Wednesday, May 06, 2009

Obama's Gift to Fiat and the UAW

The Obama administration has conducted a power grab that is unprecedented. They attached themselves to Chrysler, and now Chrysler is about to go under. Robert Robb explains it clearly in his column on

Here's the situation in a nutshell (and the point of which was the subject of a vigorous "discussion" I recently had with an Obama fan): "Chrysler has $6.9 billion in secured debt. Under the law, secured lenders have the first claim on the assets of the debtor in the event of non-payment.

"The Obama administration is attempting to muscle past this law. Under its proposal, the health care trust of the auto workers' union, an unsecured creditor, would forgive 57 percent of what Chrysler owes it, and receive 55 percent of the company's equity in exchange. The federal government would forgive about a third of what it would loan Chrysler and receive 8 percent of the company's equity. Fiat would pay nothing for its 20 percent initial ownership.

"The secured creditors, with the first claim on Chrysler's assets, were asked to forgive 70 percent of what they are owed and receive nothing in equity. (Emphasis mine - kw) When they refused and forced the company into bankruptcy, they were excoriated by Obama - a shameful act by a president who pledged to uphold the law, not make it up as he went along."

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