Last Friday, the small group of Chrysler’s secured creditors, who had thus far refused to buckle under to the pressure, decided to throw in the towel and withdraw their legal protest to the Obama administration’s plan to resuscitate the failed auto company. In a move more symbolic than meaningful, the group has decided that although it will not support the President’s plan, it won’t raise any further legal objections.
Thomas Luria, lead counsel for the “dissident” creditors, put it this way:
Being such a small group trying to fight the force of the government made [the funds] very uncomfortable. In the end, they just concluded that the political cost to their institutions was too high to bear.
The group became “small” months ago, and, it should come as no surprise why it did.
The White House’s success at dividing and conquering the creditors began even before the April 30 bankruptcy filing, when it persuaded four large banks acting as Chrysler’s top lenders to accept the deal. The White House used as a cudgel the more than $100 billion in bailout funding given to the banks since last fall, including JP Morgan, Citigroup, Goldman Sachs and Morgan Stanley.
So, in the end, Chicago style political muscle trumps both fairness and the law.
Going forward then, Chrysler will be sold to Fiat, although, given the circumstances, “sold” is a term only this administration could use with a straight face. In reality, Fiat will be given up to a 35% interest in Chrysler in exchange for Fiat’s “automotive expertise”. (That, too, is hard to say with a straight face.) And, the UAW will own 55% of the new company. The problem, of course, is when this new Chrysler emerges from bankruptcy it will find the same world as existed before bankruptcy. Labor contracts will still make Chrysler vehicles uncompetitive with foreign manufacturers, folks that didn’t like Chrysler products before still won’t like them, and the plan to build “little green” cars will still be met with the same public disdain as it always has.
So, as taxpayers, brace yourself for a very long “ride” of government subsidy after government subsidy until the majority of some future Congress puts a stop to the madness.