By on March 19, 2011


Malaise Era Molester Vans are rarely worth sparing from The Crusher’s jaws these days, what with steel prices stoking The Crusher’s hunger to insatiable levels, particularly when they’re on the rusty side. However, when that van is a ’78 Dodge Tradesman with a factory-installed 318 and floor-shifted overdrive 4-speed, things might be different. We hope. Read More >

By on April 16, 2010

Chrysler has always held a special place in TTAC’s chronicling of Detroit’s decline, enjoying a bespoke “Suicide Watch” in contrast to our Ford and GM “Deathwatches.” In the first entry in that series Frank Williams wrote of a gutted firm, dependent on incentives and flagging truck sales, seemingly doomed to drag its foreign partner into bankruptcy. Four years and countless opportunities for death with (some) dignity later, Chrysler presents much the same picture. Sure, it’s been rinsed of debts and excess capacity in bankruptcy court, but the Pentastar’s brands are still fundamentally damaged from years of self-abuse and the firm is struggling (and failing) to improve on last year’s sales numbers, which were recorded en route to said bankruptcy. Inventory may be under control, but Frank’s four-year-old assessment of an investor warning by JP Morgan could have been written yesterday [with "DCX" replaced by "Fiat"]:

JP Morgan remains convinced that management patience towards Chrysler has “worn thin and increases the likelihood that DCX will reduce exposure to Chrysler.” It’s the investment community’s equivalent of yelling “jump!” to someone standing on a ledge.

In fact, analysts from London’s Bernstein Research wrote nearly the exact same line yesterday. Chrysler has officially shuffled back onto the ledge, and once again the analysts are shouting “Jump!”

Read More >

By on November 29, 2009

TTAC did not file a full Chrysler Zombie Watch from the launch of Chrysler’s five year business and product plan, but two major points dominated our coverage. The first was this graph that shows 2009 as a trough year for Chrysler sales, with 2010 heralding a major and sustained turnaround in Chrysler’s fortunes beginning next year. Underlying this rosy projection is the second main point of Chrysler’s turnaround, a product/branding strategy that we summarized as “refresh and market like hell.” But refreshes take time, which is something that Chrysler simply doesn’t have. While the automotive world waits for the crucial Fiat-fettled refreshed Chryslers (due to begin arriving at the end of 2010), the “market like hell” portion of the plan is hitting America’s airwaves first, in the form of new ads aimed at reviving “consideration” of Chrysler’s damaged brands. But now that we’ve seen the opening salvos in this $1.4b war on consumer apathy, it’s becoming clear that Chrysler’s journey (no pun intended) of a thousand miles is beginning with a stumble.

Read More >

By on September 14, 2009

I can hear TTAC’s audience wincing at the headline. It should be “differently,” not “different.” Of course, if you imagine this executive exhortation spoken by an Italian mobster—a reasonable re-imagining given the fact that Chrysler is now controlled by Fiat—it still doesn’t work. In that case, it should be “We gotta do business different.” Preferably preceded by the word “Hey.” This ode to illiteracy appeared in a dealer document comparing Chrysler, Dodge and Jeep advertising’s effectiveness to that of Ford and Toyota. (Guess who scored higher?) So, did anyone notice the literary mistake? I’m serious. You can concentrate on what Chrysler plans to do different before it goes Tango Uniform, or you can wonder why these guys never, ever sweat the details.

Actually, it’s more about causation than a straight either/or choice. To survive, Chrysler has to learn how to sweat the details: to make interiors, engines and transmissions that don’t suck and fit them together in such a way as they don’t break, fail or fall apart. And then, gradually, inexorably, make them better, until they’re better than all their competition’s. As for branding, it’s no biggie. Jeeps go off road, Dodges go the distance and Chryslers have class. Off you go, boys. Don’t forget to pay me my $14,312,130,642 when you get the chance.

But noooooo.

“To save Chrysler Group LLC, Chief Executive Officer Sergio Marchionne has to create a mid-size sedan that can compete with the world’s best,” Bloomberg asserts. “It’s a three- to five-year job, and he may have two years to do it.”

You can forgive the ADD-afflicted media for its ongoing love affair with The Next Big Thing. But the days are gone when Chrysler could join its cross-town rivals in pinning its hopes for a turnaround on a single vehicle. Ford and GM have the cash needed to sustain the delusion that what they really really need is a hit vehicle—instead of say, a gradual return to respectability via improved version of the products they already have. Chrysler can’t even afford the vig.

