Editorial: A Funny Thing Happened on the Way to Bankruptcy…

Back when the “first” Detroit bailout bill was headed for the President’s desk, U.S. automakers scrambled to justify their $25b call on the public purse. Read the goddamn label, they cried. It’s a LOAN. For building FUEL EFFICIENT CARS. Meanwhile, Michigan Senator Stabenow displayed the political instincts for which she is rightly famous. “It’s about jobs, jobs, jobs,” the Debster decried. Well exactly. And thanks to “jobs, jobs, jobs,” the domestics will get a second, third, fourth and fifth turn at the taxpayer trough. But first, there’s a little business to take care of: Cerberus.

Cerberus Capital Management is the private equity group that bought Chrysler from the Germans. Why they did that is anybody’s guess— provided “strip and flip” are the first words out of their mouth. At the time, Cerberus swore up, down and sideways that theirs was a long-term play. They had deep pockets and they weren’t afraid to use them. Just in case anyone believed them, Cerberus installed the disgraced cost-cutting CEO from Home Depot at the automaker’s helm, and terminated virtually all new product development.

OK, so here we are. Chrysler’s dead in the water. The U.S. car market is dead in the water. Cerberus has a better chance of selling a cup of water to a dead person than off-loading their Chrysler investment at profit, either as a going concern (yeah right) or in parts. To exit their Chrysler debacle “gracefully”– i.e. prop-up the biz until they can off-load it on another sucker– Cerberus would like to draw-down some federal bailout bucks. Only that’s an extremely risky strategy.

Unlike GM and Ford, Cerberus is a going concern. Going very well, in fact. The equity firm’s website claims $100b worth of annual income from its other investments, in industries ranging from aerospace to travel and leisure. Automotive accounts for just eight percent of its total holdings. All of which means Cerberus could actually go the distance with Chrysler. You know; if they wanted to.

Which they bloody well don’t. ‘Cause they’re not stupid. In terms of money and time, Cerberus knows they’d be better off starting a new automaker from scratch than trying to revive a liability-laden, union-stifled, bureaucratically-challenged, over-dealered, product-deficient Chrysler Corporation. Or simply torching a 100 dollar bill every five seconds for the rest of eternity. So, again, Uncle Sam’s mams are looking pretty good to Cerberus right about now.

But not for long. Now that Congress has pissed-away $700b on the “are you SURE we needed to do that?” Wall Street bailout, spending several tens of billions more to “rescue” a private equity firm’s folly is an idea with wings of lead. I mean, eventually. Right now, the average American doesn’t know Cerberus from Adam. Right now, it’s all about “jobs, jobs, joibs.” So now’s a good time to ask for bailout bucks. So now they’re asking.

But the clock is ticking for Cerberus’ political fixers, and they know it. It’s only a matter of time before they’re “outed” [see: today’s Wall Street Journal]. So they’ve devised a suitable plan B: blackmail.

Cerberus is blackmailing GM into buying them. It may be a coincidence that GMAC– 51 percent of which is owned by Cerberus– has cut-off vital floorplan lending to GM dealers. It may be a coincidence that GMAC now requires a FICO score of 740 for a GM loan or lease. And it may not. I repeat: Cerberus has deep pockets. They could shore-up GMAC on their own.

So, if GM buys Chrysler, what’s the bet the GMAC “problem” goes away? More importantly, so does the Cerberus PR problem. In fact, a combined GM and Chrysler would make an even MORE compelling case for federal aid. And, let’s face it, that’s all GM has left now. Without a federal bailout, GM’s dead. And everyone knows it.

Well, not everyone. The average car buyer is still blissfully unaware that GM is a zombie. If he devotes any mindspace to the issue, Joe the Car Buyer thinks GM’s in a spot of bother, what with building all those SUVs and all. If we need to protect blue collar jobs, well, better Detroit than those banker boys or those foreign automakers (did I tell you my wife’s brother bought a new Honda?). By the same token, a merged GM and Chrysler makes perfect sense. Two are stronger than one, right?

In short, to avoid– or I should say forestall– Chapter 11, GM and Chrysler will merge.

During CEO Rick Wagoner’s tenure, GM has always tempered major bad news with a major announcement. So this could be the mysterious revelation scheduled for Friday morning. With or without Treasury Department assistance, I reckon American Leyland is on its way. If it does arrive, one thing’s for sure: Cerberus won’t be around to watch it die.