Posts filed under 'chrysler'
June 13th, 2009
If anything embodies the old saw, “Where there’s a will, there’s a way,” it has to be the new Chrysler Group LLC.
Although we could modify it, in this case, to “When the most powerful man on the planet wants something to happen, he tends to get his calls returned.” It’s not as catchy, maybe, but no less true.
I wasn’t particularly surprised, then, when the company’s bankruptcy proceedings seemed to occur exactly as President Barack Obama predicted weeks ago. The bankruptcy court judge seemed to know just how to rule on the various issues.
Indeed, the only blip came when U.S. Supreme Court Justice Ruth Bader Ginsburg ordered a stay on the judge’s decision to allow the sale of Chrysler’s assets to Fiat SpA, to decide whether it would hear the objections of a trio of pension funds.
It must have been the quickest Supreme Court decision in decades — it took a mere 24 hours before it decided to not take the case.
As I said: When the most powerful man on the planet wants to get things done in a hurry, things tend to get done in a hurry. And not surprisingly, those things tend to go his way.
At issue for the pension funds is the makeup of the New Chrysler. The United Auto Workers retiree health-care trust got a 55 percent equity stake and $4.5 billion note for its $10.5 billion unsecured claim, while Fiat stands to get an initial 20 percent stake.
That leaves the secured lenders holding the rest, the equivalent of about 30 cents on the dollar.
The major lenders, including JPMorgan Chase, Citigroup, Morgan Stanley and Goldman Sachs, backed off fairly early in the process. Then again, they are all recipients of billions of dollars from Obama’s inherited Troubled Asset Relief Program.
The smaller creditors, those in which the government doesn’t have a controlling stake, were holding out for 60 cents on the dollar.
If their objections came to nothing — the Supreme Court’s refusal means Fiat will collect Chrysler’s assets — I at least got a chuckle over Obama’s indignation as he triumphantly declared that Chrysler was bankrupt.
He vilified those pesky teacher and construction worker pension funds, all but calling them unpatriotic.
What sort of patriotism were they lacking, I wondered, those American teachers from the heartland — as if giving an otherwise worthless company to an Italian automaker somehow calls for a tearful rendition of “The Star-Spangled Banner.”
Then again, I’m probably looking at it the wrong way. Maybe I should have whipped myself into a frenzy of national pride the first time, when a German company took over.
Contact Business Editor Annette LaCross at alacross@rrstar.com or 815-987-1295.
May 16th, 2009
I thought I’d worked it out of my system, this bitterness against Chrysler and General Motors, the corporate fathers of the Midwest that first sustained, then disappointed, then betrayed me.
I thought I’d finally accepted that decades of dominating market share hid emasculated but egotistical management, which bred companies committed to inefficiency, waste and, apparently, bankruptcy.
But the hits just keep on coming. Last week, the two began gutting their dealer ranks, eliminating franchise agreements at nearly 800 Chrysler and more than 1,000 GM dealerships.
And now I’m frustrated all over again.
It’s a business model that tends to shave off the bottom line, as same-brand dealerships in the same town compete for the same customer, each one offering a sweeter deal to get him through the door. Particularly in this market, where new-car sales make up about a quarter of overall vehicle sales.
I don’t disagree with the move — and it’s only the opening salvo. For far too long, the domestic automakers have allowed their dealerships to proliferate, chasing a dream of market share that has eluded them for decades. GM, which once cornered 51 percent of the U.S. market, has plans to cut 40 percent of its 6,000 or so dealers before all’s said and done.
A drop in market share to 22 percent, which GM notched last year, does tend to get noticed — even though the automaker would have probably continued its slavish devotion to bad business practices if the recession hadn’t forced it to beg for money from the federal government.
It makes me want to bite someone. But I’ll settle, once again, for more civilized questions for these two titans of industry: What took you so long? How could you break faith with all of us like this?
By putting off tough decisions — allowing the union to stuff worker contracts with the legacy costs that are crippling them, bloating their dealership stock, refusing to see consumers who would abandon truck and sport utility vehicles — they are on their knees. Where they belong.
And they took the rest of us with them, as they must. The tens of thousands of blue- and white-collar workers on the unemployment lines is only one of the human costs they are inflicting.
The hit to local car dealerships, with their commitment to the towns and cities in which they ply their trade, will be much more far-reaching. Baseball teams, soccer clubs, golf outings, charity walks — all of them made possible in some way with the help of these dealerships.
