Faux News, you are not to be taken seriously. It’s too easy to just ignore everything you say after that. Both Bush and Obama mishandled the bailouts. And money came from both afministrations. Also, Bush consulted with Obana and did what his advisora wanted. The union bailout and stffing creditors was pure Obama though. And I do blame Bush.

      • 0 avatar

        @MikeAR anyone who defends Faux News has no right whatsoever to talk about being taken seriously – PERIOD. Seriously dude. Have you been paying attention to ANYTHING lately? Too bad my fellow Americans are rooting against American auto companies for political gain. Makes me sick.

      • 0 avatar

        MikeAR, you can’t reason with a closed mind. You and I both know that as soon as we see that oh so original and clever Faux News appellation (for all you folks who think you’re smart because you’re a lefty, that means “name”) we know that the writer is not really debating but rather tossing out bumper sticker slogans. At least Psar engages with thoughts and ideas.

        Bush started the bailout process, true, and I believe that any president would have done likewise and supported the move, but how the GM and Chrysler bailouts, bankruptcies and restructurings were accomplished, was done by Obama’s team, headed by Steve Rattner and Ron “we did it all for the unions” Bloom. They rode roughshod over longstanding rules about senior and secured creditors.

        Steve Wynn and Bernie Marcus’ comments about the US economy stagnating because of the prevailing ideologies of the current administration got a lot of attention. We know that a lot of companies are not hiring, waiting to see what the future will bring, and sitting on their cash reserves (as is prudent). I wonder how much of the stagnation is due to investors both individual and institutional/commercial spooked by how the Obami screwed GM bondholders (yes, I know that the bondholders may in the end get out better than if the company had been liquidated, but the fact remains that the UAW received preferential treatment in the BK).

      • 0 avatar
        windswords

        As for “bumper sticker slogans” how about we quit with stuff like
        “right wing religious nuts”? Ad hominem attacks on a person or group makes me dismiss the person making the comment. I thought TTAC posters were better than this. Ed, do you want to comment?

        Let’s discuss the facts and the merits and leave the name calling for sites frequented by teenagers.

    • 0 avatar

      @windswords perhaps you should talk to your like-minded pal Ronnie and ask him to stop with the “lefty” blah blah blah. Or is your desire to keep the discussion civil limited to discussion about the right?

      The truth is the bailouts have been something the right uses when it’s convenient and tries to deflect about when the inconvenient truth is pointed out – i.e., that Bush started these bailouts and the tea party had not one word to say about it back then. Most of us see that as a bunch of hypocrites piling on. If you have a shred of intellectual honesty in your presentation then fine. If you’re quoting Faux News – then I simply couldn’t care any less about what you think than I already do. I repeat – the fact that the right is and has been rooting for American auto companies to fail because they think it scores them political points makes me (and any true patriot) sick. As a car lover – an American car lover – I am glad that the bailouts happened even if they started under Bush.

      • 0 avatar
        windswords

        Ronnie is entitled to his opinions, as you are to yours. It is after all a free country we are told. But that doesn’t mean you or anyone has to resort to name calling. I don’t recall Ronnie ever putting down whole classes or groups of people with sophomoric insults and put downs. Even when the talk turns to politics. As far as I know he has always put forth his arguments on the merits. Anyway you were not the person I was referring to in my original post. I don’t know if you have engaged in that sort of behavior or not. But being of any particular political persuasion doesn’t mean you can’t express your (civil) opinion.

      • 0 avatar
        Pch101

        I don’t recall Ronnie ever putting down whole classes or groups of people with sophomoric insults and put downs.

        Then you haven’t read his posts. He’ll violate Godwin’s Law at the drop of a hat.

  • avatar
    sushytom

    So far, Fiat has done more to improve Chrysler’s products than Cerberus ever did. The upgrades to the interiors are a good sign that Fiat actually wants to sell some cars.

  • avatar
    gslippy

    Was it worth it? I don’t know. I am part of the anti-bailout crowd, but $4.7 billion isn’t that much in the context of US debt reduction.

