Supreme Court Delays Sale of Chrysler

The sale of the core Chrysler business to Fiat is at the heart of Barack Obama's plans to save the automaker from liquidation, something which the administration's lawyers argued is inevitable if the Italians walk away. Under the terms of the agreement, the deal must be completed by 15 June.

Fiat will emerge with management control and with an initial 20 per cent ownership of Chrysler under the deal, hammered out ahead of the bankruptcy filing at the end of March. A union-run healthcare trust will own most of the company, while unsecured bondholders will get only a sliver. Mr Obama condemned hedge funds holding the bonds for refusing to sign up to the deal, but a trio of Indiana state pension funds continued to try to block it.

They lost in bankruptcy court, and in an appeals court ruling last Friday, but were given permission to pursue the matter at the Supreme Court. They argued that the interests of unsecured bondholders had illegally been placed behind those of the union.

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The Obama spin here is laughable: Chrysler is being sold because, since 1979, it has needed bailout after bailout & is in the business of providing pensions to former and current workers, instead of making great cars people want.

While I definitely want to see Fiat & Alfa vehicles sold here as soon as possible, I didn't know the majority shareholder of the new entity would be a union-run healthcare trust. This spells trouble, and this is exactly why Fiat refuses to put up any of their own cash to be part of this deal: because even Fiat knows subsidizing healthcare pensions and union corruption with their own money coming into this deal means that money disappears and is never heard from again.

Much as I hate to see the union be any part of this, I still want Ginsberg to finally let Chrysler die - in part, at least - and allow Fiat to take control to send the message that American car companies need to be more like Ford if they want to survive.

UPDATE 6/11/2009: It appears Chrysler is finally going to die, for the most part, as Fiat has been approved to take over all of Chrysler's assets. Let's hope this leads to a rebadging of the brand to Fiat and Chrysler finally dies a decent death, as should have happened in 1979.

Begging for socialism

Note: this was already posted on my other blog but as it involved the auto industry it belongs here too.

In a shameful move by a shamefully & poorly managed US auto company, GM is now asking the government to completely take over the company so it doesn't have to run itself - nor confront the unions it plans to phase out:

GM is living on $15.4 billion in government loans and faces a June 1 deadline to restructure and get more government money. If the restructuring doesn't satisfy the government, the company could go into bankruptcy protection.

GM said in a news release that it will ask the government to take 50 percent of its common stock in exchange for canceling half the government loans to the company as of June 1.

If both are successful, the government and UAW health care trust would own 89 percent of the company's stock, with the government holding over a 50 percent stake, Henderson said.

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I would rather see GM go out of business or at least substantially reduce its product offerings (more than just slashing Pontiac; think much bigger - or smaller, as the case may be). The government should not be in the business of making cars for profit. And since the government will realize this soon too, taking over 50% of the company's stock (read: operational & financial decisions) means we're slowly getting on the path of government taking over all industry. Alarmist? Apocalyptic? OK maybe a bit too much melodrama to make such a leap, but it's still frightening for those of us who value good old fashioned hard work in our industry here in the States.

My only hope is that a strong state like Texas secedes from the union and shows the other 49 how it's done. Only that type of action will finally convince people that a heavily centralized federal government, which should not be in the business of bailing out or taking over industries to the point where those companies are given a lifeline just long enough to BEG the government to put it out of its misery as an independent for-profit going concern, has no place in this country.
If this (or something like it) doesn't happen? I fear the socialism bug that has infested too many countries in Europe, and spread all too easily via the EU.