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Can Chrysler Turn It Around in Bankruptcy?
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I have no problem with the UAW taking over Chrysler and giving it their best shot. I do have a problem with them using our tax dollars for the experiment with NO PLAN whatsoever. That would be like handing Microsoft over to me because I have experience installing Windows in computers.
Yes Bush handed money to GM and Chrysler after Congress denied them any money. Which put that handout on shaky ground. By your thinking if Bush broke the law it is OK for Obama to break the same law. Thankfully Congress is finally taking a look at the mess they are supposed to be over seeing.
I'd really hate to be known as the parties that took down Chrysler because they wanted more money.
Easy to say when it is NOT your pension in jeopardy.
As far as the Fiat deadline, screw em. They are not bringing any money to the table. If they want Chrysler get in and bid for it at the liquidation auction.
We have such short memories. It was the same Fiat that cost GM $billions just a few short years ago. I cannot think of one good reason to hand Billions of tax dollars to a foreign auto maker with a poor reputation. FIAT ( Found in a Toilet)
I think you're forgetting that Chrysler is not independent and does not act as an independent company. They are owned by Cerberus, and I'm sure Cerberus is directing the puppet-executives at Chrysler as to what to do. This whole bankruptcy and sale of Chrysler is being directed by Cerberus, to minimize Cerberus's losses and future potential losses.
And the investor's at Cerberus who are politically connected and part of the "DC power-club" are trying to minimize their losses, at the expense of the bondholders and other secured lenders to Chrysler. They are trying to get DC to change the rules of the game, in the name of "doing good for Chrysler and its workers", when the rules of the game have always been that the bondholders are in line first.
The feds are on dangerous ground here and with TARP, in changing the rules of the financial system, whenever they determine it is "good". This is illegal and can undermine the basic faith in investing, as if it hasn't suffered enough already.
The feds should close legal loopholes, but be hands-off in any particular company's fate.
No, actually what I'm saying is that they seem to think that Bush doing it is OK but Obama doing it is wrong, which is a completely different thing. Bush initiated it, which means there should be paper filed on that aspect as well. Now, they could be saving that to file later to further stall...or they could just be doing it for other less fair reasons.
I happen to think what was done was either right or wrong, and if they both did it, they're either both right or both wrong. I don't play partisan games.
Easy to say when it is NOT your pension in jeopardy.
You know, I seem to remember a company called Enron going belly-up and taking out a bunch of people's pensions...happened a bunch of other times too. Happens a lot, and will continue to happen, and anyone who was dumb enough to sink so much into Chrysler bonds without diversifying frankly deserves to have their retirement wiped out, and any pension manager who sunk that much beef into one COMPANY, much less one industry sector, was acting in a horribly irresponsible manner, and deserves to be drawn, quartered, stoned, waterboarded, hanged, shot, and stuck in a room with a caterpillar in a box.
Investment involves risk. That's why every sane fund manager preaches diversification. You don't diversify, you increase your risk. Which means you get no sympathy from me when you lose and suddenly can't stomach the risk anymore.
Oh I don't doubt that, but it's a distinct and legal difference, and that's why the legal complaint is shaky. There's a lot of difference between forcibly seizing a company against its will and the company voluntarily begging to be seized. Kind of like me forcing you into my car is kidnapping, but you begging for a ride and getting in isn't (and to continue the comparison, me agreeing to give you the ride, like the government agreeing to give the bailout, might not be the brightest idea in the world).
I agree. IT WAS WRONG FOR BOTH PRESIDENTS!
Investment involves risk.
Of course it does. We do have laws that lay out who gets paid and who does not. The law is very clear on secured debt, which these bonds are Secured debt. Obama thinks he can circumvent the Constitution with his silly dictatorial games. Thankfully even the most liberal member of the SC realizes what he is doing is questionable.
C11 may have been an option at one time for both GM and Chrysler. I think the actions of the President and his group have destroyed that avenue. Giving GM & C a blank check to compete against the other auto makers is crazy. It will destroy the whole auto industry. Which may just be what Obama wants. :confuse:
Do they typically diversify? Because it's being made out that they'll almost go belly-up if they can't get 100 cents on the dollar for their Chrysler bonds. If they diversified properly then that would be inaccurate and they're just trying to generate sympathy. If they didn't diversify then, sorry, but Indiana is just stupid. :shades:
Personally, if I ran any pension fund with GM or Chrysler issues in it, I would have gotten rid of them as soon as I heard they would be flying to Washington. Assuming I hadn't already gotten out when gas spiked above $4 per gallon, with the knowledge that their only reasonably profitable products were vehicles the depended on low gas prices to sell well.
Actually, the whole debt-seniority thing originated with Bush (though yes, Obama is continuing the policy). There was a good reason for it: making sure bondholders weren't just lobbying for taxpayer money to be flushed into the company so that they could then drive it into Ch7 and collect. That would amount to a bondholder bailout, something just as bad.
