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Another Economic Saab Story: Chrysler Files for Chapter 11 April 30, 2009

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Happy one hundred and one days in office President Obama.Can’t you just hear the footsteps of the revolution now?

Wall Street Journal
By JOSH MITCHELL and HENRY J. PULIZZI
April 30, 2009

Chrysler LLC filed for Chapter 11 bankruptcy protection in New York Thursday, kicking off what the Obama administration predicts will be a 30- to 60-day restructuring of the third-largest U.S. auto maker.

At the same time, Chrysler entered into a partnership with Italian auto maker Fiat SpA, Mr. Obama said in a noon address. Mr. Obama said the partnership would not only let Chrysler survive “but to thrive.”

The U.S. government will provide up to an additional $8 billion in aid, including up to $3.5 billion in so-called debtor-in-possession financing, to ensure Chrysler survives the historic reorganization process. The administration had hoped to keep the car maker out of court but decided it was the only option after a deal to cut the company’s debt was rejected late Wednesday by several of the company’s lenders, a senior administration official said.

So again President Government steps in and gives more money- $8 billion. That is $8 Billion of our tax payer dollars paid as a dowry to Fiat- an international company. Wouldn’t this lead to increased competition for the US auto industry? Was I just hearing things last night or didn’t Obama say during his historic 100 day anniversary press conference that he did not enjoy interfering in affairs outside of Washington? He doesn’t want to be running American businesses. I heard it. Did anyone else?

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Obama said he wanted “to disabuse people of this notion that somehow we enjoy, you know, meddling in the private sector.”

“If you could tell me right now that when I walked into this office that the banks were humming, that autos were selling, and that all you had to worry about was Iraq, Afghanistan, North Korea, getting health care passed, figuring out how to deal with energy independence, deal with Iran, and a pandemic flu, I would take that deal,” Obama said.

Now compare Obama’s quote from Wednesday with the WSJ story:

In exchange for the aid, the U.S. government will take a “small equity” stake in the new company, which will be partly owned by Fiat. According to a White House fact sheet, the U.S. Treasury will hold 8% of the reorganized company, while Fiat would hold 20% and the governments of Canada and Ontario would receive 2%. The U.S. government would have the power to appoint board members at the new company but would not get involved in day-to-day operations, the administration official said.

Nah, that doesn’t sound like an administration that wants to meddle in the private sector. I suppose President Obama also taught courses in bankruptcy law along with his con law courses. Watch out America next Obama will force us to purchase their cars. Every model comes with a cup holder for your Kool Aid.

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In my opinion, Chrysler and the other auto giants should have been untouched by the federal government and allowed to fail. Yes that is very cruel and conservative minded of me. That is what capitalism is. Businesses start, they fail, shit happens.  Chrysler should have filed for bankruptcy months ago. Because of government intervention or for lack of a better term “meddling”. We have wasted billions, perhaps trillions of taxpayer TARP money on auto companies that are still unsuccessful despite the bailouts. Great, just great.

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AFROCITY

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25 Responses to “Another Economic Saab Story: Chrysler Files for Chapter 11”

  1. boldandbald Says:

    I wish someone would tell me how an Italian automaker that can’t build a good enough car to sell in America is supposed to save Chrysler. Does that make sense to anyone outside of Washington? Anyone… Anyone… Anyone… Bueller…

  2. Daveman Says:

    They absolutely need to file bankruptcy!!!!! They need to deal with their own caused issues. its not our fault. I am so sick of politicians throwing money after bad business. What about the people? we dont deserve this. I never signed my credit over to the government so they can do as they please! its taking advantage of us. The UAW has a stranglehold. it must stop!

    bailouts really manipulate the market and when something goes wrong. govt blames the market. Its insanity. (doing the same thing over and over, expecting different results).

    We need a natural market correction to adjust the bad business. it lets the little guys come in and take over the market share adn lets the bad either restructure or go away. so much for the little guy. they just tease people with candy to keep us small.

    “The direction of all economic affairs is in the market society a task of the entrepreneurs. Theirs is the control of production. They are at the helm and steer the ship. A superficial observer would believe that they are supreme. But they are not. They are bound to obey unconditionally the captain’s orders. The captain is the consumer. …[Consumers] make poor people rich and rich people poor. They determine precisely what should be produced, in what quality, and in what quantities.” – Ludwig von Mises-

    The captain should never be govt! unless we want fascism.

