Taking the newest Chrysler for a spin on the Autostrade

Add comment 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.

Chrysler is putting all its eggs in basket of Fiat leader

1 comment 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.