Even if Chrysler were rolling in dough, what are the odds that the former bankrupt can create a box-fresh Camry killer in a truncated product development cycle? The automaker behind the Sebring and Avenger is going to build a brand new class-leading vehicle in the most competitive segment of the market in the most competitive market in the world? Led by the head of Fiat? It’s just as preposterous now as it was before Uncle Sam decided to save American jobs by handing Chrysler’s keys to the Italians.

And even if they did build it, who would buy it? It’s not like Ford, Honda, Hyundai, Nissan and Toyota owners are wondering when the hell Chrysler’s going to offer them something demonstrably better than what they’re already driving. How do you get satisfied consumers to buy a vehicle from a company widely known for creating crap cars, whose taxpayer-provided existence is, in and of itself, off-putting? You know; if they were buying. Which, in the main, they aren’t.

We shall not see. Meanwhile, all the rest.

Sometime in the next two weeks, Sr. Marchionne will present his product and marketing plans for Chrysler, Dodge, Jeep and Mopar (not to mention Fiat and Alfa) to the nine-member Chrysler board. Huh? While I’m a firm believer that intelligence gathering is a sign of intelligence, I’d kinda hoped that the head of the semi-nationalized automaker would have had a clear idea of what he was going to do with Chrysler before our elected representatives put him in charge of the aforementioned [nearasdammit] $15 billion “investment.” Forty-two days later, what do we know? Nothing.

Whatever Marchionne’s plan may be, Chrysler’s nine-member Board of Directors is bound to rubber stamp it. With each day’s delay, the pressure for doing something builds. With each day’s delay, the natural human tendency to consolidate power in the hands of a “man of action” grows. (Pretty good for a Canadian accountant eh?) I’m not saying Machionne is hiding behind a cult of personality. Oh wait, I am.

Whether it emanates from Marchionne’s minions or represents a mainstream meme, Chrysler’s press is increasingly focused on Sergio’s style. Bloomberg breathlessly reports the Divine Mr. M’s arsenal of cell phones, minimal sleep, and five days vacation per year. Well so what?

What we need from Chrysler is proof that they’re doing things differently, not a sneak peak into the seven highly effective work habits of sleep-deprived automotive executives. And while a[nother] new Chrysler sedan could be a showcase for New Chrysler’s capabilities, the only real proof that Chrysler has refashioned its corporate culture would be found on the showroom floor, in its existing products.

It’s not there. And it won’t be there. Even if Chrysler’s Best and Brightest hadn’t already headed for the hills (or away from the Hills), even if the company’s employees work full tilt, the company simply doesn’t have enough time to fix all the quality issues bedeviling its vehicles. And it certainly doesn’t have the ten years needed to correct a well-earned reputation for also-ran products.

Zombies are different from you and me. But they are not so different from each other. Whether its GM’s headless chicken product plans or Sergio’s [theoretically] carefully-crafted vision for Chrysler’s future, the undead are doomed. Anyone who thinks any different is deluded. “It has to work this time,” an unnamed Chrysler board member supposedly told Bloomies. “A patient can only be operated on so many times before he dies.” What if they’re already dead? Fuhgeddaboutit. If only we could.

By on June 9, 2009

The brilliant lawyer, author, and ex-blogger, Bill Patry (now senior copyright counsel at Google), wrote on his Patry Copyright Blog back in 2005 about the greatest Biblical scholar of all time, Rabbi Shlomo Yitzhak (whom everyone affectionately calls “Rashi“).

Bill wrote:

Rashi is used as a learning device for children not because he is simple (he isn’t) but because of the unusual nature of his commentary. His commentary consists of very terse conclusions, but without the questions that prompted the conclusions. Children are left with the task of asking “What’s Bothering Rashi?”

The “What’s Bothering Rashi?” approach to learning text is useful in analyzing statutes because it teaches one to ask the why of things, rather than as we almost always do, just read the literal words divorced from what the law would be like in their absence.

