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After a short, suspense filled couple of laps under the yellow, the US Supreme Court has dropped the green flag on the Chrysler-Fiat deal. The New York Times sums up the court’s view that “the Indiana funds ‘have not carried the burden’ of proving that the Supreme Court needed to intervene.” Also, earlier today, the Chrysler dealer slaughter was also given the go ahead when Judge Gonzalez approved that aspect of the deal. So, that pretty much closes this chapter of the saga. The deal is going down as planned by Fiat and the US Treasury. Now the really hard part begins.
31 Comments on “Bailout Watch 555: Supreme Court Gives Fiatsler Thumbs Up...”
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Abarth 500, here I come!
Shame on the Supreme Court.
I wonder how much behind-the-scenes Obama-administration sponsored nonsense happened to make this case slide through so easily.
The Supreme Court rarely shows deference to the Executive branch, not matter who the President is.
I think ChryFIAT or
FIATChry seems better.
Somehow.
Daimler paid billions to get rid of Chryco…
The US taxpayer paid billions to get rid of Chryco..
Seems appropriate that a pool is started to guess how much Fiat will pay to dump this heap in a couple years…
Woo! Gimme my Alfa MiTo please.
18 months isn’t that long :(
wonder how much behind-the-scenes Obama-administration sponsored nonsense happened to make this case slide through so easily.
The rabbit hole is very deep indeed. Now the Obamanation is using his powerful mind control beams on Roberts and Scalia.
The rabbit hole is very deep indeed. Now the Obamanation is using his powerful mind control beams on Roberts and Scalia.
LOL… That made beer come out of my nose.
This decision, while completely expected (and predicted ☺), sure has the tin foil hat wearers confused. Could this plan actually be legal? Yup! Constitutional? Yup! Smart Yup! What is really funny is that if you trace this plan to its roots those occurred in 2008.
Apparently Obama used the ol Jedi mind trick to convince Bush to lend Chrysler the money and not force them into Chapter 7 BK last fall… Very tricky.
“18 months isn’t that long :(”
It is if it is two and a half years.
It’s actually one and a half years.
This is unfortunate.
I would have been really good for the country for:
1) The Supreme Court to have to look at the constitutionality of the delegation of power away from the Legislative Branch to the Executive Branch with the TARP legislation.
2) The Supreme Court to have to look at the legality of using TARP funds to bail out non-financial corporations.
The bankrupcy issues are really trivial compared to the above issues.
The Bush administration thought that the Executive Branch was beyond the law and the Obama administration seems to lean that way. Unfortunately the modern Supreme Court seems to agree.
Pedal to the metal on the cash burn then ….
“The Supreme Court to have to look at the constitutionality of the delegation of power away from the Legislative Branch to the Executive Branch with the TARP legislation.”
They looked, and they saw no such constitutional issue. The legislature routinely empowers the executive branch to act broadly and deeply. The EPA, IRS, OSHA and other departments of the executive branch are routinely given broad mandates by congress and the power to make the detailed rules and take further action without ongoing legislative action. Not to mention the CIA and other “black” sectors of government spending.
You know who really wins-Canadians. They will probably get Alfas, yet will hardly pay anything!
Now we get the privilege of watching one of the worse mergers in history take place.
Time to move on folks. It’s a done deal. Get over it.
Now we need to turn our attention to the “new” Chrysler/FIAT combo plate. Can they make a go of it?
I think it depends on two internal and one external conditions:
One, can Chrysler get back at least some of it’s mojo that it had in the 90’s? Seeing what they did with the Challenger, Ram, and now the new Grand Cherokee on such limited resources I would say yes. When you think about it it’s amazing how much they did since they got out from under Dumbler’s thumb.
Two, will FIAT be smart enough to help where they can and leave them the hell alone and not interfere with Chrysler when it’s not needed? Something that Dumbler never figured out.
Three, of course there is the economy, but that’s out of Chrysler/FIAT’s control, and if it sales don’t get back to something resembling what they used to be it won’t matter, because even Ford won’t survive.
windwards says “Time to move on folks. It’s a done deal. Get over it.”
