LETTER TO THE EDITOR:

Chrysler doesn’t deserve bailout

Stacy Standley, Las Vegas

Sat, Jan 10, 2009 (2:03 a.m.)

One of President George W. Bush’s parting salvos is to “bail out Detroit” — anything to put a positive spin on a failed administration.

And one of the benefactors of the bailout is Cerberus Capital, whose chairman is none other than John Snow — Bush’s second secretary of the Treasury Department.

Mercedes dumped Chrysler after 10 years of trying to reestablish it as a competitive brand. It sold it to Cerberus Capital for $7.4 billion. Cerberus hired Robert Nardelli to head Chrysler. Nardelli was fresh from being fired as chief executive of Home Depot, where, according to Business Week, he “alienated customers just as thoroughly as he did employees.”

Cerberus Chief Executive Stephen Feinberg stated back in February in a private letter to stakeholders, referred to on the Edmunds Web site: “We do not need to be heroes to earn a good return on the investment in Chrysler,” especially as Cerberus bought Chrysler “on the cheap ... We do not need to transition the car industry or even to return Chrysler to a much stronger relative position in the U.S. car market in order to be successful.”

Is it surprising that 19 months later Cerberus went to Bush for a bailout of $4 billion?

But, it gets better. Cerberus also owns a piece of GMAC, which this week went to the trough for $6 billion. Feinberg, quoted in a New York Times article, said, “GMAC is an investment about which we have significant concerns. If the credit markets continue to decline and we find ourselves in a prolonged environment of capital market shutdown, GMAC could run into substantial difficulty.”

So, once again, let Uncle Sam bail you out.

Let’s hope Barack Obama has some folks working for him who pay attention to the facts, do their homework and don’t knee-jerk react to Wall Street financiers, trying to make a quick buck off of business deals gone sour.

Discussion: 3 comments so far…

By sebring96hbg

1/10/09 at 5:23 a.m.

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You are obviously not a "car guy." If you were, you would know that Chrysler was a very competitive auto manufacturer and flush with cash prior to the "merger of equals" with, strike that, takeover by Daimler. Thanks Bob Eaton. Daimler plundered Chrysler of its cash to rebuild Mercedes.

Also, you seem oblivious to the credit crunch which has affected all major auto manufacturers. Even Toyota has seen its sales dive by over 30%. It is thus difficult to condemn Cerberus for poor stewardship in the wake of the extraordinary global financial meltdown.

Under Nardelli, Chrysler has reduced fixed costs to lessen reliance on fleet sales, serving to increase revenues for Chrysler and to increase resale value for car owners. This restructuring will position Chrysler to be a better auto company. The government loan, not free money, will facilitate Chrysler revitalization after being freed of ten years of Daimler suppression and suffocation.
By grvande

1/10/09 at 2:55 p.m.

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You need to get your facts straight before making comments about Chrysler. In 1997, Chrysler was reported to be one of the premier auto makers in the world. Chrysler was attractive to Mercedes (Daimler) as a merger partner specifically due to the fact that it was so profitable, efficient, and had a large cash reserve. While combining Daimler and Chrysler was legally a merger, operationally, Daimler management was in control of Chrysler during the merger.

Daimler management used the Chrysler cash reserve and profits in the first years of the merger to fund the development of the Mercedes vehicle line up while systematically removing almost every Chrysler senior executive. Profits from the Chrysler financial were credited to Daimler, not Chrysler during the merger. Investment in Chrysler products was kept to a minimum and internal cross-charges were used to transfer significant amounts of cash from Chrysler to Daimler.

By the time Daimler decided to devest itself of Chrysler, the cash situation was critical and the product line was suffering due to almost ten years of Daimler mismanagement. Unfortunately, Chrysler became a stand alone company at the worst time since the Great Depression. Starting with gas prices in the US over $4 per gallon and complicated by the credit crisis. I am not sure if Chrysler "deserves help", but it is clear that these unfortunate circumstances are negatively effecting every auto manufacture in the world, on every continent. The European, Chinese, Korean, and Japanese auto manufacturers are all going to suffer this year, even Mercedes and Toyota. Many will post a loss for 2008 and many more in 2009. Helping Chrysler and the other US manufacturers is critical to the recovery of the US economy. Other countries are helping their automotive manufacturing concerns. Finally, are we so dishonest to claim that we (the US taxpayers) are not "helping" the transplants when we give huge tax abatements to Toyota, Mercedes, Honda, etc for building a plant in the USA.

Are we really certain that we want to become a country with no manufacturing base that relies on other countries for all of our production requirements?
By beaufort

1/10/09 at 5:48 p.m.

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Cerberus Capital Management is proving remarkably adept and scooping up Fed bailout money. Not only has Cerberus-controlled Chrysler LLC received a $4 billion bailout from the U.S. government but, unlike publicly owned General Motors, they are not required to tell the public how that money is being spent.

According to a recent Bloomberg article, Chrysler is only required to report its finances only to the U.S. Treasury, which has been noncommittal whether it would release any information to the public. http://www.bloomberg.com/apps/news?pid=2...

Following the $6 billion GMAC bailout, Cerberus is now preparing to return to the Federal trough with a proposal to qualify Chrysler Financial, the auto loan company that services Chrysler dealerships, for Federal money. http://ftalphaville.ft.com/blog/2009/01/...

And by the way, it Chrysler Financial is no longer owned by Chrysler LLC, but has been purchased by a division of Cerberus.

What does that suggest?

Along with the sprawling Auburn Hills Chrysler headquarters that were quietly sold to Cerberus more than a year ago, the private equity company seems to be systemically stripping Chrysler LLC of its most valuable assets---resources the company will need if it has any hopes of returning to profitability, or, more likely, being successfully sold to a foreign auto maker. As it stands today, Chrysler LLC pays rent to---you guessed it---Cerberus.

Finally, the fact that former Secretary of Treasury John Snow is involved with negotiating TARP fund disbursements with --- surprise--- the current Secretary of Treasury surely appears at the very least a mighty damn cozy affair.

http://blog.pennlive.com/leftcoast/2009/...