Why is the government so concerned about the Chrysler deal?
Admittedly, autos matter to our economy. But there’s only, say, 60 thousand jobs at stake. While that’s a lot in itself, it’s just about a tenth of the US auto workforce, and it represents only 2.5% of the jobs lost so far this year. So why should the Obama administration risk political intervention in the judicial process?
I think it’s because Chrysler is a dress-rehearsal for a potential GM bankruptcy. GM reported a $6 billion dollar loss in the first quarter, and their sales were down 50% from a year ago. Unless the economy rebounds like a bungee jumper on rebound, they won’t escape some kind of bankruptcy.
And when that happens, the UAW will be ready. Chrysler was a warm-up in the bullpen. GM is the real show. By limbering up now, the government’s lawyers, bankers, and PR people are ready to muscle GM away from the investors and hand it to the Union.
Douglas R. Tengdin, CFA
Chief Investment Officer
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