Chrysler headed to bankruptcy on Thursday after talks between Treasury Department officials and the automaker's creditors fell apart as lenders balked at what amounted to a paltry $0.33 on the dollar of the $6.9 billion in debt they held.
Despite President Obama's assurances that Chrysler's bankruptcy will be quick and surgical, don't be fooled. This could be a long, drawn-out battle in the courts. While JPMorgan Chase
As with General Motors'
The plan is a disaster. Gutting the debt holders would ensure that few lenders will be eager to rush in to help Chrysler, if they're needed. With taxpayers as a stakeholder in the business, we'll be on the hook for more financing to protect our "investment."
Yet nationalizing Detroit, as the Chrysler and GM reorganization plans so clearly do, would put the government in direct competition with Ford
In a capitalist society, poorly run businesses fall by the wayside and resources are allocated to the most efficient operators. If Chrysler or GM fall, Ford, Nissan
Yet another hurdle facing Ford is the federal government funneling even more cash to GMAC so that it can help finance the purchase of Chrysler's cars. In a rather unprecedented step, the financing arm of GM will now help consumers purchase a competitor's car. Ford, though, will still have to struggle on its own.
We can also dispense with the notion that we're trying to preserve a part of the American auto industry. It's clear that with the international operations of all automakers, calling any one car company American or foreign is disingenuous. But the virtual forced sale of Chrysler to Fiat shows that keeping Chrysler "American" was just a red herring. Fiat is interested in getting access to Chrysler's dealership network with as few encumbrances as possible, including its asbestos and environmental liabilities. That's easier to accomplish through bankruptcy.
Though Chrysler might have to endure more cuts, taxpayers will feel their wallets being carved up, too.