Chrysler Bankruptcy and Debt
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My commentary on the Chrysler debt issue and how the administration’s negative portrayal of those who hold Chrysler secured debt. Many I’m sure will already have read the posts that are linked below, but for those who haven’t this blog provides a pretty stable view of the situation. Personally I think this is a very slippery slope that the current administration has embarked upon. If we can make a case to circumvent law in the “supposed” national interest then where do we draw the line? Does …
I haven’t read it but St. Petersburg comes to mind when I hear something like that.
Washington Post “GM’s plans show jobs increasing overseas”
wow! *sigh….pit in my stomach* thanks! will look it up!
Just saw this, “GMAC to receive $7.5 billion from taxpayers next week” (Reuters) (can’t post link unfortunately, but you’ll find it.
As I said, we all surely expected this sort of thing.
IIRC Cerberus sacrificed its ownership of Chrysler in the bankruptcy deal, but they own maybe 51% of GMAC. I wonder how this will all play out come June 1 with a GM chapter 11. GMAC though has been charged with handling financing for Chrysler (or is it New Chrysler) so I would expect that GMAC might be the next GSE? The fannie/freddie of the auto industry?
It wouldn’t surprise me at all if this has been the talk somewhere inside the pentagon.
Another thought along a different line, they might be gearing up for a massive build-up in military infrastructure. Before the US entered WW II, auto mfg began dedicating great amounts of production time to defense work. (Chrysler & GM) is WWIII close?.
yes, GMAC will probably require more….and we know that feinberg certainly won’t be putting in more capital. ugh!
Probably true, but more likely that the bankruptcy, even reorg, of two auto makers starting at the same time would be more than the administration could handle. I would still bet that they will overlap in the reorg process.
About GMAC, a third of their portfolio is commercial mortgage which is beginning to show alarming increases in delinquencies. GMAC also has bonds coming due at some close future date, don’t recall when but it’s out there. They will have trouble too and probably need more $.
right….so that the 51% cerberus owned GMAC situation wouldn’t come into play at the same time?? this will be interesting….:)
Thanks Deb, it’ll be interesting to see how the Chrysler case plays out and how that will impact the GM situation, which I’m sure will follow. I’m also sure that’s why they separated their deadlines, so that they wouldn’t both be going through the bankruptcy situation at the same time.
The administration will have to look for a sympathetic judge though to justify a similar 363(b) case of asset sales for GM. I just hope that debtors don’t go along with it.
great vid!! your point about contract law, the rule of law is spot on!
You could be right although I would hate to think that our government wants to build cars, can you imagine what kind of crap would come out of that? Soviet parallels come to mind!
Bailing out the corporation does not sell cars, nor does the joint venture with Fiat as I said in the video there’s no quick fix, but Chrysler’s inability to adjust to the economic climate is a problem of their own making, same with GM.
The govt should not be involved in any of this, the market needs to fix it.
The real problem is that that is not the goal of this administration. The goal is to own the corporations and in so doing own us.
I agree with all of that but bailing out the corporation still doesn’t sell cars they need an outlet to sell from. I’m not driving to detroit to trade my car in, are you?
The root of the problem is as you described. That is where the help should have gone, eliminate the artificial market by helping the peaople that got sucked into it so that they could actually buy cars and the dealers survive which automatically keeps the corporation in tact.
It’s more complicated but I hope you get the gist.
The fundamental thing to remember is that all bubbles originate from loose monetary policy by a central bank.
Artificially low oil prices (we still pay far less than most for fuel) made non-viable vehicles seem viable, hence the mammoth SUV etc.
There’s no easy answer, we have to reset the economy to a more sustainable level and produce things that people want.
It’s a sad tale but I hope we learn something from this.
I share your frustration, I’ve seen the same in my hometown area as well. To understand the “how we got here” part involves understanding economic bubbles & where they come from & how they form.
Fake home equity gave people dollars to spend & they spent some of it on cars. Any business that was impacted by spending from fake equity had an artificial market.
Any economic activity that was on the plus side of the boom will suffer the downside when the money is gone.
By the way some of those dealerships were here for generations.
In the small town I live in out Dodge dealership closed, the Chrysler dealership closed, the Pontiac, Buick and Cadillac dealership closed, and the Chevrolet dealership closed. We still have ford and a very small Chrysler Jeep dealership and that’s all. If the government helped the little guy they would be open. How are the big three to stay viable without dealers to sell their cars?
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