Blame the Hedge Funds!

On every news story this morning about the pending Chrysler bankruptcy, the narrative included “hedge funds would not agree…” as a central theme. Economic populism still carries the day in Washington.

What you won’t hear in these mainstream news stories is that Treasury was demanding a huge haircut for debt holders (screw the “hedge funds” label, these are private investors who lent Chrysler money) in exchange for 15 cents on the dollar, a slap on the back and a hearty “atta boy”. Labor unions, on the other hand, were being subjected to slight changes in work rules and relieving Chrysler of paying $4b to the UAW for retiree benefits, all in exchange for 55% of the equity in the “good Chrysler” and a long term note. So basically the equation that Treasury was using was the debt holders give up 85% and get nothing, the UAW gives up half of that and gets half of Chrysler’s equity in return and long term note paying back (if I recall correctly) $5 billion by 2025.   

This company is worth more to creditors through bankruptcy than it is under the Treasury plan (creditors are at the top of the waterfall in a bankruptcy case, retiree benefits would resolve below creditors) and anyone who thinks GM could go through a similarly easy restructuring should watch this case under a microscope.

“[The hedge funds’] failure to act in either their own economic interest or the national interest does not diminish the accomplishments made by Chrysler, Fiat and its stakeholders nor will it impede the new opporunity Chrysler now has to restructure and emerge stronger going forward.”

How dare these hedge funds believe that debt covenants have any value under the current administration? After all, Obama himself is telling you that your economic interests have to align with the national ones. As long as they diverge, you can expect to pay 99% of all income as taxes in perpetuity compliments of soon to be implemented legislation out of Barney Frank.

[From Zero Hedge: Chrysler To File Any Minute, Hedge Funds Blamed]

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Chrysler Blog, Probably Not a Good Time for “Conversation”

Chrysler has a blog and on it they posted a digital copy of that stupid “thank you America” ad they spent $100k of your money running. The comments on the post speak convincingly about the depth of anger felt by the vast majority, probably 98%, of people on this subject as evidenced by what they are posting.

“Hey Crysler! You’re not welcome. You took my hard earned tax dollars without congressional approval. This is not the time for a “thank you.” This would be a good time for a refund…and an apology. “

“Bob Nardelli – thanking Americans for stealing their money is NOT something to boast about on your website.”

“Obviously nothing has changed. Chrysler is still making stupid decisions by wasting its stolen taxpayer money on useless ads.”

GM’s Fastlane blog has a similar statement about the bridge loans but the comments are markedly more measured. I think this reflects a couple of factors, the first being that Fastlane is much more respected in the automotive world as a blog about cars on GM’s site, whereas the Chrysler blog is simply a marketing exercise. The distinction is subtle because technically both are marketing tools but the Fastlane blog has substance that is conspicuously lacking in the Chrysler blog.

The second factor is likely the anger about the ad that Chrysler ran, which show further tone deafness about the displeasure that the American public feels about these bailouts. Chrysler also has two other problems, Cerberus and Bob Nardelli. The former being a private equity firm represents to many people a symbol for why our global economy is in the shitter to begin with, and the latter is a reviled man in many corners for his outrageous severance package at Home Depot and also because he’s not a “car guy” so he is viewed as an interloper.

Chrysler would do well to shut down the blog at this point. There is no way the comments will turn positive and because they can’t whitewash them away, the comments only serve to reinforce the negativity surrounding this company.

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Car Internet

I can see something like this being a big draw for families, just like in vehicle entertainment systems (DVDs and games) have proven to be. However, for $600 plus another $30 a month it is pretty spendy, for a computer based EVDO card you would pay less than $100 plus $60 a month for Verizon’s service, or put another way, almost 2 years of service before the Chrysler system becomes more economical.

However, one big plus is that the Uconnect service is converting EVDO to wifi, which means that wifi equipped portable devices, like iPhones and PSPs, will benefit from the connection.

This is a big opportunity for aftermarket suppliers given that there is nothing that exceptional about the integration of these systems into the vehicle’s onboard bus, basically they take a power connection, much like how aftermarket satellite radios are installed. The integration of onboard electronics to the network appears to be exceptionally limited with no vehicle functions yet taking advantage of the network.

It’s clear that the performance era for mass market automobiles is sidelined while technology solutions move to the forefront to power next generation clean tech innovations, many not exotic at all like variable displacement engines, and passenger compartment conveniences.

Chrysler’s Uconnect Web creates an EV-DO cellular connection that is then converted to Wi-Fi so that many passengers in the car can get secure Web access on their laptops, video game devices and other equipment, simultaneously, without wires, said Sterling Pratz, CEO of Autonet Mobile, which supplies the device to Chrysler.

[From Car Internet Debuts From Chrysler – 8/12/2008 11:55:00 AM – TWICE]