The Not-so-fabulous 2000s: Chrysler about to go Belly-Up

Feinberg and Chrysler Checkmated

The Chrysler car company is about to go bankrupt. This represents checkmate for national master Stephen Feinberg, head of Cerberus, a private equity fund that bought Chrysler (why??) a few years ago.
I would equate this purchase with moving one’s queen en prise for no compensation.

I assume Feinberg & his minions were trying to make a quick buck on a “flip” buy and sell of this battered behemoth, maker of plastic cheap Jeeps and what not. And on top of this, they had terrible expensive ad campaigns, such as showing trucks racing through rings of fire – entirely irrelevant to what should be the mission of building a dependable vehicle. Why take the “Dodge Challenge” when I can buy a more reliable Toyota Tundra?  Why bailout a company that made the Sebring, a car with rattling loose screws when it’s driven off the new car lot?  It appears that labor costs grew at the expense of materials costs so the vehicles became completely uncompetitive. But (good for a snicker if it wasn’t so pathetic) the engineers did develop a drink cup that could both heat and cool.  Talk about misplaced priorities!

Now what did the “intervention of the equity fund do”?  It brought checkmate onto the heads of thousands of midwestern blue collar workers and their families. One of the early blunders was appointing Robert Nardelli (who had already failed spectacularly at Home Depot, only ‘succeeding’ in rewarding himself with a gigantic departure settlement to the detriment and outrage of Home Depot shareholders) to run the newly privatized firm.  There were a series of revolting mutual idolizing praise interview and press release sessions early on between Nardelli and Cerberus that are worth retrieving if you have a tough stomach.  I kid you not, I think they called each other “patriotic” in the hiring announcement. Appointing Nardelli was the chessic equivalent of sponsoring Vergani with a multi-million dollar appearance fee, the player that went 0-and-24 without a single draw in Hastings 1895.

Ut Oh – We all find ourselves in Checkmate on this one

Weirdly, since the US Government went for an ill-advised multi-billion dollar ‘bailout’ of this poorly run company that made poorly made products, we (the taxpayers) are on the hook for this chess player’s blunders. The government gave Feinberg a “takeback”, absolving his company of much of the loss, and now all of us lose. Whatever officials in the US Government decided a private equity fund deserved a bailout require immediate psychiatric care. Is there any way for us to request a “takeback” and recover from this chess position that was obviously losing from the very start?

The government bailout is analogous to a player with a lone King paying billions of dollars to a player with two queens to take back his last move and let the game go on in a “new direction.”

Good for a Snicker – a Ridiculous Merger Plan

Chrysler pinning its hopes on a merger with Fiat. Whaaat? What on earth? Is *this* the master plan the US Government hoped would rescue Chrysler? It’s very sad, the amount of money going down the drain on this absurd merger notion. Hoping for a Fiat merger is like hoping a 1500-player will assist a 1300-player heads up against a Grandmaster. It’s not going to help.

If you need evidence, consider “despite its improved financial performance in recent years, Fiat has never been considered one of Europe’s stronger players. The quality of its cars remains dodgy and, outside of their home country, they aren’t particularly popular.” A planned Fiat merger is simply inane.

Why, US Government, Why?

“Being privately held, Chrysler has not released its financial results for recent years. But the company needed a $4 billion federal loan in the closing days of the Bush administration to avoid running out of cash.”

Why did the Bush administration prop up this portfolio of mediocre vehicles?  It made no sense. And why did the Obama administration carry on with this strategy?  Just let bankruptcy court deal with the poorer and better assets!

More Hedge Fund Nonsense

As if there wasn’t enough craven greed, today we learned of more.

The president also blasted a group of investment funds and hedge funds for holding out for an “unjustified taxpayer bailout.”

Several financial institutions, led by J.P. Morgan, agreed to reduce Chrysler’s loan repayment obligations by as much as two-thirds, Obama said.

But “a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout” Obama said. “They were hoping that everybody else would make sacrifices and they would have to make none.”

I would like to know which firms and funds! It seems like it’s time to reintroduce the public pillory in society for these “special” fund managers.

Further Incomprehensible Government Action

More bummer news – we lose again

This just in on April 30th: Administration officials said the Treasury Department will provide Chrysler with about $8 billion in loans on top of the $4 billion in loans it has already received to get it through bankruptcy.

Officials said $3.3 billion of the new loans will be used to fund operations during bankruptcy, while the remaining $4.7 billion will allow Chrysler to function normally once it exits bankruptcy. In addition, the Canadian government will loan the companies $2.7 billion to help support Chrysler’s Canadian operations.”

Huh?  The government should let a bankruptcy court do its business and not pour our taxpaper in (again and again).   What could possibly be a bright spot?  One little tidbit:  Nardelli is getting sacked again.

Chrysler CEO Robert Nardelli said that the reduction in the network of 3,300 dealers would not be a “catastrophic” but that it would be “noticeable.”

Nardelli, who joined Chrysler two years ago, will leave after Chrysler emerges from bankruptcy and completes the alliance with Fiat.” Do you think he’s negotiated himself a 7-figure golden parachute as in his disastrous Home Depot termination?  (Disastrous to their shareholders).


2 Responses to “The Not-so-fabulous 2000s: Chrysler about to go Belly-Up”

  1. fluffybunnyfeet Says:

    From today’s WaPo –

    If the bankruptcy proceeds as expected, the administration would create a new Chrysler that would purchase assets of the old company. The ownership of the new company would be divided between the union’s retiree health fund, which would get a 55 percent stake, Fiat, which would get at least a 35 percent stake, and the United States, which would take an 8 percent stake. The Canadian government would receive two percent. Chrysler’s creditors would get $2 billion in cash and no equity stake. The automaker’s current owner Cerberus Capital Management would be wiped

    – Umm, looks like a certain ex-Master will be hustling quarters at Wash Sq Park again…

  2. nezhmet Says:

    I’m amazed that the government would bail out a privately held company that didn’t have to disclose its financials. That was crazy. Just let it go into bankruptcy… the bankruptcy system works! Don’t put the taxpapers on the hook for crummy products.

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