Hanging By a Thread

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With one day to go before it must face bankruptcy, Chrysler has amazed everybody by almost putting together a deal to save itself. That is, Ron Bloom of the government’s auto task force has almost put it together.

First, Bloom cut a deal with the unions to get their wage and benefit demands in line with reality. Then he got the four major banks to agree yesterday to forgive almost $5 billion of the $7 billion they are owed—and pressure the minority lenders into going along, though this is still the sticking point.

The prospective deal would give the UAW a 55 percent stake in Chrysler, with Fiat getting up to 35 percent and the lenders 10 percent. A quick bankruptcy is still very much in the cards if the reluctant lenders don’t settle. That would enable the proposed deal to go forward, but likely harm the company’s reputation and comeback potential.

But don’t forget: Treasury lent the company $4 billion and has promised up to $6 billion more if the Fiat alliance goes through. So we taxpayers aren’t contributing chump change. The Wall Street Journal’s Evan Newmark dissects the deal and is skeptical about its worth to the taxpayer, much less its real potential to enable Chrysler to survive.

I hope he’s wrong, but it could be that the big banks were smart to take their $2 billion and run. Stay tuned tomorrow.

Please give us your educated guess on how this story will end.

—jgoods

1 Comment

  1. Fiat and Mopar… Fipar? It might make economic sense but it makes no sense from an American marketing perspective. Fiat was unable, and unwilling, to understand and market to the American public. That’s not their fault. But has anything changed since the 70’s? And what about reciprocity, or will American dollars be flowing overseas at the same 35/10 rate while the UAW exerts pressure on Fiat to make the same mistakes Chrysler made in the first place? Time will tell.

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