Bill’s post came to mind in thinking about “What’s Bothering Ruthie?” that would prompt her to call a halt to a sale that remarkably worked its way from bankruptcy filing to cert. review in less time than it takes the average person to buy a used Town & Country. Here are a few ideas:

Read More >

By on May 10, 2009

David A. Skeel Jr. is the S. Samuel Arsht Professor of Corporate Law at the University of Pennsylvania Law School and author of “Icarus in the Boardroom” (Oxford University Press, 2005) and “Debt’s Dominion: A History of Bankruptcy Law in America” (Princeton University Press, 2001). In an article in the free market American Enterprise Institute’s house organ,  The American, Skeel says that while the Obama administration avowedly patterns itself after FDR’s New Deal, the deal that the President’s task force on autos has cooked up for Chrysler would actually “make a true New Dealer turn over in his grave.”

Prof. Skeel points out that a major aspect of the New Deal was reform of bankruptcy laws that permitted sham sales called “equity receiverships” to bondholders and other creditors.

New Dealers hated the process, which they saw as opaque and designed to foist a deal crafted by the insiders on everyone else. Jerome Frank, a lawyer who later headed an important New Deal agency and became a federal judge, complained in 1933 that the judicial sale in these cases “was a mockery and a sham.” He said, “A sale at which there can be only one bidder, is a sale in name only.”

In 1938, thanks to the handiwork of another prominent New Dealer, future Supreme Court Justice and then-SEC Chairman William Douglas, Congress dramatically altered the bankruptcy laws, eliminating the former practice.

The Obama administration blueprint for Chrysler’s bankruptcy looks startlingly like the artificial sales that the New Dealers so abhorred. Unlike a traditional reorganization, in which the parties negotiate the terms of a restructuring that is then voted on by each class of creditors and shareholders, the administration plans to quickly sell Chrysler’s most important assets to a new entity “New Chrysler” whose stock will be owned by Chrysler’s employees and Fiat.

The senior lenders who objected to the government’s offer (which amounted to little more than 30 percent of their claims) will not have any vote on the sale. Their only option is the one they have pursued: objecting to the sale, and praying that bankruptcy judge Arthur Gonzalez takes a hard look at its terms even while the government is breathing down his neck and saying in a sense, he better approve or else.

The dissident bondholders made Judge Gonzalez’ job a little easier today when they folded after two of the remaining five holdouts withdrew from litigation. Still, Gonzalez has to approve the sale of whatever worthwhile remains among the dross of Chrysler.

What makes the Chrysler plan unique, and makes it similar to the receiverships of the New Dealers’ era, is that it is not really a sale at all. It is a pretend sale and its main purpose is to eliminate the pesky creditors who might otherwise interfere with the government’s plans. It also seems to flout bankruptcy’s priority rules by giving Chrysler’s employees (who are general creditors) a big stake in New Chrysler while forcing senior lenders to take a major haircut. The usual rule is that senior creditors must be paid in full before lower priority creditors are entitled to anything.

Skeel says that the judge can do two things to make sure the sale is appropriate. The first is to get an independent determination of the value of Chrysler. So far all the parties involved in valuing the assets have an interest in exaggerating or lowballing the company’s valuation. The second is to require a complete accounting of the deal so it’s absolutely transparent in terms of who is participating and who’s getting the shortest haircut.

Though much of the criticism of the Obama administration’s plans for Chrysler and GM has centered around government excesses, threats to the capital markets and the rule of law, it’s interesting that Prof. Skeel worries more for what it may portend in terms of bankruptcies in general.

The Chrysler sale looks like the latest of a series of government interventions that have run roughshod over ordinary legal rules, and it appears to be paving the way for a similar strategy in a General Motors bankruptcy. Much of what the government is doing allowing Chrysler to file for bankruptcy, promising to guarantee its warranty obligations is admirable. But the use of a sham sale of the sort the New Dealers thought they had forever eliminated will cause mischief in future bankruptcy cases.

Not only may the government go back to this well, but in the future private parties will conclude that sham sales are a legitimate tool in their own cases.

By on May 7, 2009

Saving Chrysler is just stupid. There isn’t one shred of pure economic logic—never mind basic business sense—to rescue this company from liquidation. Yet, here we are watching tax dollars garnered from real earners (individuals and corporations) tossed into a swirling morass circling the drain of history. It’s time to speak up against this misbegotten adventure. And, well, here I am.

My argument against saving Chrysler springs from one basic business premise: risk taken should be compensated by adequate reward. It should be intuitively obvious that all the capital invested into Chrysler since Daimler’s acquisition back in 1998 and Cerberus in 2007 has never earned an adequate return. So why should we think that the US Government will be smarter than a successful German automaker or a wealthy private equity firm? Does it really make sense to pour (past and future) $12 billion or more of taxpayer dollars into the same hole?