If they do go into Ch7, I think bondholders should be paid based on the company's assets/balance sheets from November or December. They should not have access to any taxpayer funds that went into the company afterward. Basically, treat it as if there were no bailout and the companies went into BK rather than getting bailed out (which is what really should have happened in the first place anyway).
I agree with you there for sure. Only pre bailout assets should be liquidated and the bondholders get their money first. Then however the law provides. If you read one of the articles dealing with the lawsuit. The pension fund bought the bonds last year at 43 cents on the dollar. Their secured value would make them a profit if the company goes broke. If not they are due the $1 per share when they come due. So it was a smart investment if the government does not try to change the Constitution mid stream.
Good comparision. Now imagine you're a government employee just like the president is. You're a school bus driver. You're authorized to only pickup kids and take them to school. You see me with my car on the side of the road with a flat. I'm going to be late for work again and could get fired, so I'm jumping up and down, begging for you to break the rules and let me on the school bus. There are plenty of other cars that see my situation, and could stop and help me if they wish.
I agree with you and gagrice that government loans to Chrysler (i.e. Cerberus)shouldn't be included in payments to debtors.
Ok that detail actually changes things a lot more. Did they ever think maybe that the reason WHY they only had to pay 43 cents on the dollar is because everyone figured Chrysler was going to default and they wouldn't get anything? I think it was already determined that Chrysler didn't have enough assets to cover all of their bonds, right? Particularly in this economy, when no one is going to pay top dollar. Someone saw liquidation in Chrysler's not too far future, saw someone was going to end up not getting anything for their toilet paper, and decided it wouldn't be them. So they needed to find a sucker who would give them money for their Chrysler bonds. In steps the Indiana Pensions, who got suckered into taking them AND paying for them. And the seller then laughed all the way to the bank.
Now if I was the BK judge, I'd go as far as offering them 43 cents on the dollar...I DO have some sympathy for their pensioners, and maybe the fund managers DID get suckered, and maybe we can be kind-hearted enough to compensate them the money they got suckered out of (provided it doesn't start giving them access to the money from the bailouts). But not a cent more. And they're not going to make a profit off of taxpayer bailout dollars, which I can pretty much guarantee they've got in mind.
Chrysler's credit rating at the time of the purchase was "B-", well below investment grade. In other words, the Indiana pension fund should never, ever even considered buying these "junk bonds". Later that month, July 30, 2008, Chrysler's rating droped to "CCC". To me, this is another example of the type of greed that got us into this recession. The investment manager risked this pension fund on a gamble. They should have never bought these bonds in the first place.
I'm not an economist, nor do I play one on TV but I have read a lot and listen to many experts. You would have a hard time finding anyone recommend buying Chrysler's bonds in July 2008 as part of long term investment.
As for the Chrysler (and soon GM) issue it seems to boil down to "the greater good" versus "bondholder's rights". Either way probably has complications. Finding against the bondholders will have costs down the road such as potentially higher interest rates due to increased debt holder risks. However, going for the current bondholders may likely really mean Chapter 7 liquidation rather than Chapter 11 reorganization (look at the balance sheets!) and a large hit to jobs and the US economy. I don't think the decision should be made solely on narrow legal interpretations for either side because of the potential ramifications. I don't know that there is a clearly "correct" answer here, and whatever happens we as a nation need to put our disagreements and preferences aside when the decsion is finally made (and be glad we didn't have to be the one deciding this tough issue!) and start working together to turn things around. My experience over the years has been that hardliners on any side of an issue seldom resolve anything, it is the moderates who have to step in and be practical to get anything actually done.
I think the investment manager for the Indiana pension fund knew exactly what he was doing. He had no business investing these retirement funds in junk bonds. You do not invest retirement funds in companies with "B-" rating and in an industry that was on "life support". This whole soap opera reminds me of the guy who gets a "tip" about a company and buys tons of stock looking for a quick profit. And then gets upset when the scenario doesn't go his way and he is left with worthless stock.
If my money was tied in these bonds, I would be furious at the fund manager for buying junk bonds.
Well said. Easy for us to debate this issue. Kind of fun in a sadistic way but very educational. Learning a lot form everyone.
Yeah, except you've seen how the hardliners treat moderates these days, right? :shades:
Anyway, this whole big mess is the result, not the problem. This is what happens when you start getting into bailing out private companies with few to no preconditions. And even if there are some (like seniority of debt) they get argued over.
I love the seniority of debt bit...bondholders want more for their Chrysler bonds, so they figure they can tweak the rules and lobby for a taxpayer bailout so there's more assets in the company to collect. Government is smart enough to see this coming (though it's probably more like dumb luck) and decides to tweak the rules to make sure that government debt is senior and the bondholders can't tweak the rules to get at the taxpayer dollars. Bondholders hate this, so they try to tweak the courts, then government tweaks the BK process, tweak tweak tweak..