So the fact that President Goodwrench simply declares something to be, and it happens, doesn’t trouble you in the least? As Hugo Chavez mockingly said, Obama’s now to the left of this communist dictator.
It doesn’t trouble folks that when BO had a speech about the auto industry, he used the personal pronoun “I” 34 times and the word “law” not once, and the word “Constitution” not once?
People in nations other than the United States are paying close attention to what goes on.
Having contracts and bankruptcy law simply torn up and tossed aside – taking away the rights of leinholders and bondholders – is going to have consequences.
I’ll give you a bit more than a hint and I’ll make it a full-blown statement and prediction:
Nobody in their right minds will put penny one into the US economy.
Can anyone figure out what’ll happen then, given the fact that we are so morally, spiritually and fiscally bankrupt as a nation that we have put ourselves into a position of requiring hundreds of billions of loans every year to function? The US economy will completely tank. Oh, “they’ll” be able to hit the printing press, all right…. Zimbabwe, here we come?
We indeed have elected these people, and unfortunately, they reflect the morals (or lack thereof) of the general public. We are getting the government we not only deserve, but the one we actually believe we thought best to elect. Well, we Americans and how many illegal aliens?
Likewise, the United State Constitution was written for the express use of a moral peoples and is wholly inadequate for any other. Hence, it is now being used as so much toilet paper in Washington DC.
It’s sad to see my home nation going down in flames.
We may as well go out with a laugh.
I have a new name for the Fiat and UAW owned Chrysler.
EF Motors. For Epic Fail.
“Two, will FIAT be smart enough to help where they can and leave them the hell alone and not interfere with Chrysler when it’s not needed?”
I honestly don’t think Fiat ever intended to let Chrysler operate as a semi-autonomous division. Maybe I missed something? That was the problem with DaimlerChrylser – the divisions had no relationship to each other and did not benefit from the association. There are very few economies of scale if you have to run a company with unique product to support Chrysler’s small market share, and try to add a small market share of unique product for Fiat on top of it.
I think Sergio’s idea is to make ONE global product line, maybe badged as Chryslers in the US and Fiats elsewhere (maybe not) and with the Dodge truck brand expanding global.
“Nobody in their right minds will put penny one into the US economy.”
Hmmm, then why are the stock and credit markets doing better today than they were the day the Fiat-Chrysler-Treasury deal proposal first hit the news a few months ago? If your theory about the unwillingness of investors to invest were true, we would already see the evidence.
Three different layers of the federal courts looked at this and don’t see the grave constitutional problems the alarmists point to.
Three different layers of the federal courts looked at this and don’t see the grave constitutional problems the alarmists point to.
I am personally getting tired of the bogus constitution-is-being-destroyed argument. It just shows how the internet can quickly circulate these memes among the uninformed, telling people what they want to hear instead of what’s accurate.
People don’t seem to understand the bankruptcy court is a court of equity. The purpose of the court is to make the “fair” decision, which can vary from situation to situation.
The bankruptcy law is somewhat contradictory. On one hand, there is the issue of absolute priority. On the other, courts have ruled that cramdowns are fine if they achieve a higher purpose of reorganization.
Unfortunately, the right-wing politicos have distorted or misunderstood this. Absolute priority is not absolute, nor is the doctrine of cramdown just because the borrower wants one absolute.
Creditors lawyers tend to argue that absolute priority is absolute, even though they know that it isn’t absolute in any way whatsoever. Sometimes the argument works and sometimes it doesn’t, and if the lawyers are any good, they know that. If absolute priority was used 100% of the time, there would almost never be a successful Chapter 11 filing, because liabilities almost always exceed assets in these cases.
The ultimate answer in the real world is that the outcome depends on the situation, and a large deal will tend to result in the debtor getting the benefit. The bankruptcy court has to decide whether there is a social benefit in lenders not being fully repaid, and the answer depends upon what is at stake.
