The big lie being presented for the auto bailout is that a gazillion UAW members are going to lose their jobs if the industry folds. What will really happen is that the same human resources working at The Big Three's plants will likely get picked up by the acquirer on a geographic basis at a reduced, more appropriate salary base. If they don’t like the reduction in pay, they can always opt to seek alternate careers. Subsidizing them is socialism and is the underlying reason why Europe is paying 13 months’ salary for 11 months of work. What the UAW fails to appreciate is that in today’s global marketplace, labor costs, like water, are rapidly seeking their own level, meaning that they are going where it is most cost efficient to produce goods, which explains why outsourcing is thriving. So the days of over paying labor because it is unionized and holding a gun to employers' heads are going, going, well....you get the idea!

So how do the finances of these two UAW sponsors look? Well, we know that GM is showing assets of $136 Bn versus liabilities of $191 Bn, which puts them underwater to the tune of $55 Bn. Current assets versus current liabilities shows a deficit of $15 Bn. Call me a “glass half empty“ guy if you will, but I believe that this turkey is cooked, so stick a fork in it and serve it up to the courts for chapter 11. If your deficiencies are $55 Bn and your current deficit is $15 Bn, how is $10 Bn going to help you? Sounds to me like George W. is running this gig like he did the first five years of the war, with a knee jerk reaction? But perhaps it is something else. No, I am not a Bush Bashing Liberal, but after 30 years in the securities industry, this looks to me like we are simply throwing good money after bad.

And how about that Chrysler? Well, since we are giving them $7 Bn, wouldn’t it be appropriate for us to investigate their finances fairly closely so we know a little more about what we are getting into? Where is that info you ask? Undisclosed, as it were, because Cerberus (multiple choice) hasn’t, doesn’t, won’t....found/find it appropriate or considers it politically inexpedient (or “all of the above”, your choice), to disclose the facts. So why in the name of Adam Smith would we use the wealth of our Nation to allow these two manufacturing giants to merge, as is currently being persued by said manufacturing maestros’ current majority shareholder, Cerberus. Well, George W. says it is to preserve jobs and save the nation; but, the truth is that Cerberus may be harboring some secrets to go with its own selfish reasons.

In Greek mythology, Cerberus was a 3 headed dog that guarded Hades as son of Echidna, half woman, half serpent, so perhaps that explains their decision making, although, in fairness, its founder, Steve Feinberg, does admit that the choice of name was not his finest moment. When Bob “Numbnuts” Nardelli, the Cerberus appointed Chrysler CEO, who was previously discharged by Home Depot after driving their EPS in the ground, was being questioned about Cerberus during recent House Committee hearings, the members inquired why Cerberus wasn’t putting more of their own captial into Chrysler, to which he replied that it violated the firm’s fiduciary reponsbilities to investors. Well, given that statement, you have to ask yourself why a capital investment firm would limit their ability to add to an investment as large, and, particularly, as unstable as Chrysler was when they purchased it? Why is it limited? Because the investment structure that Cerberus employs, in which hedgefund pools represent the conduit for investing, prevents them from commingling funds from Cerberus #1 through #? with those of, say, Cerberus #4, since you cannot commingle pools of investor capital if in doing so you jeopardize or compromise either pool's portfdolio. That WOULD be a violation of fiduciary law. Of course, it also covers their bacon if, for whatever ‘crazy’ reason (wink), someone in Congress expected them to pony up a little more dough to help get their investment out of crisis.

Who is Cerberus?

·         They are headed up by John W. Snow, Bush 41’s second Sec’y of the Treasury and

·         fronted by Dan “Spelling Bee” Quayle, Cerberus is obviously a Republican shop, which now explains why Bush has bailed them out with taxpayers’ money. 

·         They buy distressed companies and use their influence to get business and make them healthy again before reselling them. So what does Cerberus Series #4 own?

o   Well, 80.1% of Chrysler of course, but guess what another Cerberus Series Fund owns. Does 51% of GMAC surprise you?

·         Why would Cerberus appoint a certified loser like old “Numbnuts” to run the place? Well, what better way to secure U.S. Government bailout funding than to lose even more of your ass...ets?  

Do you wonder how all of these experienced, well connected Republicans might have gotten into this pickle? Perhaps they thought this one out and determined that if Jimmy “Peanut Brain” Carter was allowed to bail out Chrsyler in ’79, that they could get our Government to bail them out if Chrysler took a dive this time around too. But to invest $7.5 Bn in a company that got in such difficulty only 19 months from the date of their investment would indicate that they are either pathetically inept at finances or they already had plans for bailout as part of their resolution, which is a rather unique management aspiration upon acquiring such a large asset. Considering who runs Cerberus, the former assumption would appear to be flawed. The latter consideration is so blatant that it points to a level of arrogance that usually only comes from politicians who think they are untouchable; however, what is more untouchable in terms of repercussion than a lame duck president? Then, to really put the icing on the cake Cerberus brought old Numbnuts in to takeover after his sparkling performance at Home Depot? Oh, please!  “Mr. Quayle, please spell the word ‘Duh’. Thanks, Dan. Close your mouth now, you’re drool is giving away our little ‘secret’” (wink,wink, nod,nod).