  3. kimberly Says:

    the fact that they are filing bankruptcy is a slap in the face to all Americans…. What where we (as conservatives) saying last year? LET THEM FAIL!!!!

    we all knew that they would fail eventually and here it is with TONS of tax payer money waisted, and not to mention all the waisted money that we just sent out of the country….

  4. Yup… our borrowed money down the drain. Businesses fail all the time. Why is the auto industry any different? After all we let Enron fail (which at the time was supposed to be the end of the world). Barclays Bank failed. Heck, the local burger joint in my neighborhood failed. The world didn’t end. This is about running the company in order to keep the UAW happy. But business isn’t run for the sake of the “worker” (sorry to all you Marxist out there). Business is run for the sake of PROFIT. No profit = no business

  5. Rodrigo Díaz Says:

    Another Economic Saab Story:

    Oooooo, Damn Good Headline…

    No Lee Iacocca for Chrysler this time

    1979 Auto Bailout

    Realizing that the company would go out of business if it did not receive a significant amount of money to turn the company around, Iacocca approached the United States Congress in 1979 and asked for a loan guarantee. While some have said that Congress lent Chrysler the money, the government, in fact, only guaranteed the loans. Most observers thought this was an unprecedented move, but Iacocca pointed to the government bailouts of the airline and railroad industries, arguing that more jobs were at stake in Chrysler’s possible demise. In the end, though the decision was controversial, Iacocca received the loan guarantee from the government.

    After receiving this reprieve, Chrysler released the first of the K-Car line, the Dodge Aries and Plymouth Reliant, in 1981. Like the minivan which would come later, these compact automobiles were based on design proposals that Ford had rejected during Iacocca’s (and Sperlich’s) tenure there. Since they were released in the middle of the major 1980-1982 recession, these small, efficient and inexpensive, front-wheel drive cars sold rapidly.

    Chrysler introduced the minivan, which was by and large Sperlich’s “baby,” in the fall of 1983, which led the automobile industry in sales for 25 years[3] Because of the K-cars and minivans, along with the reforms Iacocca implemented, the company turned around quickly and was able to repay the government-backed loans seven years earlier than expected.

    Iacocca was also responsible for Chrysler’s acquisition of AMC in 1987, which brought the profitable Jeep division under Chrysler’s corporate umbrella. It also created the short-lived Eagle division, formed from the remnants of AMC. By this time, AMC had already finished most of the work with the Jeep Grand Cherokee, which Iacocca desperately wanted. The Grand Cherokee would not be released until 1992 for the 1993 model year, the same year that Iacocca retired.

    Throughout the 1980s, Iacocca appeared in a series of commercials for the company’s vehicles, using the ad campaign “The pride is back” to denote the turnaround of the corporation, while also telling buyers a phrase that later became his trademark: “If you can find a better car, buy it.”

    Source: http://en.wikipedia.org/wiki/Lee_Iacocca

  6. Al Says:

    I’m pretty sure the first bailout for the auto industry was given by our previous President….a conservative. I’m also sure that President Obama, just as other Presidents have, has had to do alot of things that he didn’t necessarily like, but is in the best interest of the country.
    You guys are quick to say that these companies should be allowed to fail but that’s how Depressions, and even Great Depressions are created. The domino effect of large corporations closing would make cities and states go absolutely bankrupt. Families would be devastated and yes, your and my life would be drastically affected. Our economy, communities, cities and yes, government is so structured around the success of corporations and the jobs and tax dollars that they generate that when they fail, cities have literally vanished from maps.
    You really have to be careful what you ask for….because you just might get it!!

    • You’re right. Stuff happens. Companies fail. Economies crash. People are fired. It’s happened a thousand times over. The most prominent airline in my youth was Eastern and when it collapsed you would have thought that planes would never fly again. But they still do. Auto companies have gone out of business before (Packard, Marathon, AMC, etc.) Steel companies have failed, coal companies, the entire passenger railway industry, streetcar manufacturers. And it is devastating to those investors and employees. It is also the price of a free market.

      No great depression was ever caused by the collapse of any single business, but a great many have been occurred because of incessant government meddling and distortion of markets. I believe in regulation and I believe in a social safety net. I do not believe the government’s job is to prop up failing business because it invariably becomes a political rather than economic or business decision which companies get money and which don’t.

      http://www.theblackcommenter.wordpress.com

    • boldandbald Says:

      I don’t recall any conservatives excusing Bush for the first bailout. Most said it was a mistake then and Obama has simply added onto that mistake instead of learning from it.

