The Fog of Mendacity

Chrysler Peapod

Here is a must-read blog entry on Powerline ... see Chrysler's Resurrection.  Prepare yourself to get sick to your stomach and again wonder if those bozos in Washington are ever being straight with the American public.  And, also see a clear example of how an august newspaper such as the New York Times can flack for the current administration.

The story is about Chrysler and its $12.5 billion bailout from the American taxpayers in 2009.  Most of the details are in this well-documented story and its contained links, but the bottom line is that, for all this generosity on the U.S. taxpayers' part, we have ended up taking a $1.3 billion haircut and also being on the hook for a $3.5 billion loan to Fiat (which recently finished purchasing 51% of Chrysler.)  This loan is ostensibly meant to allow Chrysler to develop cars such as the Peapod shown above ... but it will most likely never be paid back.

Now the other 49% of Chrysler is owned by the United Auto Workers which is a clear recipe for disaster ... anytime union workers negotiate with themselves over pay raises and work rules, they always end up winning in the short term but losing big in the long run.  Yes, you say, they do have jobs currently ... but with salaries that are effectively being paid for by the U.S. taxpayer.

Another part of this saga that isn't told directly therein is that the bondholders in the original Chrysler were virtually wiped out (30 cents on the dollar) and that the original stockholders now have lost something like 90% of their investment -- a very convoluted calculation. (In a traditional bankruptcy, they would have probably faired much better.)  If you are tempted to dismiss these losses to the better good of Chrysler's staying in business, please reflect on how many pension plans, 401Ks, and IRAs have lost oodles and boodles in this transaction ... just maybe one of yours.

So, next year, when you hear The Barry bragging about how he saved Chrysler and 115,000 "auto-industry" jobs ... with very little cost to the U.S. taxpayer, you will know "the rest of the story."