Political Shapshot: Chrysler To Declare Bankruptcy
May 1, 2009 4 Comments
This is a new feature on TruPolitics.net. Political Shapshots offer a brief, concise summary of a current issue. Each Snapshot has a representation of the left and right perspective, as well as the TruPolitics take on the issue.
On Friday, the White House announced it would finally shepherd Chrysler into bankruptcy. The 84 year-old company’s Chapter 11 filing is the sixth largest in history, and shifts ownership from current shareholders to Italian automaker Fiat and the United Autoworkers union.
Right: Increased government intervention has incited outrage from many top Republicans who initially opposed the automaker bailouts. Expect to hear from Republican leaders as the story unfolds, especially regarding the failure of the bailouts and the waste of the $4 billion loan given to Chrysler by taxpayers a few months ago.
Left: Nearly all Democrats supported the initial bailout, citing the importance of the companies to the U.S. economy and the rights of the UAW. In the new plan, the left has not wavered in its commitment to back the company with government dollars and support. President Obama pledged $3.3 billion in increased support to Chrysler, $2 billion of which will be used to pay off Chrysler’s lenders and the rest to pay the company’s bills during bankruptcy. The government said it is prepared to pitch in $4.76 billion more to keep Chrysler running for several years. The Obama Administration blamed the bankruptcy on 20 smaller investment firms and hedge funds, who voted as a group to reject the government’s last offer to eliminate $6.9 billion in debt owed to them.
TruPolitics.net: Chapter 11 is the correct move for Chrysler, as it will allow the company to restructure its debt, renegotiate poor contracts, and trim its bloated inventory. General Motors would be wise to take the same route. The bankruptcy, however, means that the bailouts failed. The $4 billion American taxpayers lent to the company is now for naught. Even so, the Obama Administration has pledged an additional $8.06 billion in future support to the company, brining the total taxpayer bill to $12.06 billion. That represents approximately $115 per household in the United States—an enormous waste of money. The bankruptcy should have happened months ago, before the bailouts, and it would have if it wasn’t for government intervention. Significantly, the newly proposed plan also gives the union a majority ownership stake in the company (at least what is not sold to Fiat), pushing aside the rights of shareholders and credit holders. This is proof that government intervention in the private market is both flawed and unjust.
Hey if the union owns the company they may actually do things to make it succeed
That’s an interesting take–perhaps they will take more responsiblity for their overpriced contracts etc. The unions, especially the compensation and pension packages, are the greatest burden on the U.S. automakers. Until that problem is solved, it will be difficult for them ever to compete.
Unions are outdated and unnecessary. Check out labor laws. It’s covered. Work for your wage not your rights.
Consider this completely unethical and probably illegal result of Obama’s plan to hand the reigns of 2 of the big 3 over to the very architects of their demise: What is to stop the UAW from working in collusion to hurt Ford or force Ford to do its bidding. Is this not a violation of Anti-Trust laws at least on some level?
The UAW has said that they will not keep the ownership they have been given, but will sell it to fund health benefits for its members. So, Obama has really just given the UAW a bailout and thrown the investors who took the greatest risks to the wolves. Talk about ‘fairness’ and spreading the wealth around.