Bailout Watch 299: Chrysler "Government Loan Unlikely To Be Repaid"

With GM, the bailout is pretty straightforward. Give us money or the economy dies. With Chrysler, it’s a lot more… complicated. In case you hadn’t noticed, ChrCyo owner Cerberus is looking for an exit strategy. Give us the money and we’ll sell/give our 80 percent share of the company to someone else. The United Auto Workers. Suppliers. Someone. Anyone. The New York Times quotes the official statement: “Cerberus has advised the Treasury that it would contribute its equity in Chrysler automotive to labor and creditors as currency to facilitate the accommodations necessary to effect the restructuring.” How… magnanimous. Meanwhile, president Bush is throwing a quartet of billions Chrysler’s way– without anything resembling a specific plan for recovery (’cause there ain’t one). And here’s the [non] money shot, from the privat eequity firm’s own mouth : “Unless Chrysler’s labor costs can achieve parity with the foreign transplants and without the restructuring of Chrysler’s debt,” Cerberus announced. “Chrysler cannot be restored to long-term health and the government loan will be unlikely to be repaid.” So, unless the UAW capitulates (which it won’t) and the feds bailout Chrysler Financial Services (which it will), you can kiss the Chrysler bailout bucks goodbye. It’s an extraordinary, and extraordinarily honest, admission. But it seems that honesty’s got nothing to do with it…

“Cerberus officials lobbied the White House last week to prevent the private equity firm from being held responsible for the Chrysler loans if the automaker cannot repay them, according to people with knowledge of the talks who declined to be identified because the discussions were private.

But Chrysler executives, who are responsible for the day-to-day operations of the company, were shut out of the discussions, those people said.”

As Tina Turner almost sang, “What’s cars got to do, got to do with it?”

Bottom line: “In its statement, Cerberus said it agreed to provide $2 billion in proceeds from Chrysler’s finance arm to ‘backstop’ the loans.” So, 50 cents on the dollar, a cauterized wound, and 90 days to find an even bigger sucker. Someone needs to give former U.S. Treasury Secretary and current Cerberus Chairman John Snow a raise.