      Companies do not exist to give people jobs. They exist for one reason only…to make money. When they stop making money they should either revamp the way they do business or shut their doors. When the government starts to step in and ‘help’ businesses that eventually leads to what we see now, the government taking over that business. When that happens the focus is no longer on making money, but on employing people. That is a sure step toward failure. Failure doesn’t have to come in the form of closing of doors, it can come in the form of poor products and services. And that is inevitable when a company’s main interest is no longer profit. The end result of this trend will be a reputation that American built products are poor quality, and that is something that will hurt even good businesses.

      I just hope that the next administration will be able to turn this tide around and return us to a truly capitalist nation, for that is the only way that we will be truly free.

  7. manbearpig68 Says:

    This is really for the UAW. They played a major part in putting Obama into office.. Chrysler already received 1.5 BILLION in TARP money in January. I would actually like to hear Iacocca’s view on the state of the automakers right now.. I bet that he would have some pretty harsh words for them!

    As it has been stated by many people above, Chrysler should fail along with GM and we move on from there.. There is no leadership in those companies and everything should take it’s natural course and they should have been in court filing about 5 months ago..

    • Rodrigo Díaz Says:

      I would have to think that every word Iacocca said, would be “beeped”, “deleted”, or otherwise erased, except ‘Good Day’ manbearpig68.

  8. Al Says:

    What’s funny is…If any of us or any of our family members, neighbors or friends worked for these companies, we would be singing a different tune.
    When the world is run by those who only see things from their own point of view and make decisions for other people based on that limited point of view, we end up with dictators!!!

    • boldandbald Says:

      And you have such an open mind about this.

      As a matter of fact I have a significant number of family members in the Detroit area. None happen to work for the automakers directly, but their livelihood is certainly tied to the economy of the Detroit area. That doesn’t change my feeling on the situation one iota. This is about what is best for the long term viability of the country, not about some touchy-feely, cradle to grave mothering that will only bring us all down in the end.

  9. manbearpig68 Says:

    Al – BULLSHIT

    I would feel bad if somebody I knew worked for one of these companies but that’s only for a few minutes and they need to move on!!

    I grew up in a household with parents that started and ran a very successful small business in the Midwest and if it failed, they would be doing something else. When money was tight, we didn’t spend and when it was good, money was reinvested. My parents didn’t rely on anybody bailing them out. As kids and young adults we were expected to help out. We were told to hold ourselves accountable for our own well being.

    I was laid off in this recession from a very large company and it is my own responsibility to take care of myself..

    No accountability leads to BIG GOVERNMENT!

  10. Y’all seem to be so acidic with the auto industry and callus to those who work in it. Have any of you considered the current plight of the domestic auto companies is largely due to the greed of Wall Street? I’m talking about the same guys that get bonuses coming out of the $700 billion TARP fund or AIG and it’s own $200 billion-plus bailout.

    The lack of available consumer credit has seriously impacted auto sales, along with the Wall Street-created economic downturn. But the US auto industry is scrutinized and derided for requesting loan guarantees—not a bailout—of less than $50 billion. Wall Street gets $700 billion or more, no questions asked. And they pay million-dollar bonuses to the same guys who created this whole fiasco.

    How does that fit with the general consensus here of taxpayer value for money spent? Is there fair treatment between the charlatans of finance and the tangible products of industry? Does corporate greed and shareholder equity supersede the value of workers who once delivered corporate value?

    In the interest of full disclosure, I live in metro Detroit and have worked for a couple of companies doing business with automakers. The Big 3 are not perfect, but Joe Average on the plant floor is just doing his job. Should he be unemployed because you don’t like his employer or his union? The auto industry is the last bastion of manufacturing in this country and y’all want to turn your backs on it.

    Why is the smoke and mirrors of the financial industry treated differently, then? If business is business and you succeed or fail based on your product line, business acumen, and market savvy, why do banks and AIG get nearly a TRILLION dollars in government subsidies but makers of tangible products—cars—get less than a half billion?

    Do you realize more people work in, or are dependent upon, the auto industry than the financial industry? Have you considered the economic impact of the failure of the auto industry on social programs like unemployment and healthcare? Do you realize that terms like “legacy costs” are a euphemism for retirees? Would you think it’s fair if what had been promised to you for 40 years of service was cut in half because “things have changed”?

    If you can look in the mirror and honestly say, “If it was me or my family members, I’d still believe it’s in the best interests of the country,” then I respect your viewpoint. If not, I urge you to consider the real costs involved and let your representatives know how you feel about that.