See where all the rule tweaking gets us? Into a deep disgusting mess.
The retirees will next get to sue either the investment company (if Indiana hires outsiders to manage the fund; otherwise, maybe they'll be able to sue the state).
Or they'll sue banks doing the underwriting for the Chrysler bonds. That's what they did with Worldcom. (Basex.com)
I think the next round of suits you see will be against Moodys and the other rating services. Follow the money. :shades:
The unfortunate thing is that while we're all discussing bondholders, liquidation, debt seniority, and credit ratings, there's a whole bunch of people going out of work, and my teammate at work can't get any love on the Chrysler Care contract he paid for when he bought his car (ball joint went while he was doing 50...SKREEEEE!!!).
As I discovered a few months ago, the rating services such as Moody's are PAID by the company they are rating! Moody's is not paid by the government or charity. So there might be a conflict of interest there. :P Follow the money.
Ummm...might, yeah. Kinda like auditors being paid by the firms they audit. Wasn't there some big news about that in recent years? :shades:
The temporary job losses is not a large enough hit to make that much difference. We have been losing 600,000/month for months and we may be recovering. The fact is, is that if Chrysler goes under, the demand for new autos will change little. people who would have bought a vehicle will still buy a vehicle of some other brand. There will still be the SAME number of autos sold. other manufacturers would gain and may add jobs or not layoff further. So I don't buy this major loss of jobs argument.
If Dell goes out of business next week, the economy does not end. HP and Gateway and such will benefit, and the same number of computers will be sold. Chrysler going out of business may be exactly what Ford and GM need to become profitable.
I do not want the government to change the rules of the game such that the race-car gets $500 everytime it passes "GO" and doesn't have to pay Boardwalk if it lands there.
It sure would hammer consumer confidence if nothing else. When people think the economy is getting worse, they stop spending. And fewer cars (or laptops) will be sold.
There's more at risk to letting Chrysler and GM fold than simply job numbers.
this is about cushioning the blow, and giving these companies a chance to survive, when it does.
Viva La Alfa Romeo. :shades:
They were dying, not surviving during boom times. They just went from being a terminally ill patient with excellent medical care to having terminal stage 5 lung cancer with no medical care. The death was inevitable, it was only rushed by the economy.
Keeping them on life support waiting for the next BOOM time will only lead to a death during that boom time.
Congress still has a say in this. Will they wilt under the pressure of King Barry?
All three of the Domestics lost billions in 2007 when 17 million vehicles were sold. How will they make money when we may never see that big of a sales year again? I don't think the EPA and CARB will sit still for Fiat/Chrysler to bring their fuel efficient diesels to the USA. So what does Fiat have to offer in this flaky deal?
Nothing! Which is why I give this marriage only a few years. :P
Fiat does have the fuel efficient engines that Chrysle desperately needs. I don't know how quickly they cna get these vehicles over here. I also don't know who is going to buy a vehicle from Chrysler or Fiat.
These are interesting times.....
http://money.cnn.com/2009/06/09/news/economy/supreme_court_chrysler/index.htm?po- stversion=2009061004
There are many things that happen that make no sense to me.My company was sold in 1998 for $250,000,000.....the previous year,we grossed $500,000,000....does that make sense?
I guess just don't understand business.
Also, Chrysler is so MUCH MORE poorly ran that it makes the BAD airlines of yesteryear look like SAINTS.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
The Fiat 500 is a cool car, I'd have to say I'm interested in it as well.
2021 Kia Soul LX 6-speed stick
http://www.fiat.co.uk/Content/?id=2154&linkidentifier=id&itemid=2154
Would they offer substantially more warranty here because it is what Americans expect and because we may otherwise be skeptical of buying a Fiat? Well sure, they MIGHT.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
And the Fiat Abarth would have to come with a stick shift for me. Period. Just as sure as the Yankees are going to sink in to the Atlantic when things get serious later, the 500 needs to come with a stick, not paddle shifters.
The smaller the car the more it must have a stick shift, the '08 Mitsubishi Lancer is just large enough to be OK with me to have an automatic CVT tranny. As long as I can have my titanium paddle shifter with 6 forward and 6 back.
And The Guess Who's #10 album, a can of Coca-Cola classic, and roads without holes in them...hey then I'm a happy Arizona camper.
2021 Kia Soul LX 6-speed stick
And The Guess Who's #10 album
Don't send me no hand me down...
At first, they wanted to just brand the car as '500', but look how well that worked for Ford!
Agreed? The car is a serious threat to my pocketbook in the future at some point. And I repeat-for this car I want a manual transmission. It's in the size range at which an automatic transmission would seem too "slow", or "sluggish" or just generally uncool. Gotta have a stick shift for this baby.
2021 Kia Soul LX 6-speed stick
2021 Kia Soul LX 6-speed stick