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Obama Forced Chrysler Into Bankruptcy

From a daring Detroit Free Press:

Obama’s man called shots on bankruptcy

Proceedings show he planned Chapter 11 for autos in advance

BY GREG GARDNER

June 7, 2009

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

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…

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…

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

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."

Welcome to the world of state run fascism industrial policy.

In all of its naked glory.

(Thanks to Jason Gillman for the heads up.)

This article was posted by Steve on Monday, June 8th, 2009. Comments are currently closed.

16 Responses to “Obama Forced Chrysler Into Bankruptcy”

  1. proreason says:

    This country is in very serious trouble, both domestically and internationally.

    We cannot survive 43 more months of this.

    • JohnMG says:

      So…..Obama made Chrysler (through Rattner, Feldman, et al) an offer they couldn’t refuse. And we’re supposed to be surprised? With a politician from Chicago in charge? Not likely!

  2. The writer of that story did a hell of a job. I actually wrote him with an attaboy for stepping out into traffic like that.

    Lauria BTW who on the Beckman show was one of the first to stick it to those weasels in DC.. Yet he was also a MAJOR contributor..
    http://www.newsmeat.com/fec/bystate_detail.php?st=FL&last=lauria&first=thomas
    oh the bitter irony..

    • JohnMG says:

      Well, you get what you pay for. He tried to get by on the cheap and look what happened. He needs one of those bumper stickers like I’ve got that says, “Don’t blame me, I voted for the American.”

    • Liberals Demise says:

      Hot damn John……where do I get one of those stickers at?

    • JohnMG says:

      Try this link, LD and look under political bumper stickers.

      http://www.stickerhound.com

      Another one I like says; “Vote democrat. It’s easier than working.”

    • Liberals Demise says:

      Outstanding, Mr. MG!!

      “My dog is smarter than a democrat”

    • pdsand says:

      I saw one the other day that said, “keep working! millions on welfare depend on you!”

  3. spiffyw says:

    Isn’t where we should bring’ light to’ is the’ little ax man’. “The” Government tsar who set the rules . Where is the smart scalpel our Administration was going to use to make cuts….. We got the Little Ax man GM/Chrysler should realize their mistake and rectify ASAP ! They must be made to show how this determination was made. A government employee who shouldn’t have an ‘ax’ is on the loose and can do more damage .. Zero transparency so far… Watch as they they will dilly… dally… delay… and stall . If our government can’t make A decent business decision and stand by their reasons, They should not be interfering. America has been foisted upon a 31-year-old tsar who was never confirmed by the Senate. He has admitted his only experience with GM was sleeping in the parking lot in Youngstown. Wake up America. Don’t let ‘small individuals’make bad decisions and then hide behind old rhetoric.We are not stupid… Quit treating us like we are !

  4. take_no_prisoners says:

    The Wall Street Journal is reporting that the Supreme Court has stayed the sale of Chrysler to Fiat to give it time to review the pleadings of the Indiana Pension Fund, in spite of the government and Chrysler lawyers stating that Fiat could pull out if the sale isn’t completed by 6/15 and then the only course would be liquidation yielding $800 million for all parties involved.

    • tranquil.night says:

      It just got out on foxnews.com too, here’s the article.

    • Odie44 says:

      To think “hey make the deal legit before Fiat pulls out” could be the worst defense for Team Bamabi – and SCOTUS not buying it has restored a sliver of hope for checks and balances, regardless of political leanings…

      SCOTUS doesn’t like thier turf stepped on and just shot a resounding blow over the bow of Bambi.

      Ironically a good amount of car salesmen use the “if you dont buy it now, I can’t promise that model and price will be here tomorrow”…

    • JohnMG says:

      …..” if you dont buy it now, I can’t promise that model and price will be here tomorrow”…

      Sorta like electing a guy president before we have a chance to see if he’s an American citizen, Odie?

    • Odie44 says:

      JohnMG –

      Yes indeed. Hopefully buyers never return to the car lot, and in fact look for an early trade in ;)

    • proreason says:

      This is the best news in months.

      One more tiny chink in the tyrants’ armor.

      If somehow the SCOTUS puts an end to this mad dash to communism, we should all get down on our hands and knees and give thanks to the Founding Fathers.

    • JohnMG says:

      One thing it does bring into perspective is Obama’s all-out push to swiftly seat So-so-mayor on the Supreme Court. I don’t think Souter would prove as mallable as the “Mad Puerto Rican”. And I have no doubt as to where she’d come down on this one. “Capitalism is EVIL–it must be punished”!


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