    With ~51000 jobs just at Chrysler, that $4.7 billion cost about $91k per job saved, less if you amortize it over the length of time each job lasts, and even less if you count supplier jobs, etc.

    However, if the GM bailout has stranded $50 billion of unrecoverable money, the per-job cost to taxpayers is considerably more: about $239k.

    So the Chrysler bailout came at about 1/3 of the cost per job saved, when compared to GM.

    Looking forward, I’d say Chrysler desperately needs a good small car; the Fiat 500 isn’t going to do the trick.

    • 0 avatar
      Pch101

      $4.7 billion isn’t that much in the context of US debt reduction.

      The thing to remember is that the alternative wasn’t free. Even if there had been no economic wipeout, it would have still cost several billion dollars to properly fund the pensions, which would have gone into the PBGC. I’m pretty sure that the bondholders weren’t going to step up with a checkbook to pay for that.

      • 0 avatar
        PenguinBoy

        Here in Canada, the failure of Nortel was big news. After seeing many former NT employees lose severence and benefits, I am glad the Chrysler retirees received preferential treatment.

        I also think the Chrysler bailout was worthwhile – Chrysler has a significant presense in Canada, and the current management seem serious about turning the company around.

        Toyota just got a bunch of government money to expand their operations in Canada. It would be interesting to compare the cost per Toyota job to the cost per Chrysler job. For some reason giving public money to Toyota didn’t result in the same popular opposition as bailing out Chrysler…

      • 0 avatar
        Pch101

        Here in Canada, the failure of Nortel was big news. After seeing many former NT employees lose severence and benefits, I am glad the Chrysler retirees received preferential treatment.

        The government wasn’t being nice; the pensions were underfunded, and there was likely a legal obligation to fund them.

        Had there been a Chapter 7 liquidation, that pension burden could have been effectively shifted to the government because the feds act as a guarantor, similar to deposit insurance. In effect, a liquidation of these companies, particularly GM, would have been the equivalent of a major bank collapse. The PBGC was already underfunded going into the crisis, so adding an automaker to the mix would have put the entire pension system underwater, causing even more panic.

    • 0 avatar
      windswords

      Gsliipy,

      I told everyone here when we were discussing if Chrysler and GM were worth saving that Chrysler was always going to be both cheaper and easier to turn around than GM.

  • avatar

    Fiat-Chrysler may actually end up being an American company. I heard rumors FIAT wants to move headquarters to Michigan and it caused outrage in Italy. There are other examples – rumors that Nokia is planning moving HQ to Silicon Valley to be closer to the action. Being far away from center of innovation they further fall behind. Or e.g. Thomson was originally American company, but after all alliances and mergers ended up being a French company. Marantz originally was the American company and they set up production in Japan as Marantz Japan and eventually Marantz Japan bought the parent company and then merged with Denon to become D&M.

  • avatar
    Sam P

    Compared to the cost of the Iraq war, it’s cheap.

    • 0 avatar
      windswords

      If the decision to go to war were made by beancounters, then we would never have fought WWII. Way too expensive. But thank God we did.

      • 0 avatar
        mike978

        Windswords I hope you are not equating WWII with Iraq.

      • 0 avatar
        toxicroach

        Why not? Sam P is comparing the auto bailouts to the Iraq War. Compared to that WW2 and the Iraq War is a much more accurate analogy.

        Neither makes sense but at least one is comparing apples to apples.

      • 0 avatar
        mike978

        toxic – I didn`t pick up on where the bailout was compared to WWII – which I agree would have been a silly and inaccurate comparison. All I saw was he compared the bailout to the Iraq War. Windsword brought WWII into it.

