Cerberus - Chrysler - White House

[javero]

Posted: 11/21/08 at 8:23am

This thing really is a three-headed beast after all.

The current Cerberus Chairman was Dubya's 2nd Secretary of the Treasury. His dad's VP Dan Quayle runs one of the divisions.

Cerberus has a 51% stake in GMAC and an 80.1% stake in Chrysler. GM owns the other chunk of GMAC.

GMAC now wants to be reclassified as a bank holding company in order to make a b-line to the public trough to get bailout money.

Poor Chrysler's fate hangs in the balance.

Would someone here please try to justify a bailout for Chrysler.
Sorry Chrysler

[Yawper]

Posted: 11/21/08 at 11:08am

The auto manufacturers are asking for a loan that would be repaid with interest, not a free money 'bailout.' If the credit market was open they could get the money elsewhere instead of asking Congress.

Chrysler has repeatedly stated that Cerberus would take no flow through from any loaned monies and that such provision can be written into the finance agreement.

Chrysler has been looking for opportunities to merge or partner with another company and earlier talks with GM looked serious. This has generated mixed feelings in the industry due to the possibility of tens of thousands of jobs lost and the potential of losing US intellectual property if Chrysler merges with or is bought out by a foreign company looking for easy, ready-made entry into the US market.

Ideally Chrysler would remain a US company, either as part of Cerberus or spun off public again. The second choice would be to have them merge with GM, although in that case all that likely would survive is the Jeep line and possibly, upon inspection, the electric car technology they've developed.

The disregard people have shown for US manufacturing recently has been frightening.

[javero]

Posted: 11/21/08 at 1:02pm

Yawper--thanks for that sincere and insightful reply. I have one final question…has Cerberus indicated that it would divest itself of GMAC?

I only ask because it has appeared in that past that Cerberus was simply interested in getting Chrysler off the books.

I think there are four issues which make this a tough sell:

1. timing: Wall Street got out ahead of Detroit in the bailout race
2. politics: the GOP has too many tentacles attached to the bailout/relief/loan/whatever
3. apathy: charges that Detroit can’t seem to get its act together; doesn’t produce attractive fuel-efficient vehicles anyway; Joe Laptop doesn’t drive a pickup and since when did the US Congress become lender of last resort
4. union busting: secret wish on the part of many Americans that the Big 3 go bankrupt and take the UAW and affiliates out of play

I honestly don’t mean to trivialize any of this or point fingers. It’s just that I grew up in a part of NC that once had a major manufacturing hub. Now, towns in the area are experiencing rapid dips in populations as plants close and jobs head either offshore or south of the US border.

Folks back home are resigned to the fate and haven’t asked the US Congress for an aid package. 911 dealt a death blow to a planned Global Transpark that would have been one of the largest cargo airports in the nation. That was the first major credit squeeze a fact which has gone largely unreported by MSM.

I tend to agree with Barney Frank when he cautions that we don’t want this to descend into white-collar/blue-collar class warfare.

That said, one side of the political divide needs to be careful applying the “protectionist” label when the other raises concerns about the loss of US manufacturing jobs due to the hodgepodge of trade agreements. It comes back to bite them in the keyster when “protection of US intellectual property” is the thing standing between financial aid and a failing industry.

My dad likes to joke that the only thing Americans are good at producing these days are salon products and bad movies.

Updated On: 11/21/08 at 01:02 PM

[Yawper]

Posted: 11/21/08 at 1:54pm

No, Cerberus doesn't want to divest from GMAC. They also wholly own the Chrysler counterpart to GMAC. When GM and Cerberus were talking a short while ago about Chrylser (minus it's finance arm) Cerberus wanted GM's remaining stake in GMAC.

If the financial sector had not collapsed, leading to the Wall Street bailout, and the credit market did not remain closed despite all that money thrown at Wall Street, the automakers wouldn't even be looking to Congress. Over the last few years the automakers have been quite successfully restructuring themselves and all were well positioned in their plans until the credit crises hit, damaging their cash flow because they can't get access to the credit lines they had before. GM, being the largest, is having the most difficultly. They aren't broke, they have plenty of assets, but they just don't have enough cash on hand to function well and they can't tap their equity because the banks aren't lending. Ford lucked out because a few years ago they mortgaged absolutely everything they have, including the Blue Oval logo, to maximize their cash on hand.

For a number of reasons, including it's industrial sector, Michigan is a left leaning moderate state, and frankly, Detroit's caught in the middle, getting whacked by both sides.

Southern Congressmen, mostly GOP, are serving self-interests after having lured foreign manufacturers there with massive incentives and tax breaks (which includes Michigan tax money since Alabama and Mississippi are huge 'debtor' states - that rankles here).

Free-traders would love nothing more than to see the union broken.

Left-wingers can't see over their Prius windshields to even look clearly at what the Detroit makers offer now and will have on the market in the next two years.

Most of all no one at the Federal level wants to acknowledge the inherent disadvantage US manufacturers face when competing against importers into the US market. Most overseas competitors have government supplied health care and/or retirement. Many countries heavily subsidize their globalized companies, and some countries essentially close their markets to US products.
Given these conditions it's no surprise American manufacturing barely exists anymore.

Aside from obvious economic reasons the real reason to not bury the US automakers is that no one else commits money to technical research and development like they do. It's a fallacy that the Japanese companies are ahead in technology now, but they are great at PR and get the media pundits to climb aboard and that's the US makers downfall, which has become painfully apparent these past few weeks.

Rep. McCotter's speech hasn't been given aany coverage by the national media that I've seen, but it certainly struck a chord here.

http://www.youtube.com/watch?v=zI2nCkl19ZM

"In the end, this issue is even larger than the Big Three, in many ways larger than the economy. It is what type of nation do we become. Do we become a nation that no longer produces wealth, that no longer has a path to middle class prosperity? Do we remain the America we inherited? Or do we just let it go and watch real people suffer in the process?"