Francis Cianfrocca looks at all the “moving parts” in the Chrysler bankruptcy and tries to figure out where they are all headed. His first problem is to understand the game, which on the face of it doesn’t make sense, until you look at it from a certain angle.
I have at least two very big questions, one of which is public and the other isn’t … The public question relates to Fiat. Fiat CEO Sergio Marchionne, focused as he is on overtaking Volkswagen, has been very emphatic that he will put no cash into Chrysler in return for Fiat’s stake, which starts at 20% and could go as high as 51% by 2016. Fiat is giving nothing but access to small-car technology. That can only mean that the government intends to dictate Chrysler’s production mix. That in turn means that the government has chosen to enter the auto business in a forthright and unprecedented way.
The private question relates to the current owner of Chrysler, which is Cerberus Capital Management, one of the most powerful, most wealthy, and most feared private equity groups in the world. They easily have access to billions of dollars they could invest in Chrysler. As of a month ago, they had gotten more than $5.5 billion from the feds. The fact that they simply don’t want to invest their own money tells you that Chrysler as a company isn’t worth investing in, and ipso facto the taxpayers are flushing money down the toilet.
In short, it’s a hell of way to run a business. If you were running a business. So what, Cianfrocca asks, is going on here. The first thing to observe is that the taxpayer money flushed down the toilet really doesn’t go to waste. There are people willing and able to stand between the drain pipe and the septic tank and strain out all the bills, ready to sponge them dry. They don’t mind the odor and in fact may think it lends a certain character to the proceedings, the object of which is really to transfer dollars from one set of pockets into another, the real purpose of the underlying game. Cianfrocca writes:
The real import of the story, of course, is that President Obama is picking sides. Bankruptcy proceedings are adversarial, and the goal is for an impartial judge or trustee to balance the competing claims in light of the rule of law, the existing contracts, and the ultimate good of all the parties. … As it seldom has before, the US government under Barack Obama is directly superseding private contracts, ex post facto. They can change the rules on anyone, anytime, for reasons they only have to explain through a cowed and uninquisitive press.
The Business Insider (hat tip: Hot Air) alleges that a second source (Lauria being the first) in the negotiations has alleged that the White House been using strongarm tactics to make the cards come up their way.
The sources, who represent creditors to Chrysler, say they were taken aback by the hardball tactics that the Obama administration employed to cajole them into acquiescing to plans to restructure Chrysler. One person described the administration as the most shocking “end justifies the means” group they have ever encountered. Another characterized Obama was “the most dangerous smooth talker on the planet- and I knew Kissinger.” Both were voters for Obama in the last election. One participant in negotiations said that the administration’s tactic was to present what one described as a “madman theory of the presidency” in which the President is someone to be feared because he was willing to do anything to get his way. The person said this threat was taken very seriously by his firm.
The White House has denied the allegation that it threatened Perella Weinberg.
If the accounts cited by the Business Insider are true they would suggest that whoever is doing the shaking down has done it before because it’s an acquired skill; one unlikely to be taught in the polite halls of academia or in genteel salons, and more likely to be learned in the political world of Chicago. But how could that be, after all the assurances by the blog-free zone press that this was going to be the most ethical administration in history, led not by an ordinary man but by a transcendent figure fit to stand alongside Abraham Lincoln and Mahatma Gandhi? Did they get that part wrong? Well now’s the time to for the uncowed and inquisitive to ask questions. Because if not now then why bother?