Chrysler: John Snow's hostage?
Why does Cerberus (the private equity firm that owns Chrysler) need money from the government? …Chrysler… is asking for $5.3 billion in new loans (on top of the $4.3 billion already committed, and in addition to another $6.0 billion from the Department of Energy’s alternative energy funding program)…
If Chrysler were a Silicon Valley, venture capital-funded startup that needed cash, and had a viable plan, the VCs would simply invest more money, effectively diluting themselves (and the founders). If the Cerberus overlords really believe the plan that their underlings mailed in yesterday, why not put in the money themselves?…
You’ve probably heard this bank bailout analogy: The banker walks into the Oval Office, puts a gun to his head, and threatens to blow his brains out unless he gets a bailout; the government bails him out because they don’t want to have to clean the carpet. The difference here is that no one cares about Cerberus… so instead he dragged a hostage named Chrysler into the Oval Office and put the gun to her head. In the end, this feels like a kidnapping, where Cerberus is betting that the Obama Administration won’t be willing to take any risks with the hostage’s life.
(Of course, American oligarchs don’t use guns; they use lobbying. Which is why John Snow is still chairman of Cerberus despite overseeing this catastrophic bet on the auto industry.)
Posted by James on Wednesday, February 18, 2009