In another thread here, I asked about the "fairness" of the Chrysler "settlement" between the stakeholders. It was clear that whatever "agreement" was reached was actually forced by the Treasury Department, applying the full weight of the government to influence the outcome.

Bankruptcy has a purpose and a well-established set of laws and precedents on the respective rights of creditors, employees and owners. In Chrysler's case the legal rights of various classes of creditors were completely trampled by the government. While the result wasn't an actual legal precedent, a business precedent was established that will take a long, long time to overcome. When our government talks about the value that our founders placed on the separation of powers and the value we supposedly place on the Rule of Law, someone ought to remind them of what was done to trample the rule of law in the Chrysler case.

Read the article in The Economist, a pretty balanced publication from London...

http://www.economist.com/opinion/dis...ry_id=13610871

Many weeks ago there was a lot of discussion on this board about the bailouts of the "Big 3." Feelings were split among many as to whether the moneys would do any good at all. A lot of commentary occurred concerning why the government (prior and current administrations and many congressfolk) were so willing to dump money into failing businesses with no plan as to how they would sell their products. We heard a lot about everything except why businesses exist at all - to sell product or provide customer-desired services.

Well, here we are again, many billions of dollars later, and the "Big 3" are no better off now than they were in 2008. The only difference is the nation is now much deeper in debt.

What is obvious is the cronies of both administrations - those who contributed to the campaign coffers - got "protected" and bailed out. It's sort of like the old Jerry Reed divorce song - they split the gold mine down the middle, and they got the gold, we got the shaft.

So, nothing happened "good" with the bailout, and the gamble made with no hole card got called and busted out. Chapter 11 is now going to occur - which should have been done in the beginning.

And the cars and trucks made by the "Big 3" still haven't been sold and are sitting in inventory, and no plan has happened to get them sold at any price. And if they were sold at any price, then the spare parts business for them would continue, as would the service work and all the other downstream business that happens once the car leaves the lot would still exist

Meanwhile, Toyotas and BMWs and Nissans are still being assembled in the USA (with a still decent US content as part of the vehicle) and sold at a profit.

Seeing as how the auto bailout was such a "success," is it any wonder why there is so much skepticism about the rest of this bailout game?

I would not be surprised to find out that at state functions held within DC, that the Army Band playing the National Anthem has been replaced with videos of Dire Straits performing "Money for Nothing."

Originally Posted by SteveZ

Meanwhile, Toyotas and BMWs and Nissans are still being assembled in the USA (with a still decent US content as part of the vehicle) and sold at a profit.

Our cruise vacation sailed from the Port of Charleston SC last month.
There are acres of parked BMW's stored at the Port due to the auto sales slump.
Certainly not just a Big 3 problem.

Originally Posted by KayakerNC

Our cruise vacation sailed from the Port of Charleston SC last month.
There are acres of parked BMW's stored at the Port due to the auto sales slump.
Certainly not just a Big 3 problem.

Very true, but none of the others have been able to circumvent the laws on the books concerning bankruptcy protection in lieu of dipping directly into the pocket of every person in this country.

What has happened is that we all now virtually own a Big 3 vehicle - we get to make REAL payments on a virtual car. What a deal!

A current today view on this situation....

"The rule of law, not of men -- an ideal tracing back to the ancient Greeks and well-known to our Founding Fathers -- is the animating principle of the American experiment. While the rest of the world in 1787 was governed by the whims of kings and dukes, the U.S. Constitution was established to circumscribe arbitrary government power. It would do so by establishing clear rules, equally applied to the powerful and the weak.

Fleecing lenders to pay off politically powerful interests, or governmental threats to reputation and business from a failure to toe a political line? We might expect this behavior from a Hugo Chávez. But it would never happen here, right?

Until Chrysler.

The close relationship between the rule of law and the enforceability of contracts, especially credit contracts, was well understood by the Framers of the U.S. Constitution. A primary reason they wanted it was the desire to escape the economic chaos spawned by debtor-friendly state laws during the period of the Articles of Confederation. Hence the Contracts Clause of Article V of the Constitution, which prohibited states from interfering with the obligation to pay debts. Hence also the Bankruptcy Clause of Article I, Section 8, which delegated to the federal government the sole authority to enact "uniform laws on the subject of bankruptcies."

The Obama administration's behavior in the Chrysler bankruptcy is a profound challenge to the rule of law. Secured creditors -- entitled to first priority payment under the "absolute priority rule" -- have been browbeaten by an American president into accepting only 30 cents on the dollar of their claims. Meanwhile, the United Auto Workers union, holding junior creditor claims, will get about 50 cents on the dollar."



http://online.wsj.com/article/SB124217356836613091.html

I feel like I should add this to the thread on Unions becoming stronger and stronger, empowered if you will, by their large investment !

Originally Posted by Bucco

Secured creditors -- entitled to first priority payment under the "absolute priority rule" -- have been browbeaten by an American president into accepting only 30 cents on the dollar of their claims. Meanwhile, the United Auto Workers union, holding junior creditor claims, will get about 50 cents on the dollar."

I feel like I should add this to the thread on Unions becoming stronger and stronger, empowered if you will, by their large investment !

The only "fairness" test that the bankruptcy judge must apply is to determine whether those secured creditors will get as much from the government's proposed reorganization plan as they would from selling off the company in pieces. It shouldn't take a judge more than a few weeks to conclude that 30 cents on the dollar is the best they're going to do.
http://www.washingtonpost.com/wp-dyn...s=rss_business
Obama "threatened" the bondholders that they would do worse in a chapter 11 than what the government was offering them before chapter 11. The bondholders didn't believe that. No one knows who is right at this point.
The hold-out hedge funds had purchased the debt paper from banks and pension funds for as little as 11 to 16 cents on the dollar. They were looking for a big payday.
http://online.wsj.com/article/SB124199948894005017.html

means they close plants and lay off even more people because they are a public company which means they are beholding to the share holder...not the employees (nothing new).
And like GM what they don't shut down they farm out to China to lower costs as well as prostitute ownership.
So where do the new jobs come from if they are NOT coming from the manufacturing sector?

Obama's achilles heel(s) are the new jobs. If they DO NOT lower the USA cost of operations they will continue to layoff....so I repeat where do the new jobs come from?

Where is the logic and the new jobs when Obama headlines show he has cut the advertising budget of Chrysler by 50%. Must be a new economic model....no advertising...raise the price...ship even more jobs off shore.
Real operational insight....what a joke!!!

No plan = no results....attaway new administration it is working.

BTK