Friday, December 19, 2008

Nardelli on Chrysler Bailout

I've been pretty harsh on the auto bailout so I though it only fair to post Chrysler's CEO's open letter concerning the bailout.

I still disagree with it though, especially in Chrysler's case. Chrysler is currently owned by Cerebrus. Cerebrus has the liquid assets to make the same loan to Chrysler but has elected not to. If its own parent company won't save Chrysler, why should the US taxpayer?

To be fair, Cerebrus isn't the most altruistic parent company on earth. Cerebrus is the same company that bought Mervyns and then spun it off into its own company minus its original real estate holdings. That put an already cash-strapped Mervyns chain in the position of having to pay exorbitant amounts to lease land it previously owned and proved to be the death knell of an already struggling store.

I only mention this Cerebrus business because of a curious comment in the open letter:
Cerberus has already agreed to forgo any benefit from the upside that would, in part, be created from the bridge loan and any other government assistance that the Company may obtain.

I don't really get that. Chrysler has said that without the bridge loan, it would go into bankruptcy. Few expect that the company could make it out of bankruptcy. If the government makes this loan, it is essentially saving the company. How exactly can Cerebrus not benefit from that? They get any long term profits that come from the company continuing to exist.

Update: I found an email picture that I really like concerning the bailout so I'm posting it here:

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