Chrysler heads to bankruptcy court AP Photo/Paul Sancya
This is a really bad story on a lot of different fronts. First and foremost we will know see first hand if customers are willing to buy a car from a car a bankrupt car company, this move is also very likely to add to the unemployment rate in Michigan, and I really got to wonder if this company has any long term future.
Think about it, Chrysler executives, Daimler-Bends of Germany, and the good folks of Cerberus Capital Management all have already failed to run this company effectively. Why should any of us believe that the Government, the UAW, and Italian car company Fiat do any better?
It seems to me that there is something fundamentally wrong with this company, something so wrong that almost nothing will be bale to fix it. Some of the most successful businessmen the world over have already failed to do anything with this company.
As Chrysler enters into bankruptcy court we get some news on who will own the new Chrysler-Fiat alliance. Fiat will own around 20%, the government will own a significant chunk until its loans are repaid, and the UAW will also own a significant chunk of the company.
Think about that for a minute, the labor union is going to own the company. This raises all kinds of questions about fairness and such, but if the UAW is to own 55% of the new company apparently the fix appears to be to disregard profit and simply makes cars for the sake of making cars.
In fact that seems to be what these companies have been doing for the past few years, and we can now see where that has gotten us. Once we take profit out of the mix, it sure looks like a giant step towards socialism. Without the need to make profit Chrysler and its union owners will be free to do whatever they want.
More than all of that though, is we have to view this as a failure of the Obama Administration. This government and its policies have now wasted 4 billion dollars trying to avoid bankruptcy court, where bankruptcy court is exactly where this company should have gone once things got this bad.
That would have saved 4 billion of tax payer dollars from an investment that was doomed to fail. Now the Government is set to loan more then 8 billion more to help the company emerge from bankruptcy proceedings.
That seems to be a better investment, once the new company has itself realigned, has its debt restructured, and is set to resume normal business operation I have no problem with the government stepping in and loaning money in the short term, to insure long term success.
In fact this company has already done that once before and paid back the government the entire amount of the loan, and the taxpayer made some profit on that deal.
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