After spending some time reading through the deals being made on the Chrysler "bankruptcy" I realized I needed to use the quotation marks as they are intended to convey meaning, which is to say so-called bankruptcy.
While the company will be entering bankruptcy proceedings, what is commonly referred to as debtor-in-possession financing is going to be provided by the federal government to the tune of $8 billion.
This financing provision will allow the Obama administration to guide the direction that the company seeks protection from the bankruptcy court during its proceedings; that is to say away from an overabundance of monkeying about with union contracts.
While the bankruptcy court will continue to have a theoretical power to work these things over it is still bound by the need to repay debtors and at some level see if the company can be salvaged as a workable entity. The administrations yelping about the hedge funds stopping a deal that would involve even greater nationalization of the company is nothing but a bit of stagecraft to further their campaign of class envy and misdirection from their policies.
Their offer to the bondholders with such that they would have been completely marginalized in board representation at the expense of the government and the unions. Investors having invested their own money would have been subservient to appointees from the Obama administration using your money and wedging their union supporters into the governance of the company, all at the expense of private capital.
When the hedge funds refused to go along with this beat down, the administration took a couple of days to see if there was any way they could be forced into accepting it and when no present, legal method was available to force them into accepting the government terms, the administration opted to push Chrysler into the less controlled realm of the bankruptcy court.
The resulting government dinosaur will arrive bloated and unable to compete on a global stage for car buyers with or without Fiat. The inevitable cries from union and government officials to then enact protectionist legislation to force buyers into GM and Chrysler products seems almost inevitable and we will discuss its obvious outcomes tomorrow.
In the meantime, just imagine what would happen if Amtrak had to compete with Japanese, German and Korean trains.