It is worth noting that a merger of GM and Chrysler was suggested as a viable idea by Cerberus. GM may be sucking wind, but GMAC has serious potential. So, if you put GM and Chrysler together, it suddenly becomes a focused effort to (don’t forget to wave the flag while reading) save jobs!! (and hum "my country 'tis of thee" if you can multitask.) Saving GM would add serious value to a very underwater GMAC, which it is rumored that Cerberus acquired at firesale prices in November of 2006, despite the fact that in 2004 the Republicans were leading the charge for the government agencies to reduce the sub-prime risk, yet Cerberus bought 51% of GMAC, with its rather large exposure in that market, in December of 2006. I wonder if they thought that might be a bailout situation. I also wonder whatever happened to the sugggestion that GMAC be converted to a bank so they could get money from that bailout........., oh, that 's right, they couldn't qualify. So what other bailout could help them out? "Hmmmm............hey, if they bailed out the autos......". You know, after thorough review of their actions in the last few years, one might conclude that it is less than coincidental that Cerberus, with strong personal and party connections to a lame duck president, might be intentionally buying distressed assets that can only be saved with U.S. Government bailout money.

Now, you have to ask yourself, "If the American public is going to put almost as much money ($7 Bn) into Chrsyler as the entire firm cost Cerberus a year ago ($7.5 Bn), simply to delay its demise for only one quarter.....

·         How much of the stock is part of the consideration if it succeeds? And if it fails, do we get it all? 

·         Will Cerberus be allowed to keep anything if it fails? Well, the interesting thing is that they are rumored to be making a wish list for the “good” assets for just such an event. Is that because if this all gets resolved by “bailout” politicians instead of chapter 11 courts, there is a greater chance that Cerberus could keep some of the good assets while letting the taxpayers get bagged for the bad .………ya think, Sparky?   

Then you have to ask yourself why should Daimler get to keep ANY stock, when they had the firm for 10 years and are the primary culprits behind its demise, which is one explanation for why they sold it for 25 cents on the dollar to Cerberus to begin with. Why would Daimler, with all of their experience, think that it made sense to keep 19% of the stock if it was being acquired by inexperienced operators? Acquiring assets cheaply doesn't guarantee positive future business results, so how does retaining a business with that kind of managment make sense? One might suspect that they knew the fix was in and that there was a chance that a massive influx of government funding would be forthcoming if the company didn't improve over the next 19 months. How could you make sure that Chrysler would not survive? Well, bring in a CEO with no experience in the business and is working for free unless he turns things around, with a proven track record of ineffective performance...like our old buddy, Mr. Nardelli. The answer to the Daimler question is that Daimler could write down the loss in 2007 against terrific operating earnings for the year, and in the event a bailout comes and Chrysler has to be saved with U.S. taxpayers' funds, Daimler gets a serious benefit from the bailout without being the company in charge when it tanks. They can also focus their resources on a fairly strong core business rather than deal with the turnaround issues at Chrysler.  Consequently, it would appear that both Cerberus and Daimler would benefit greatly in more ways than one if they could count on a Republican lame duck leader to help out should things continue to slide at Chrysler. Further, since Cerberus is private, Chrysler’s balance sheet is, well…..currently unknown; however, as part of Daimler, a publicly held company, they would have to be part of the public domain and.............current.

One final thought…… The Japanese didn’t start building plants here because they were so grateful to us for vaporizing Hiroshima and Nagasaki. They did it to reduce costs. Their workers cost about 67% of what the Big Three pay, but due to Japanese efficiencies in production, they design and build a much better automobile, which is easily proven by the comparative resale value of both countries' vehicles over the years. In the last two decades the Japanese have continued to build plants in the States while Detroit kept closing them, yet despite making approximately the same number of vehicles globally, Japanese earnings have consistently dwarfed those of the Big Three.

Are Republicans really going to bail out the UAW, who, by being the high cost producers have weakened the Big Three into near extinction, while consistently backing Democratic Candidates for national office? This, in a year when the UAW is asking for transparent voting, which would expose any rank and file workers who vote against management and subject them to retribution (never a good career decision)? The UAW looks incredibly cavalier in asking for open voting at a time when their contracts have so thoroughly compromised the automakers, and this is costing them greatly in the court of public opinion, which is the one that most politicians will be tuned into on the bailout. What better way for Republicans to benefit than to use this series of events to weaken the Democratic Party's greatest ally, the UAW, while making Cerberus and their Republican investors a possible fortune.

So George, please tell us again, why is a bailout better than letting these assets go to the low cost, most efficient producer through Chaper 11 a bad deal for us now? “Well, everyone knows the more efficiencer you are the better for us, but it’s just plain less Americaner to let some other country improvetize our manufacturing. ‘sides, our workers get paid more doing it our way. That’s just plain common cents” ( wink, nod out).

They say politics makes strange bedfellows. Perhaps, but when money is involved, it gets even stranger.

9/01/2009 ~ Strange, in recent reports it has been noted that 71% of the fund's investors are asking for their money back.....hmmm. Go figure!