The carnage continues.
Contact Business Editor Annette LaCross at alacross@rrstar.com or 815-987-1295.
April 30th, 2009
This week’s least newsworthy moment came Thursday, when President Barack Obama announced that Chrysler LLC was filing for bankruptcy and Chrysler’s long-awaited deal with Italian automaker Fiat Group SpA had been signed.
The Chapter 11 bankruptcy filing was as inevitable as the sunrise. All of the competing interests tugging at Chrysler’s remaining assets demanded it — a company as large, as old and as far-reaching as an automaker is left almost no other choice.
And for the most part, it’s what everybody wanted.
The Obama administration won’t commit to a lifetime of financial bailouts for Chrysler, which is, for the most part, what it would be accepting if it allowed the company’s restructuring plan to go through without bankruptcy.
Not to mention that Obama wanted to get as far away from the United Auto Workers union — the unions are among Obama’s strongest allies and, arguably, one of the interests holding the most sway in the White House — as he can before it had to demand greater concessions than those the union approved earlier this week.
Fiat likes bankruptcy because it makes it much easier for the company to pick and choose what it likes from the company’s assets. It can essentially separate the company into two piles — good assets in one, “bad” assets in another — and take only those it wants.
Chrysler’s bondholders, which ultimately forced the automaker’s hand, like the bankruptcy idea, too — they’d just prefer the automaker liquidate its holdings. While most of the more than 45 investment banks and hedge funds, which hold nearly $7 billion in Chrysler debt, indicated they would accept the government’s offer of $2.5 billion, a few held out.
In Chapter 7, or liquidation, those bondholders would be among the first to get paid — and would likely walk away with far more than the paltry $2.5 million the government was handing out.
That led Chrysler right to bankruptcy court.
For Obama, it’s good news. It means he will be able to deflect criticism — for the next 30 to 60 days, at least, which is when the company is supposed to emerge from this “surgical” bankruptcy — to the greedy bondholders who broke the back of the brave American car company.
Left behind, of course, are the workers at Chrysler and its supplier plants, who found out rather abruptly Thursday that they’ll be out of work for the next 30 to 60 days while the automaker figures out how to be a) bankrupt and b) owned by Italians.
Then again, it’s also enough time to retool a few plants to produce re-badged Fiats.
Contact Business Editor Annette LaCross at alacross@rrstar.com or 815-987-1295.
April 18th, 2009
After spending most of the past decade dying by inches, Chrysler LLC bowed to its second bailout by the federal government to keep its heart beating — the financial equivalent of life support for the ailing automaker.
Sadly, though, even as its workers labor busily to keep the body alive and healthy, their efforts are largely symbolic at this point. The bankrupt automaker, in other words, is already brain-dead.
Of course, the company still has about 10 days to broker a deal with another automaker before the Obama administration pulls the plug and allows Darwinian theory to take over. And the only one audacious enough to try is Fiat Group SpA and its charismatic, driven leader, Sergio Marchionne.
Don’t get me wrong — I have nothing but respect for the 56-year-old Marchionne, who nearly single-handedly overhauled Fiat’s inept management structure, abandoned plans for apathetic, lifeless cars in favor of successful models like the hot-selling 500, or Cinquecento, and set about fixing its crumbling dealer network.
On the brink of bankruptcy when Marchionne took over, Fiat ended 2008 with $2.2 billion in profits on sales of $78 billion, and its operating margin was one of the best in the industry. Last week, the Italian automaker reported a 14.7 percent increase in March sales amid a 9 percent drop in European car sales — the only European automaker to see sales grow.
Obviously, the man’s doing something right. And few companies have needed brain transplants more desperately than Chrysler and its crosstown rival, General Motors Corp.
His brain would certainly be a welcome change at the former No. 3 automaker.
Still, I hesitate to get too carried away by turnarounds engineered by one man — even if this one man has racked up a fairly impressive track record.
If that man is taken out of the picture, what happens to the company in the long term — particularly one as committed to incompetence as Chrysler’s management has traditionally been?
And the proposed deal is curious, given the state of Chrysler these days. It needs money. Now. And the shotgun marriage involves no cash.
The money would come in the form of an additional $6 billion government loan.
Other than that, Chrysler would get almost nothing immediately. Except Marchionne’s brain.
Here’s hoping he’d stick it out long enough to make some real changes in Detroit.