The scale of the automakers and the availability of DIP financing are really what clinched this; in the case of Chrysler, having a replacement operator pretty much made it a done deal from the start. The bondholders got more than liquidation value, so they have nothing to complain about.
menno:
“So the fact that President Goodwrench simply declares something to be, and it happens, doesn’t trouble you in the least?”
Maybe. But that is something that can be fixed in Nov of 2010 and 2012. Obsessing about in the context of Chrysler is a waste of time. And time is not waiting, because the same issues for you will present itself with GM’s C11, which is undereway as we speak.
RetardedSparks:
“I honestly don’t think Fiat ever intended to let Chrysler operate as a semi-autonomous division.”
My point was when you merge a company to make it successful you have to be able to recognize each others strengths and weaknesses. Dumbler never did this. Imagine if Chrysler’s cost reduction processes were able to give Dumbler a C or E class for just 10% less cost for no reduction in capability/reliability? (Not that Dumbler had a corner on reliability – hell, Chrysler might have been able to improve their reliability). Dumbler would have sold them at the same price would be swimming in Euro’s now. But no, those dumb Americans could not teach the mighty Dumbler anything.
FIAT has to recognize what Chrysler brings to the table and incorporate it into their side if it makes sense. They also have to recognize where Chrysler needs help. I’m talking partnership, not dictatorship. Renault/Nissan seems to have pulled this off.
It’s not just bankruptcy law, it’s the banks, it’s the bailouts, it’s everything all tied up.
We Americans essentially went from one criminal batch of politicians in control, to another. Chicago politics, written in bold print.
Of course, I realize that folks see what they want to see, and won’t recognize the damage slowly being done for some while yet. By the time you do, it’ll be like the passengers on the Titanic who didn’t bother going to the lifeboats when called because – after all, the ship was unsinkable. Just like the United States surely is unsinkable – we have the world’s reserve currency, after all!
But watch what China does, Psych101 and others.
China hold the best cards and they are not blinking.
The stakes are higher than you think.
Some people are warning as clearly as they can and others are of the opinion that we’re all over-reacting.
http://www.lewrockwell.com/blog/lewrw/archives/027119.html
Time will tell. Frankly, we who are pessimistic truly hope we are wrong. But you can put hope in one hand and pour water into the other and which one fills up first?
Is it better to take stock of reality (say, your house burning down) and react with caring neighbors to try to put the fire out with water while calling 911, or stay in a dilusional state (pun intended) and simply sit down and decide that your neighbors are nuts and it’s just a bit of smoke, nothing to worry about?
Roll on 2010 and 2012. Of course, it may well be too late.
Calling the firemen after the roof collapses and the walls fall in simply means they feel like “basement savers” instead of firemen.
It’s not just bankruptcy law
To be candid, I have serious doubts that most of the posters here have enough understanding of legal issues to comment on them or to interpret the commentary that is being lobbed around the internet.
The people who are screaming about the Constitution don’t know what they’re talking about. Bankruptcy is provided for in the Constitution (Article 1, Section 8) and the Supreme Court has previously ruled in favor of cramdown.
Good lawyers can argue both sides, because they should know both sides of the priority argument. Listening to one side of the story, without understanding that there is more than one side, merely reflects a lack of critical thinking skills on the part of the listener.
China hold the best cards and they are not blinking.
This has nothing to do with the topic. Are you trying to talk about cars, or just looking for any chance to post links to right-wing websites?
Hi Psych
Lew Rockwell is Libertarian, not Liberal or Conservative/left or right wing.
China has everything to do with the sub-topic which was that our nation is dramatically in debt to others and with each passing Obamabot bill which promises even more free money to suckers who voted for him, we get ever deeper into debt as a nation and it increases the likelihood that we’ll default.
Think a GM bankruptcy, or a California state bankruptcy would be news – how about the entire United States Government defaulting?
Christian people who read “God’s Human Owner’s Manual” (aka the Holy Bible) understand that the borrower is slave to the lender.
Just where do you suppose that leaves us, Psych?