  11. manbearpig68 Says:

    I just looked at my unemployed, conservative capitalist self and said it’s in the best interest of the country to let the companies fail!! There should not be any bailouts, TARP, etc, etc. ZERO!! Accountability is key!!!!

  12. Al Says:

    Cynicalsynapse,
    I think we are on the same page. It’s easy to get on here and spew out alot of rhetoric that ,supposedly, sounds good. It’s entirely another to make a REAL evaluation of the current economic status and understand what it really takes to keep American families going.

  13. Al Says:

    If one corporation fails, there won’t be a depression. However, if several of the auto companies fail there very well could be.

    I assume you all think that the government should not have bailed out Fannie Mae and Freddie Mac either. Well let me inform you of something, as Cynicalsynapse so astutely pointed out, if these two CORPORATIONS had failed, there would have been a MASSIVE collapse of the banking industry. It would have been worse than the Great Depression. When the banking and insurance industry collapse then other industry begin to collapse. Welcome to Thunderdome!!

    There is a much larger picture than what’s being painted by the conservatives. I support Pres. Obama 100% because I see the bigger picture as he does. Allowing these corporations on that level to fail and not investing in the vital areas of growth for America’s future, is the method and mentality that got us into this mess in the first place.

    The ‘Trickle-Down Theory” only works when CEO’s play the game fairly and we all know that hasn’t happened. CEO’s have taken the Republican tax breaks and incentives and pocketed them for themselves and left the employees hanging out to dry. The answer to this is not to further CRUSH the employee but get rid of the CEO’s responsible, as Pres Obama has, and invest so that employees still have jobs and cities and communities that can thrive.

  14. manbearpig68 Says:

    Then why don’t we just bail out every small business that failed in the last year, every farmer that failed, every person that’s going to file bankruptcy, and keep going down the list. All of their families were affected. You are going to reward everybody for failure because it hurts them? If a company is going to fail, they need to pay the consequences and families need to move on to something else. That’s not spewing rhetoric, that’s truth and the way America was built!!

    • Al Says:

      In an ideal world, it wouldn’t be necessary to bail out anybody, large or small. However, reality is that the smaller companies don’t have enough of an effect on the country that would warrant a ‘bailout’. The large corporations do, that is how Capitalism works. Once you get large enough, as a corporation, there are certain amenities and allowances made because of the vast benefit to the community at large, and the potential vast devastation as well.

      So when intelligence becomes a factor in the discussion, then we can understand the difference and why they are treated differently. In theory, I don’t think it’s fair either but when the large corporations are thriving and all is well, we don’t have a problem getting what we can from them, ie. Employment, Charity (individual or communal), etc.

      Listen guys… It is what it is. We love Capitalism when we’re eating, we hate it when we’re starving. I’m talking about the REAL Capitalism, not the THEORETICAL Capitalism…

      We apparently don’t agree but I love the discussion. Keep thinking and reading and talking. This is what democracy is all about!!

      • manbearpig68 Says:

        If intelligence was a factor in the discussion, you would understand what I was saying.. Your idea of Capitalism may pass at someplace like Columbia but Liberal Head Up Your Ass World is much different than the Real World!!!

  15. manbearpig68 Says:

    Al,

    Your last comment is the true definition of spewing rhetoric!

  16. manbearpig68 Says:

    Actually it’s your mentality that got us into this mess! It’s about the same as me saying ” Oh I’m going to go pick up every drunk and crackhead I see today, take them home and take care of them” Even though they are going to keep drinking or smoking crack, I can support them with the $1000 I have in the bank and tomorrow I can go get a loan for an easy million.. My grandkids that I have in 20 years from now will still be paying for it in their lifetime but it’s worth it!! All the junkies and drunks will be safe then and it will make me feel good!!

  17. Al Says:

    manbearpig68,
    I think your name says it all…..lol

    Your example of picking up all the crackheads and drunks is way off base. I’m dealing in reality and you’re babbling…. I’d be happy to continue a discussion with you with intelligence and insight, not hype and more rhetoric.

  18. manbearpig68 Says:

    My name does explain it all!!! LOL Liberal BullShit!! Poor little Union worker’s(Many don’t know what real hard work is), poor little people that are losing their house(that should have never had a house)

    Feel, Feel, Feel = debt, debt, and more debt!!

    Your ideas are just what’s needed to run this country into a heap of ruble!


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