  • avatar
    Brantta

    40 MPG unadjusted combined (30 MPG EPA adjusted) is what Chrysler needed to be on par with Ford and GM.

    Base model, manual trans.:
    2011 Dodge Caliber – 27 MPG Combined
    2012 Ford Focus – 30 MPG Combined
    2012 Chevrloet Cruze – 30 MPG Combined
    2013 Dodge Compact – 30 MPG comb (40 MPG comb unadj.)
    http://www.fueleconomy.gov/feg/2008car4tablef.jsp?column=4&id=31372

    There is a high probability that Dodge will make samo economy package (dual clutch trans, longer gears) for Dodge Compact that will get 40 mpg on highway, like Focus SFE and Cruze Eco. Dodge is 1 mpg behind base Civic and 3 behind Elantra, but Hyundai is well known for gaming EPA and that is almost impossible to achieve EPA estimates.

    • 0 avatar
      Mr Carpenter

      Brantta said ” Hyundai is well known for gaming EPA and that is almost impossible to achieve EPA estimates ”

      I have to respectfully disagree, Brantta.

      My wife and I just did a tour of Door County Wisconsin and drove from Michigan (through the UP).

      During a timeframe where I was essentially forced to drive 40-50 mph for several hours, the 2009 Hyundai Sonata obtained 43 mpg.

      During a timeframe where I was driving 65-75 mph for several hours, I obtained 33 mpg.

      During a timeframe where I was driving 55-60 mph for several hours, I obtained 36 mpg.

      While touring in towns, I obtained 28 mpg.

      ALL of these figures are significantly higher than the EPA numbers, just for your information.

      I actually was surprised – and I also have to wonder if some of the results occurred because of a recent change from Shell gasoline being used 90% of the time to Mobil / Exxon being used 90% of the time. (Long story made short; Citi Bank and Shell unilaterally changed the reimbursement on their gas / credit card – so I fired them).

      Oddly enough, I’d always thought Shell gas did the best in MPG’s and so did my boss, another true car-guy (who uses Shell in his race car). Apparently not; we saw a real 10-15% improvement in MPG’s with Mobil fuel since our switch a few weeks ago.

  • avatar
    Suter

    Wasn’t worth it at all.

    If Fiat wanted Chrysler (or pieces of it) it would buy it after bankruptcy. There would be no cost to US taxpayers. The only ones with looses would be shareholders (who probably are in part to blame to allow Chrysler to operate as it did).

    The money spent on bailout would give many months of security to Chrysler employees.

  • avatar
    VanillaDude

    The entire stunt was illegal.
    The fact that some justify it doesn’t make it any less illegal.
    The reasons it was illegal are more important the the reasons given to break the law.

    What is the point of having laws if a president can just break them whenever there is a political benefit?

    There has been so much law breaking over the past six years in order to “save” the US, we should all be rolling in clover right now. We aren’t. We are worse off than if the laws were followed.

    You and I are living proof that the Federal government destroys more than it creates right now.

    • 0 avatar
      mike978

      If it was illegal, and I am not in a position to verify or debunk your claim, then why has no court found it illegal. We have the separation of powers, the President is not an all powerful position but one branch of the system.

      • 0 avatar
        Pch101

        why has no court found it illegal.

        The fact that wasn’t illegal surely has something to do with it.

        When you see internet posters frothing at the mouth about something that is “illegal” or “unconstitutional”, then you should remember that the odds of it being legal and constitutional are about 100%. (OK, maybe 99%.) They generally don’t know what they’re talking about, and this is no exception.

  • avatar
    Zackman

    I don’t take sides with any of this – not that I don’t stand for anything, it’s just the fact that the government will do what it deems right in its own mind, whether anyone else likes it or not.

    Let’s see if this comes back to bite them.

    I do feel it’s more jobs being sent out of the country, though.

    Am I worried? For now, no, as I’m still laughing over “bacon stripes” and “blitzkrieg…” from VanillaDude’s comments yesterday!

  • avatar
    and003

    Speaking for myself, as a Mopar fan, I think it was worth it. I believe this because Fiat was the only Chrysler parent company that had anything remotely resembling a workable plan to fix the ills of the original Chrysler company … including its most notorious: inferior quality vehicles.

    Given such moves, what’s so bad about Chrysler being an Italian company? I don’t know about anyone else, but I think that’s a good thing.


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