“Earlier this week, industry sources said GM had asked for roughly $10 billion in an unprecedented government rescue package to support its acquisition of Chrysler from Cerberus Capital Management LP,” Automotive News [sub] reports. Today, we learn that “The U.S. Treasury Department is not negotiating with General Motors and the owners of Chrysler LLC on a request to provide direct government aid to their proposed merger, a Bush administration official said today.” Uncle Sam’s reluctance to grease the deal’s wheels puts it in serious doubt. As in kills it dead. Which raises a familiar question: what the Hell was the point of this merger thing, anyway? There are two main theories. 1) GM viewed Chrysler as a cash grab and 2) GM is/was/wanted to position itself for a massive federal bailout. Proponents of theory two suggested that the feds strongly favored a GM – Chrysler merger so they could then bailout two Dodos with one stone (or something like that), and “save” Chrysler’s jobs. When it became clear that no such jobs rescue was possible, the Treasury balked. Assuming the American Leyland deal doesn’t go down, all that’s left for Chrysler is Chapter 7 liquidation. Yesterday’s Wild Ass Rumor of the Day– which had GM and Renault/Nissan carving-up Chrysler– could well be ChryCo’s pre-C7 valuation process. As for GM, one way or another, they’ll get their own damn bailout. Too big so they failed is still seen in D.C. as too big too fail. At least until the election’s over…
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Rewarding GM management with cash from the taxpayers is a truly bad idea, despite the fact that my hometown of Detroit may have been spared (delayed) some of the inevitable pain of the demise of GM and Chrysler.
However, even Bush is a socialist now. If the handouts are going to be sent to the bankers, why not everyone? Why should any family or business even try to fix themselves, when rich Uncle Sam is ready to cosign?
You’ve seen life through distorted eyes
You know you had to learn
The execution of your mind
You really had to turn
The race is run the book is read
The end begins to show
The truth is out, the lies are old
But you dont want to know
Nobody will ever let you know
When you ask the reasons why
They just tell you that youre on your own
Fill your head all full of lies
The people who have crippled you
You want to see them burn
The gates of life have closed on you
And now theres just no return
Youre wishing that the hands of doom
Could take your mind away
And you dont care if you dont see again
The light of day
Nobody will ever let you know
When you ask the reasons why
They just tell you that youre on your own
Fill your head all full of lies
Where can you run to
What more can you do
No more tomorrow
Life is killing you
Dreams turn to nightmares
Heaven turns to hell
Burned out confusion
Nothing more to tell
Everything around you
Whats it coming to
God knows as your dog knows
Bog blast all of you
Sabbath bloody sabbath
Nothing more to do
Living just for dying
Dying just for you
-Sabbath, Bloody Sabbath
Black Sabbath
(I will re-post this when October sales come out!! :P
I have another theory: Cerberus never wanted these talks to succeed. They spread those rumors and started negotiations, but ultimately, all they wanted was an excuse for ripping Chrysler apart.
They would have looked like the bad guys before, but now they can blame the government.
Tom,
I think that there may be an element of truth in what you write. I would also propose that Cerberus was/is in multiple negotiations with different parties to see which deal proved most beneficial to them. I still believe that they want 1) to get rid of Chrysler and 2) complete control of GMAC. My guess is that they will sell off Chrysler piece-by-piece, take their loss on that bad investment and move on. Where does this leave GM? Something about a creek and paddle…………
Tex
I agree with Texn and believe a third theory should be added
Robert wrote ” what the Hell was the point of this merger thing, anyway? There are two main theories. 1) GM viewed Chrysler as a cash grab and 2) GM is/was/wanted to position itself for a massive federal bailout”
Cerberus is the big dog in this kennel. Dump the bad investment (Chrysler) on GM and the public treasury. Keep the not so bad investment GMAC and get already approved bailout money for GMAC (much easier to turn around than Chrysler).
Least loss for Cerberus (and avoids lots of bad PR and possible litigation down the road)
Cerberus has learned that it is hard to make their expected rate of return with a manufacturing enterprise (messy equipment, employees and suppliers).
To me it is a liquidation of chrysler no matter if GM takes them or Cerebus parts them out.
It is ironic that what Chrysler saw in American motors )jeep) will be the mainstay of what anyone else sees in Chrysler.
I said before in Truth that the big winner was Daimler. It must have been Dieter Zetsche’s involvement with Chrysler for Daimler that let him see the weakness there. Further, if he had the knowledge to know that the slowdown or rather crash in new car sales was around the corner, he was simply brilliant.
