4/30/2009
Back to The Remaking of America: Daily Log
After having already received $4 billion in bailout money from taxpayers, Chrysler files for Chapter 11 bankruptcy (which it should have been forced to do in the first place), after debt-restructuring talks collapsed.
The Obama administration had pre-“negotiated” deals with the majority of the stakeholders. However, the judgements that Obama attempted to impose are not necessarily in the best interest of the business, and are definitely not in the best interest of many investors. Obama appeased his labor supporters by giving the majority share of Chrysler (55%) to the United Auto Workers union retiree health fund. While Cerberus Capital Management, which struck a $7.4 billion deal to buy control of Chrysler two years ago, will lose ALL of its equity in the company.
Obama praised the large banks that hold most of the Chrysler debt and supported his plan. But of course, the big banks (JP Morgan Chase, Citigroup, Morgan Stanley, and Goldman Sachs) are also recipients of billions of taxpayer dollars and have a strong interest in playing nice with Obama. Obama also publicly denounced the 20 smaller lenders that refused to take the deal (which would have returned only a third of their investment), in yet another political attack on private businesses.
The U.S. government has plans to provide at least $8.08 billion in additional financing to Chrysler. So, the pressure to restructure efficiently and become more profitable, which is normally placed on companies in bankruptcy, has been limited by the government’s involvement. The U.S. government owns 8% of Chrysler, and as part of Chrysler's bankruptcy filing, the government has the right to appoint four directors to Chrysler's board, further solidifying the government’s role in this once private business.
Sources:
http://www.bloomberg.com/apps/news?pid=20601103&sid=anOtOhu3yDyU&refer=news
http://www.nydailynews.com/money/2009/04/21/2009-04-21_more_money_please_general_motors_and_chrysler.html
http://www.sacbee.com/341/story/1825237.html
http://uk.biz.yahoo.com/01052009/323/factbox-u-s-bailout-money.html
http://www.heritage.org/Press/Commentary/ed040209a.cfm
http://online.wsj.com/article/SB124139467875781705.html
http://online.wsj.com/article/SB124113484242375207.html
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment