I just discovered this. Chrysler’s going Chapter 11 was literally forced upon them by the federal government. That’s right: the federal government took over a company, forced them into bankruptcy, and then sold them off to a foreign company.
Here are the details from a recent in-depth report from the Detroit Free Press:
Obama’s man called shots on bankruptcyProceedings show he planned Chapter 11 for autos in advance
June 7th, 2009
Detroit Free Press
By the evening of April 29, with their historic bankruptcy filing hours away, Chrysler Chairman Bob Nardelli and other company leaders were left with no doubt that Steven Rattner was calling the shots.
Chrysler executives still hoped to avoid bankruptcy. The UAW had ratified a second round of concessions that froze wages, cut retiree health care benefits and agreed not to strike the company for more than six years. All but a handful of lenders had signed off on the U.S. Treasury’s offer of $2 billion to write off $6.9 billion in Chrysler loans.
Reluctantly, however, the leaders were recognizing the harsh decision Rattner made weeks earlier: Chrysler was filing for Chapter 11, no matter what.
Rattner had met with Ron Kolka, Chrysler’s chief financial officer, and told him how it would go.
“We need a deal with Fiat today. We were told to pretty much take it,” Kolka wrote in an e-mail to Nardelli, Vice Chairman Tom LaSorda and Robert Manzo, a financial consultant Chrysler hired in November. Rattner and his colleague Ron Bloom “will call the union in and tell them what will happen. Then they’ll tell the banks, ‘Here’s the deal: take it or liquidate it.’ ”
As details emerge in bankruptcy proceedings, it is clear Rattner has both the president’s absolute trust and a go-for-the-jugular instinct. He was not interested in a mundane, outpatient treatment for suffering Chrysler. The president wants major surgery on Detroit’s auto industry, and Rattner is running the operating room.
Details emerge on White House role in Chrysler bankruptcy
Not since President Harry S. Truman seized the American steel industry in 1952 has America seen such a bold exercise of federal power over a vital organ of the U.S. economy.
More than 30 hours of testimony and dozens of e-mails in the court of U.S. Bankruptcy Judge Arthur Gonzalez lift the curtain on how forcefully President Barack Obama’s automotive task force pushed Chrysler LLC into bankruptcy and into the arms of Fiat SpA of Italy.
In less than two months, Steven Rattner, who was appointed Feb. 23 as the head of the task force, fired General Motors Corp. Chief Executive Officer Rick Wagoner and forced Chrysler and GM to make radical changes the companies had struggled to address for years.
Rattner, a reporter-turned-investment-banker who is described as relentlessly ambitious, has become — with Obama’s blessing — the chief architect of U.S. industrial policy.
The jury will remain out for some time on whether Rattner and the auto task force created a profitable and sustainable company at either Chrysler or GM. That’s because severe job losses, compounded by troubles in the credit and housing markets, could delay a sustainable recovery.
But while Rattner has clearly been in charge, the savvy negotiator has kept a relatively low profile.
Unlike his key auto task force deputies, Ron Bloom and Matthew Feldman, Rattner rarely used e-mail.
Chrysler’s fate was not its own
Rattner was unfazed by his lack of experience in the auto industry and, after a short period of research, began quickly making decisions and demanding results.
High-ranking power brokers like Chrysler Chairman Bob Nardelli and Vice Chairman Tom LaSorda seemed caught off-guard.
Chrysler executives preferred to keep Chrysler as a stand-alone enterprise — even after Rattner declared March 30 that their turnaround plan was not viable.
But their fate was not completely in their own hands, and Rattner & Co. was already committed to a deal with Fiat.
The four banks that held about $4.8 billion of Chrysler’s $6.9 billion in secured loans — J.P. Morgan Chase, Goldman Sachs, Morgan Stanley and Citicorp — were negotiating with Rattner and his team.
Chrysler executives, meanwhile, were given the tough task of getting labor costs down to the same level as Japanese competitors in the United States and Canada.
A plan to consolidate Chrysler’s dealer network was also a collective effort, with Fiat approving the criteria by which 789 dealerships were selected to have their franchise contracts terminated.
The alternative to a Chrysler-Fiat deal was to liquidate the entire company — wiping out 55,000 Chrysler jobs worldwide, 3,200 dealerships and their 140,000 employees, and mortally wounding hundreds of suppliers already in dire straits.
“Unfortunately, it was a real possibility,” Nardelli testified in bankruptcy court. “We felt, and the board of directors agreed, that we needed to maintain a level of cash that would permit an orderly liquidation. We were targeting about $750 million.”
It’s Fiat or bust
Despite the government’s commitment to Fiat, in the final days before the April bankruptcy filing, the Chrysler team resurrected the idea of a merger with GM that was initially proposed last fall.
