In Friday’s USA Today, columnist James Healey celebrated how "Savvy Fiat scooped up Chrysler for a song.” There was no effort to explain why Team Obama would sink billions into a Chrysler bailout so it could help an Italian carmaker prosper.
“Fiat's agreement to buy the remaining 41.5% to own all of Chrysler reeks of financial savvy,” wrote Healey. “Fiat/Chrysler CEO Sergio Marchionne has engineered ‘a bit of a coup,’ said Max Warburton, industry analyst at Bernstein Research.” A coup of the president and the TARP managers?
"He's being called 'Maestro,'" noted Bernard Swiecki, Industry analyst at the not-for-profit Center for Automotive Research.
The deal for Fiat North America to buy the rest of Chrysler for $4.35 billion from the United Auto Workers retiree health trust was disclosed in an announcement Wednesday. Triggering the praise for Marchionne:
-- Fiat will have bought an entire car company — a healthy, profitable one now — for about $6.3 billion, including money it's already paid. That's relative peanuts. Daimler-Benz paid $37 billion for Chrysler in 1998. Cerberus Capital and a group of investors paid Daimler $7.4 billion for 80% of Chrysler in 2007.
-- Among the Chrysler assets Fiat acquires is $12 billion cash.
-- By using Chrysler's own cash for some of the purchase price, Fiat avoids borrowing.
At Human Events, John Berlau offered the conservative point of view missing in USA Today:
"Much of Chrysler's profits from its overhauled line are going to prop up Fiat's failing, money-losing Italian business, rather than to expanding production and jobs in the U.S. Moody’s had downgraded Fiat’s credit rating to “junk” even before the Obama administration arranged for it to acquire a Chrysler stake, and in Autumn 2012 Moody’s gave Fiat another downgrade that the Financial Times described as even “further into ‘junk’ territory.”
...In the 2009 deal overseen by the Obama administration’s auto task force, Fiat paid no money to acquire its initial 20 percent stake in Chrysler — only contributing some of its intellectual property, instead. Fiat would later pay $2.2 billion to raise its stake in the company to 58.5 percent.
Continuing the bailout shell game, Fiat will now pay fellow bailout recipient UAW $4.4 billion for its stake in Chrysler. All the while, the U.S. government has pitched in more than $12 billion in taxpayer infusions.
In “saving” the American auto industry, Obama gave an American company away. And he gave it away at the expense of pension funds and other secured creditors, which were given a much smaller stake in the new company than they would have been given under traditional bankruptcy proceedings.
