Chrysler fiat deal held up

Oh my gosh. Have any of you been reading about the Fiat purchasing Chrysler deal being held up? An Indiana pension fund has filed with the U.S. Supreme Court to nullify the deal. The reason is that they are upset that the interests of junior claimants to the assets of Chrysler seem to be receiving preferential treatment to senior claimants. The total amount of their investment, made last year, is around $42 million. Ugh! I say “ugh” because the deal is worth billions and worth tens of thousands of jobs around the world.

In these situations the Supreme Court almost always chooses to pass on taking these kinds of cases. I am guessing that the Indiana note holders are simply trying to get a better payoff than they stand to make under the bankruptcy filing and any prospective reorganization plan. However, in the meantime they are doing a lot of damage. Ugh!

Another reason to say, “ugh” is that these bondholders took their initial position in Chrysler last fall when things began to look grim for the automaker. In other words, they became note holders under the shadow of a possible bankruptcy filing. In other words, they had to be aware of the risks that they were taking on when they purchased the bonds. What part of “caveat emptor” or “buyer beware,” do these folks not understand? Let us hope that their case is not heard and that the deal goes through. By the way, this does not make me a supporter or non-supporter of the deal. However, I am against knowledgeable asset managers getting preferential treatment.

If you have wondered why I don’t cover the auto industry very extensively on this little blog of ours, it’s because I wrote off the U.S. auto industry over 10 years ago. At that time, when GM was asked if it was going to develop a hybrid vehicle to compete with Toyota’s soon to be launched Prius, management said, “We will wait for them to launch and see how it does before we risk the capital.” To me it was the final nail in the coffin for the U.S. auto industry. Instead of taking a market leader approach to managing their business, for almost 40 years they took a market follower approach. I also long felt that the only way for the U.S. auto industry to truly become competitive again management had to be fired wholesale and for bankruptcy to be filed in order to shed union benefits that crippled their ability to compete globally. The fact that some of these things are happening now still does not make me a bull on the U.S. auto industry.

Smiles sent your way!

Jason