Dieter didn’t buy Chrysler, it was his old boss Schrempf, so he can only be given the credit for getting Daimler out. It has been said, he is doing equally bad at Mercedes who is closing production for a month at the end of this year. However, he has no damaged brands, and for the Germans to keep building and then have the dealers make fire sales to clear the stuff out is unthinkable. At least they know how you wreck a brand, they tried to stay up with GM in the give away business in America.
The only way you win is to stop. Yes, Mercedes will fight another day, Chrysler will not. ps It is ironic that the new Dodge Ram is possibly the best of the pickups now made in the US and the market is trashed.
However, even Bush is a socialist now…
As an actual, honest-to-god socialist, this bugs me. I don’t like the way the term “socialism” has been co-opted as a way to polarize ideologues by playing on their fears of the S-word.
psarhjinian :
October 31st, 2008 at 8:53 am
As an actual, honest-to-god socialist, this bugs me. I don’t like the way the term “socialism” has been co-opted as a way to polarize ideologues by playing on their fears of the S-word.
Well people should be afraid of the S-word as this is America afterall. As the brilliant economist Thomas Sowell said, “Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it.”
;)
Well people should be afraid of the S-word as this is America afterall. As the brilliant economist Thomas Sowell said, “Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it.”
Don’t tempt me, man, I’m just itchin’ to whip out the keyboard today..
Sanity rules the day? We shall see…
@rmwill,
You read my mind. I agree completely with your post.
The only thing I might add is that we can absolutely count on Chrysler being dissolved. It’s just a matter of which method now.
While I’m not a card-carrying socialist like psar, I can say without reservation that what we’re seeing in the US is not socialism. It is corporatism: taking from the people and giving to corporations. It seems like socialism, because it bears the hallmark of increasing government involvement and state ownership, but it isn’t the redistribution of wealth to the poorer members of society, it is the increasing concentration of wealth and power to our new corporate overlords.
“Helping” GM or Chrysler with bail-out money is like helping by slowing, not stopping, the downward rush of the guillotine. “If it t’were done, it is best done quickly ” applies to liquidation in any form.
How much is it going to cost to get rid of the trademark near the top of Chrysler’s new hq?
I hope this latest rumor is true. Taxpayers funding a merger and massive layoffs makes no sense at all.
Strategically, VW belongs on the courthouse steps buying many of the pieces of a parted out Chrysler.
dean:
“It seems like socialism, because it bears the hallmark of increasing government involvement and state ownership, but it isn’t the redistribution of wealth to the poorer members of society…”
If you look at socialist countries you not find welath redistributed to the poorer members of society. They will get a handout or two (like the new washing machines Fidel just gave to Cuban households) but the majority of the wealth will be in the hands of the few, be they governmnet officials or captains of industry. Only capitalism allows for a large middle and upper class and the ability to move from the lowest to the highest classes (and unfortunately, but not too often, back again).
If you look at socialist countries you not find welath redistributed to the poorer members of society. They will get a handout or two (like the new washing machines Fidel just gave to Cuban households) but the majority of the wealth will be in the hands of the few, be they governmnet officials or captains of industry.
No one pegged this inevitable result better than Orwell in Animal Farm. But since we’re having this debate over terminology, I would submit a form of fascism (I know, I know, just hear me out). Definitions are as numerous as belly buttons, but the ideology’s Third Position consisting of corporatism, mixed economy, economic planning, etc. are similar to what we are seeing today in the U.S. The term is now hoplessly perjorative, but still has some value if one can set aside Nazi connotations. I’m not arguing here for what the Bush adminsitration is doing in its entirety on the economic front, but simply trying to define it from an historical perspective.
It’s socialism: they are taking from one strong company that pays corporate taxes (Exxon) and giving it to a company (GM) that has wracked up so many losses that even if they make money for the next twenty years they won’t pay any taxes.
I’ve had expensive vehicles stolen and my father was recently mugged. The only difference between the mugger and the government was grace. Both wanted what somebody else had and took it, damn the consequences.
Hey RF, Is there some reason ChryCo can’t do CH11? I think that would be their best bet.
Wolven :
Chapter 11 is protection from your creditors that assumes you have a viable business (a.k.a. exit strategy). No one in their right mind would make that argument now. And the ones that could will be drifting away on their golden parachutes.