Let’s review. Daimler acquired Chrysler for $36 billion or so and spent billions more trying to make a go of it. Sure, Chrysler had some profitable years in the interim. But by the end, Daimler recognized that there would be no future and effectively walked away from the mess. The decision matrix in Stuttgart came down to this: there would never be a return on the investment in Chrysler. It was an experiment in globalization gone seriously awry.

Despite public announcements to enhance and restore an American icon (hey, Steve Feinberg, you don’t look so good in that American Flag outfit), Cerberus had no intentions of making Chrysler into a real company. Rather, it would be a strip and flip operation by reducing expenses, fobbing off vehicle development to others (Nissan, Mercedes, and anyone else) and make money from financing customers’ wheels. We know how well this business strategy worked. Cerberus lost $7 billion of someone’s money (we still don’t know whose). All gone forever.

And now the American taxpayer has become the next sucker in the game of Chrysler. What is the ante at the table so far? Some $6 billion and going higher. And for what? To continue the fallacy that Chrysler in the last two decades has been a great American icon? Even President Obama can’t polish that pig.

The lawyers in bankruptcy court have argued about absolute priority, lenders tainted by TARP funds, and diminution of value without a quick sale. But it’s really irrelevant. The fact remains that any dollars plowed into Chrysler will never provide an adequate return.

Let’s review the government’s plan with Chrysler . . . With a quick asset sale, a modified UAW labor agreement, Italian management today, small cars tomorrow, and perfecto! We’ll enter into an automotive utopia of profits and cash flow. Will someone please dial 911 to the White House and clue the Administration into reality please?

There are NO good assets of Chrysler cobbled together in any fashion that can be considered as a going concern. Recall that Chrysler has had little retail success in the past several years with its product line. Fleet sales likely made up at least 40% of all sales. Guess what? The New Chrysler will have the same product line. Does the President really believe that American consumers will now wake up and buy Chrysler products all of a sudden? If so, he’s sadly mistaken.

Some will argue that the New Chrysler has a competitive labor agreement. Yea, so what? Labor makes up less than 10% of the total cost of running a car company. And GM and Ford get the same deal—which matches mostly what all the transplants already have. No real advantage there.

But the coup de grâce rests with faith in the Italians to do a better job running this mess. C’mon now! Fiat is and always has been a second-tier automotive player in Europe. Its product reputation hasn’t brought it accolades. And why would Americans even consider small cars from Italy being superior to Ford’s new Fiesta (a raging best seller in Europe) or cars from Honda or Toyota already here? And small cars just don’t make the same profits. Go ask the Japanese for the truth on that one.

The bottom line should be clear. Putting money to work in Chrysler, even reconstituted as a new company, makes no sense. Pitting the same product line, same weak brands and future Italian-mobiles against strong competitors in the USA today just doesn’t compute. Not for the capital invested. In fact, no venture capitalist would do this deal. No private equity players show any willingness to take this on the come. And not one other automobile manufacturer wants to buy the rotting corpse of Chrysler. Only the American government—an entity already proven incapable of running its own shop successfully—has stepped up to the plate.

This will not end well.

By on May 5, 2009

For all the “Inside Baseball” we play around here, we never forget that this is a car website. And the immediate reason Chrysler has gone under is because its products have been consistently sub-par for several cycles now. With that in mind, we can dissect the financial details of Chrysler’s alliance with Fiat all we like, but if it doesn’t produce products that sell, it goes nowhere. Car and Driver‘s analysis of Chrysler’s plan (PDF) shows that Chrysler has nothing besides a tarted-up “new” 300C and EV vapor in its new-car pipeline. Which means Fiat’s going to have to step up, big style. But are Fiat’s products up to the challenge of overcoming Chrysler’s brand baggage? And will they translate into the US market success that Chrysler needs to pay off its taxpayer loans?

Our own Fiat review archives are stocked with one Panda 4×4 (“2011 Jeep A Segment”, per C&D), one Grande Punto (2011 “B Segment Hatch”),  and an Alfa 147 (ha ha, you wish) review, which ain’t bad. While we wait for our man on the continent to update us on the now-relevant Italian whips, we went looking for thoughts on Fiat product on the internet . . . and you’ll never guess what we found.