Robert Manzo — a financial consultant whose Capstone Advisory Group will be paid $17 million when the Fiat sale closes — was the main supporter of resurrecting the GM deal. He pushed the idea in an April 14 e-mail to LaSorda.
“He even, in his documents, asked that we look at three specific platforms: the truck, the Jeep and the minivan,” LaSorda said in court.
Questioned by Glenn Kurtz, representing three Indiana pension funds, about why he suggested that Nardelli and LaSorda revisit the GM option, Manzo said: “I do believe the valuations of an alliance with GM were higher than those of a deal with Fiat.”
But Rattner and the Treasury team had already made clear on March 30 that the task force would put taxpayer money only into a partnership with Fiat.
Between March 30 and April 14, Fiat’s top executives, Sergio Marchionne and Alfredo Altavilla, met at least 30 times, and had at least 100 calls, with Rattner and his colleagues, Altavilla testified.
No second chances
In the waning hours of April 29, with bankruptcy approaching, tempers frayed and at least one of Rattner’s team, lawyer Matthew Feldman, showed frustration with certain Chrysler players.
The four major banks and all but four or five investment funds had accepted the Treasury’s $2-billion (29 cents on the dollar) offer to retire $6.9 billion of secured loans.
The holdouts were represented by Thomas Lauria and Glenn Kurtz — the same lawyers now pleading the case of three Indiana pension funds that are protesting the way the Chrysler case has been handled. Lauria, an aggressive negotiator and a free-market advocate, wanted his clients to be paid in full.
Nardelli, LaSorda, Chrysler Chief Financial Officer Ron Kolka and Manzo were hoping that a sweetened last-minute offer of $2.25 billion would satisfy the holdout investors and maybe — just maybe — avert a Chapter 11 filing.
Manzo told Feldman by e-mail that he and the Chrysler team supported the higher offer. “We can easily find $250 million of savings,” Manzo said. “It was always the company’s hope we could accomplish it outside Chapter 11.”
But with the clock ticking toward midnight on April 29, Rattner, Bloom and Feldman were not about to turn back from their Chapter 11 strategy.
“I am now not talking to you,” Feldman replied to Manzo. “You went where you shouldn’t.”
Manzo apologized, but Feldman was still upset.
“It’s over. The president doesn’t negotiate second rounds,” Feldman said. “We’ve given and lent billions of dollars to your team, so your team could manage this properly. I’ve protected your management and board, and now you’re going to put me in a position to have to bend to a terrorist like Lauria. That’s BS.”
Finagling with Fiat
While Rattner, Bloom and Feldman played hardball with the banks and won, they had limited leverage with Fiat.
Fiat, the task force’s chosen partner, brought no cash to the table. The Italian automaker wanted to offer only the underpinnings of future vehicles, engines and other technology that Fiat and Chrysler initially said was worth $8 billion to $10 billion. However, in bankruptcy court, Altavilla, who is chief executive of Fiat Powertrain Technologies, said Fiat’s contribution was worth considerably less: $3 billion.
Nardelli testified that Rattner and Bloom told him they wanted Fiat to pay some cash “due to the optics, not the economics, of the deal.”
Marchionne repeatedly said Fiat would not offer cash, and the idea died.
Unlike Wagoner, who did not accept Rattner’s premise that GM must file for Chapter 11, Nardelli never defied the broader task force strategy, nor did he resist any conditions Rattner set on future government investment.
“They were the only investors out there willing to save this iconic brand,” Nardelli said in bankruptcy court. “I’ve been in business 38 years and some of their requests were nothing abnormal.”
There were moments, however, when Rattner and Bloom were micro-managers. In late April, before the Chapter 11 filing, Nardelli asked LaSorda to negotiate with Daimler AG over its decision to surrender its 19.9% equity stake and a $500-million loan.
Bloom weighed in quickly: “I’m more than a little surprised that you would consider settling without approval,” Bloom e-mailed LaSorda.
Nardelli asked him how he and LaSorda should proceed.
“First, by discussing things before you settle,” Bloom said.
The e-mail chain ends with LaSorda thanking Nardelli for his support, and this final sentence: “I guess UST is running it,” referring to the U.S. Treasury.
This is beyond obscene.
Here we have a man – Steve Rattner – with no automotive experience, obviously no business experience running around screwing bond-holders (some of whom are labor unions), chopping up an American company, and selling it off to a foreign company. All of those Americans were literally screwed out of their money, and all of those jobs lost all because Steve Rattner and Barack Obama decided to compare penis size with corporate bigwigs.
Just utterly obscene. I don’t know how else to describe it.
This report – from an uber-lib outlet like the Detroit Free Press – details what a total lying scum-bucket bastard Obama is when he runs around claiming he doesn’t want to run the auto companies.
Is this type of outright autocratic rule what you voted for?