Monday, June 01, 2009

Changing Bankruptcy Horses in the Middle of the Stream

The Obama Administration hops off one horse of the economic apocalypse, and onto another.
The Automotive News - "Judge Arthur Gonzalez approved the $2 billion sale of the assets to a new company that will be 68 percent controlled by a health care trust aligned with the United Auto Workers union.

Fiat will control 20 percent, the U.S. and Canadian governments will control the other 12 percent.

In his written opinion, Judge Gonzalez said the only alternative to approving the sale was the 'immediate liquidation' of the company and that he was concerned about saving the value of Chrysler as a continuing operation.

'Indeed, because of the overriding concern of the U.S. and Canadian governments to protect the public interest, the terms of the Fiat Transaction present an opportunity that the marketplace alone could not offer, and that certainly exceeds the liquidation value,' Gonzalez wrote in a 47-page opinion.

Chrysler filed for bankruptcy protection on April 30 to complete the sale and alliance with Fiat within 60 days in a case that analysts have seen as a test for the much bigger and more complex bankruptcy of GM."
Which is what your Modern Pharisee said 4 days before the bankruptcy. Now that it's practically speaking, all over for Chrysler (yes, they will live) it's time for GM to go under the knife. The argument being "we didn't kill Chrysler, and we won't kill GM."

I'm not even going to pretend that I'm keeping up. There is considerable question as to whether or not Government intervention was necessary but Rahm Emanuel is never one to let a good crisis go by underutilized, so if GM and Chrysler could have sailed through without the help of the feds, we'll never know. I guarantee that the Federal Government which is entirely controlled by Democrats would never want us to know we could have survived by ourselves. In the end it may be that GM would have survived, and Chrysler would not have and the Feds needed a guinea pig to show that the could avoid killing the patient. Dying Chrysler gets the experimental miracle drug and lives to tell about it. Mildly feverish GM gets the injection whether it needed it or not. Like I said, it's way too big and I'll have to wait for history to be written, which hopefully we'll be around as a nation to read.

Along the way there have been allegations of Obama franchise murders that were designed to "get back at" Republican opponents. You better believe that if Democrat operatives didn't bump off a few car dealer enemies along the way, they sure thought of it. I thought of it immediately myself but had no time and none of the resources to check it out and eventually other more connected bloggers sniffed out the story. I still say it may be much ado about nothing. I have only worked for one Democrat car dealer and he backed Obama in the last election cycle. Vocally. He lost his Jeep franchise in a county Obama carried. He was not in a financially unsound position.

In the end, Ford will have to do this too. The UAW lynch mob is at the gates having successfully pulled a revolt at GM and Chrysler, elbowing their way into the board room, they now have Ford right where they want them in terms of bargaining power. Ford may not have needed to go bankrupt and may complain until doomsday that they had the right to survive as the sole American Automaker, but that ship has sailed. Now they are saddled with unattractive Union commitments and costs that the other two of the big three have shed. Ford either goes slowly under the waves, or signs onto some version of what the other two have been forced to accept.

In the end, with behavioral precedents now firmly set, when the Government comes knocking, Ford execs will likely get up, dust their chairs, pack their knick knacks in boxes and head for the doors, just like Chrysler and GM because disturbing perceived realities are now governing.

Today at my dealership the Governor of our state came by. I got the chance to shake the hand of the man who vetoed gay marriage in Vermont. I guess that's my first official function as a lobbyist. Rumors were flying around that he was here to "give us the Jeep franchise." This from a sales force that I though would have known better. They knew the Jeep dealer up the street did not survive the Chrysler Bankruptcy and they thought "Oh, government awards franchises." Hence the rumor.

He was actually here to sign the new Vermont franchise legislation for car dealerships. Governor Douglas was actually more aggressive in taking customers as they walked through the door than our salespeople were. The owner of my place of business was relaxed and happy since he had worked hard on that legislation. He had the news tucked under his belt that the road was all downhill now on Chrysler's trouble and he has no GM franchises to sweat. Other shoes will continue to drop, but for now it looks like we'll be here for a while. It's probable that some GM dealers hadn't let it be known they "Got the Letter," But now that GM is in Chapter 11, there will be a list. I imagine some employees in some dealerships that though they survived are in for a rude surprise. No doubt more dealerships will fall under the axe.

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