The first stop for anyone who wants to know about cars that aren’t sold in the US is Jeremy Clarkson at The Times. The man drives just about everything, and there’s no need for Google Translate! And who could ask for more than Clarkson on the Bravo aka Sebring/Avenger 2.0? “To buy this car you must decide that what you really want is something that’s not quite as good as a Golf,” pans Clarkson towards the end. And that’s about it. Crappy but loveable. To wit:

There’s a looseness to the controls that you may interpret as poor build quality or a slackness in the system, and I’d be the first to agree that the steering’s not that great and the handling isn’t especially noteworthy. However, somehow, it puts a smile on your face. Maybe it’s because it feels so very, very different to a taut and muscular Volkswagen.

He loves the styling, which definitely wins the coveted “better than a Sebring” award.

Inside, it’s pretty much the same as all the other cars in the world, except for one thing. I could never quite get comfortable. Italian cars always used to be designed for creatures that are only found under rocks in the sea, and while they’ve got better, they still refuse to accept that a human being’s legs are usually longer than his arms.

Oh dear. On second thought, maybe Clarkson isn’t the first place to go. Even Top Gear’s freebee mini “review” is more helpful.

But what do our underwater friends, the Italians, say about the cars that must win America’s heart to repay the tax bill? To answer this question we must turn to the funniest place on the internet, Google Translate. Unfortunately, Italian reviews tend to sport a distinctly chauvinist streak. Infomotori.com gushes:

What we are living today, is the arrival of another new “queen” for this Italian car constructor from Turin. The new Fiat Bravo has caught everybody’s attention for months, making all experts, dealers and competitors wonder about it. In a short time New Fiat Bravo has already become such a desirable car, like Fiat 500 did in the past. This is a very important result for Fiat, because it represents the concrete its re-birth: Fiat is now ready again to challenge international competitors.

In the Bravo, Infomotori “taste some brave maneuver,” and basically finds nothing lacking. Even a long-term test for Yahoo! Italy (also by Infomotori) suggests “Are you comfortable in five, with no particular Behavior and the line sportiveggiante not minimally affects the input board. A pleasant atmosphere, as we said, free of obvious flaws and drops coarse style.”

One reviewer for omniauto.it gets a little too excited about the diminutive 500, and how it “officially enshrines the awakening of ‘Fiat mother’ by a long agony, the approach to a new life.” He has to remind his readers:

“We must not forget that the 500 is also an industrial product, a car in the banal sense of the word: a machine. And as such, has to with the market and competition. The premise, as it often was for Fiat cars from the past, there are. Mechanics, in no uncertain terms derived from that of ‘Panda excellent, very good promising talents of efficiency and reliability, supported by the merits of the establishment of Tichy: The best of Fiat factories and capable of a quality which, if it is not Japanese, they pretty close.”

Reppublica.it is a little more even-handed. Though they call the 500 “Funny How A Kart,” they caution overeager fashionistas “we must never forget that – refinement of design or not – we are always at the wheel of a car segment A. Segment where the noise often reigns supreme in modern cockpits apparently.” But analysis inevitably swings back towards the nationalist pissing match with the Germans already in progress:

“The kilometers go by and the only possible explanation for this dynamic is that suspensions are beautiful duretta. We go in search of a pavé or uneven ground beautiful, but nothing: the 500 digests scomporsi without even the worst holes. The passenger is not getting those typical shocks to which many German cars have become accustomed. Sure, the seats are very padded their work, but also demonstrate an excellent compromise suspension calibration.”

A series of rather serious enthusiast tests from grandprixnews.myblog.it give a decent overall impression of several Fiat offerings. Grande Punto is knocked for lacking power and a less-than perfectly usable rear hatch. “The vision side driver is not the maximum, the uprights are quite large and the small windows do not help much,” we are told. “Rear access is easy, and opening the door is suitable for raising and lowering of the car without too many contortions.” The Panda review suggests the diesel engine (a theme in nearly every Fiat review) and praises the Panda’s “excellent maneuverability.”

But the Panda 100HP “wins the internet,” as the kids say. Between a killer evo review (“brilliant”) and a virtual driving experience that suggests it is invulnerable to high-speed crashes, the Panda 100HP seems to be the Fiat in which to “taste some brave manouever.” Too bad Chrysler has no apparent plans to bring it to America. So much for the internet, then.

By on May 5, 2009

Proponents of Chrysler’s current reinvention often refer to the exercise as a “surgical” bankruptcy. OK, who’s the surgeon? As far as I can tell, the people in charge of deciding how to cut-up Chrysler are Chrysler. “Physician heal thyself” is a nice sentiment, but it doesn’t normally involve a scalpel. Second, speed. When a patient is bleeding to death, time is of the essence. Chrysler is hemorrhaging red ink. It’s one thing to stop the bleeding (as Uncle Sam adds multi-billion dollar cash infusions). It’s another to attempt to cure the patient with a knife. And after the health care recipient leaves the theater, well, who expects an amputee to run a marathon? In other words, the operation may be a success, but the patient will still die.

The counterpoint: synergy. Or, to call it by its rightful name, “wishful thinking.” In the course of human history there must have been two huge companies working in a hideously complicated manufacturing enterprise who were able to integrate with each other and prove that the whole is greater than the sum of the parts. A partnership that delivered cost reductions though combined “back office” functions. More efficient and creative product development. Better sales and marketing. Streamlined management. A more productive workforce. It’s just that I can’t think of any.

[Renault - Nissan? The fact that this partnership works at all---and the jury's still out---is down to the fact that the two companies tend to stay out of their each other's way.]

It’s ironic that the American carmaker that forged a company-killing merger with a German automobile manufacturer almost eleven years ago to the day now wants US taxpayers, suppliers, creditors, workers, the media, etc. to accept the idea that Chrysler’s future is best served by merging with an Italian automobile manufacturer. To borrow an adjective from the non-TARPies court filing, that’s “incomprehensible.” Unless you try really hard to believe that someone isn’t stripping assets from someone else. To wit: The New York Times.

Fiat and Chrysler have much to offer each other. Chrysler desperately needs Fiat’s small cars and fuel-efficient engines to balance an aging lineup of S.U.V.’s.

For Fiat, Chrysler offers an instant dealership network for its return to the United States. They can also benefit from savings on the $46 billion worth of parts and materials they would buy as a combined entity.

The whole “ChryCo needs small cars” meme flies in the face of any realistic appraisal of commercial reality. Stateside, small cars a small part of a shrinking market; Chrysler needs small cars like a man dying of thirst desperately needs a shot glass of low-alcohol beer. Chrysler needs a mainstream model that generates enough profits to sustain their credibility the next time they call on the public purse. I mean, to repay their “loans.” Something like the Chrysler 300. Only a lot better.

The merger’s small car justification violates a pseudo-military maxim: go where they ain’t. Trying to sell small cars in a mature marketplace against highly-developed, well-entrenched competition is a Sisyphusian endeavor. GM’s failure to recapture its automotive mojo in its North American and European home markets—even while it succeeded outside of North America and Europe—proves the wisdom of the advice.

Besides, Chrysler already has small cars. Yes, they’re crap. But fixing ChryCo’s crap cars would be a lot less expensive and time consuming than hitting reset. Again. And that’s without adding Fiat’s cultural dissonance to the mix.

Clearly, there’s a political subtext to this supposed “desperation.” ChyrCo’s political overlords and their camp (not in the Batman TV series sense of the word) followers have a hard-on for American-built small cars/hybrids. To use an Obama-ism, they believe it’s “the right thing to do.” But even The Gray Lady understands that it’s probably not the most profitable thing to do; hence the SUV “balancing” remark.

As for the joint savings on parts, somebody somewhere’s smoking one. Three years after assuming control of Ford, CEO Alan Mulally still hasn’t fully realized his plan for parts worldwide parts commonality. Similarly, GM’s “world car” program has been a spectacular failure, delivering unto the world a seemingly endless stream of badge-engineered failures (e.g., Cadillac BLS), non-starters (e.g.,Pontiac G8) and nichemobiles (e.g., Chevrolet Camaro).

Just for S&G, figure Fiatsler will save ten percent on its $46 billion parts and materials tab. Split it two ways. That’s a $2.3 billion cost reduction. Which is not even half of Chrysler’s current cash burn. Or the United States government’s outstanding “loans” to the Auburn Hills zombie. This theoretical saving might pay for the bureaucracy needed to organize the two automakers’ parts integration. It might not. if history is any guide, any such attempt would end up costing money and delaying production.

So where’s the beef? Nowhere. The Chrysler – Fiat deal is one of those veggie burgers that only looks good—and then only to vegetarians. It sounds crazy, and it just won’t work.

By on May 1, 2009

Announcing Chrysler’s bankruptcy, President Obama vilified the “investment firms and hedge funds” who decided to “hold out for the prospect of an unjustified taxpayer funded bailout.” No, not the existing unjustified taxpayer funded bailout. The new one. “Some demanded twice the return that we bludgeoned the other TARP-supported lenders into accepting.” Obama didn’t say that; but he would have if his daughter had made the same birthday wish as Max Reede. Anyway, it turns out the Presidential Task Force on Automobiles can’t stand losing, they can’t they can’t they cant stand losing, they can’t they can’t they can’t stand losing to hedge funds. “I don’t stand with those who held out when everybody else is making sacrifices,” Obama chided con multo vigore. As intended, Obama’s remarks triggered a shit storm from both his supporters and the business community.

“U.S. Tactics Spark Worries Over Lenders’ Rights” The Wall Street Journal reports/warns.

Banks, hedge funds and other investors that hold $6.9 billion in secured loans are being asked to release their contractual claims over Chrysler’s assets in exchange for a fraction of what they are owed. Many lenders see that as a raw deal, because in the bankruptcy code’s priority scheme, secured creditors are supposed to get paid before unsecured creditors such as employees.

Remember when Congressman Barney Frank confronted an expert on bankruptcy law during the second round of the so-called bailout hearings? [link help?] When the witness said it would be illegal for the feds to jump the queue to recover bailout bucks, Frank suggested that Congress could rewrite those pesky laws because, well, Congress wrote them (never mind the Constitution or common sense). Well, here we go . . .

Investors worry the government-led plan could rewrite the rulebook on corporate restructurings and the entitlements of creditors. They say that could make lending more expensive for corporations, while crimping lenders’ willingness to get involved with companies that have a connection to the government.

As of late Wednesday, about 20 of the 46 lenders were opposed to the government plan, according to a statement from a group of debtholders. If more than half the lenders oppose the reorganization, the Chrysler deal could be stuck in bankruptcy court for far longer than the government hopes.

Or not. After all, you have the President of the United States deciding with whom he does and doesn’t stand in a legal proceeding. Could the Prez use his political power to gazump secured debt holders? Yes he can! And that’s when this could get really, really ugly.

Of course, there are those who see beauty in the face of Gorgon (stoned as they are). How about Salon’s “A sob story from the vultures who forced Chrysler into bankruptcy.

According to reporter Serena Ng, Gwin, the “principal” of the Group G Capital hedge fund, “is wrestling with the knowledge that the retirement plans of some 80,000 Americans may rest in his hands.” 

Spare us the sob story, [Chrysler investor] Geoffrey Gwin. You’re in this game to make money by speculating on the bonds of companies that are in big financial trouble. Now you’ve found yourself smack in the middle of a major political showdown between a pissed-off public and a Wall Street that hasn’t had this little credibility since 1929. Too bad for you. Good luck sweet-talking the judge.

The Washington Post is down with that “reasoning.”

What you need to know about these vultures is that their idea of fairness is throwing 100,000 people out of work and denying retirees their pensions and their health benefits just so they can liquidate the company and maybe squeeze an extra 15 cents on the dollar from their Chrysler debt.

As you might expect, The Huffington Post is just as huffy.

On the 101st day of his Presidency, Barack Obama finally slapped the hedge funds across the face like they deserved . . . The President’s message was this: when labor, management, and taxpayers of multiple nations have stepped up to bat, the American public will not be held hostage by hedge fund managers stalling for profits. That is the message. And it is a message Americans have been waiting patiently to hear.”

As over 70 percent of the public opposed providing additional bailout billions to Detroit, I thought they were patiently waiting to hear that the United States government was getting out of the car business. If so, in this they were disappointed.

As in any good zombie movie, Chrysler’s liquidation—the only “viable” or indeed probable outcome in this—depends on a hero who stands for truth, justice and yes, the American way. In other words, it’s all coming down to the judge Arthur J. Gonzalez.

And who chose Gonzalez? Art got the nod via a sealed envelope system known as “the wheel.” It is, literally, a wheel of fortune. You can’t make this shit up. Nor the confrontation to follow.

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  • Authors

  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Matthias Gasnier, Australia
  • Tycho de Feyter, China
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Faisal Ali Khan, India