I saw this on Twitpic the other day, and it cracked me up:
“Fiat;n. worthless or fake moneypar.”
http://twitpic.com/5fu50
Menno & Pch101,
The real problem is that people have not been able to separate the BR’s of Chrysler and GM from the governments involvement in it. On the face of it I don’t see anything wrong with the legalities of Chrysler or GM’s reorginazations. As for the governments involvement in it, I don’t like it one bit. And it may yet lead to unintended consequences that we all may regret. But I recognize that if it weren’t for that involvement there would be no Chrysler or GM now. So for now I’m glad the companies have a new start and chance (not guaranteed) to survive.
Why do you keep calling him Psych 101?
Pretty sure it’s PCH101.
As in Pacific Coast Highway 101.
Or California route 101.
You know, that highway in California that everyone likes to film car commercials on?
windswords:
Was Rennissan a merger of equals? (I don’t recall the context). If so, it explains the success of that venture. One could have lots of humorous arguments over who is less competent – Fiat or Chrysler – but from a financial POV this is a take-over, not a merger. It will be very hard for Fiat to get past the idea that Chrysler is a load of bumbling idiots. I agree with you that would be bad. There are no doubt a ton of talented people in that company, just not the 100 or so at the top.
If Fiat can take advantage of what Chrysler does well – trucks, minivans, and retro muscle cars – they will be smart.
I have to agree with menno, sorry Pch101.
The ‘rule of law’ here in the good ol’ America has been replaced with the ‘tyranny of good intentions’.
The problem with politicians, whether Democrats or Republicans, is that when the law doesn’t suit their objectives, they simply disregard it or try to find a way around the intent and spirit of the law. The Obama Administration chose to abrogate contract law and the entire bankruptcy process in the Chrysler (and soon to be GM) Chapter 11 proceedings.
So what is the takeaway? Is the rule of law important to politicians all of the time or only when it suits their provincial interests? The evidence to date generally suggests the latter. In a way, it is startling that the Chrysler case had to end up before the Supreme Court because the lower courts lacked the fortitude to seriously tackle the obvious legal injustices being perpetuated.
So what about US Treasuries? This administration has now demonstrated that it has no respect for the contractual obligations entered into by others — and the Supremes have decided that it’s expedient not to stand in their way. Does that make you more or less confident that the government will stand behind its own debt obligations? How do you think it makes the Chinese and Europeans feel about that?
I know how I feel about it…..Sold to you!
Oh, right, Jesse. For some reason, I think “psych 101” (first level of college courses in psychology) when I see his name – having never been to California, PCH101 wouldn’t make any sense to me until it’s explained. Thanks. I’ll try to type his onscreen name right.
Oh by the way, PCH101? And other doubters of what I’ve been saying about this all?
Take a lookie-lou here.
http://www.infowars.com/russia-may-swap-some-us-treasuries-for-imf-debt/
And here.
http://www.guardian.co.uk/business/2009/jun/10/oil-market-reserves
Now, you have to understand the idea that as the US dollar collapses in value (due to non-support by other nations in lending which will result in the Fed simply cranking out more dollars out of thin are, deprecating the ones in existance) also plays into the perceived future $250 per barrel of oil scenario.
What is REALLY going to be scary is the story/rumor I read yesterday about oil producing countries mulling the idea of only accepting GOLD for OIL.
Which would mean that before long, what little gold is probably left in Ft Knox would be in the hands of our enemies, and eventually, we americans would have to try to get-by on 1/3 of our current energy needs.
Here’s a newsflash if that happens: we won’t have much fuel for transportation by car because we’ll need much of it to produce food and transport it.
We’ll end up, in the worst case scenario, as a 3rd world, hyperinflation nation with no trade partners, barely able to feed ourselves.
Auto industry? What auto industry? We’ll end up as a big version of Cuba.
Maybe the Israelis, South Koreans and Japanese will take some small pity on us and actually send us a few heavy goods vehicles now and again to keep our food moving. (Israel actually has military truck factories which could be used for production of a few farm trucks).