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Supreme Court Holds Up the Chrysler/Fiat Etc. Deal
Update on what Damon Root and Jacob Sullum were blogging on earlier today, regarding Indiana pension funds' court challenge to the sale of Chrysler to Fiat, the UAW, and the U.S. and Canadian government in possible violation of existing bankruptcy laws and the legal status of TARP funds: the Supreme Court has declared a (temporary) "no" to the deal. From Bloomberg:
Chrysler LLC’s planned asset sale to a group led by Italy’s Fiat SpA was delayed by Justice Ruth Bader Ginsburg while the U.S. Supreme Court considers a request for a longer postponement that might scuttle the deal...
A federal appeals court in New York last week allowed the sale, while putting its decision on hold until 4 p.m. today to let opponents including Indiana pension funds seek Supreme Court intervention.
Ginsburg’s one-sentence order today said the bankruptcy court orders allowing the sale “are stayed pending further order” of the Supreme Court. That language leaves open the possibility that the justices might clear the deal to go forward in the next several days....
The pension funds sought a stay that would last until the full nine-member court decided whether to hear their appeal. The funds said in court papers they would suffer “irreparable harm” should the sale go forward.
Chrysler said the sort of stay sought by the funds “will, in practical effect, kill the Fiat sale and lead to a liquidation.”
The Obama administration, which is supporting the automaker at the Supreme Court, played down the impact of Ginsburg’s order. An administration official who spoke on condition of anonymity said the stay is intended to give the court enough time to make a determination on the merits of the request.
For much, much more on the legal, constitutional, historical, and practical problems with the U.S. government's swift takeover of the auto industry, see our forthcoming Reason magazine cover feature in our August/September issue, out in early July.
|6.8.09 @ 9:14PM|#
I wonder at the government taking over the auto industry, using
the court to let the creditors who GAVE product to the carmakers
come out the loser, while the un-invested unions are given better
treatment while the little guys are being 'railroaded' by
government via the courts and the president via that bully pulpit
of his. Will all those suppliers and creditors be bailed out? IF
so, would they dare, knowing what might happen when the government
saves someone then fires and puts unions on the boards. Obama
warned of 'grave consequences' if the deal fails.
I figure the government will give the pension investors a lot of
their $42 million, but then, what of the billions more owed? Fiat,
cars that look fast and smooth, while broken down n the
driveway.
|6.8.09 @ 9:16PM|#
An administration official who spoke on condition of anonymity said the stay is intended to give the court enough time to make a determination on the merits of the request.
Really, Bloomberg? You had to grant anonymity in order to quote
someone saying that the temporary stay while the Supreme Court
considers the request was doing so in order to make a determination
of the merits of the request?
|6.8.09 @ 9:24PM|#
This whole affair between the government and GM/Chrysler stinks of political union payback for support in 08 (& beyond), building of a bigger political power base, and duping of the average American worker. How many other workers lose their less-than-$48/hr jobs without bailouts?
|6.8.09 @ 9:29PM|#
Another loser in Obama's gambit is Lee Iacocca, who saved Chrysler in 1979 by personal charisma. He will lose his FREE CAR each year (I'd drive a Ford Mustang -- his creation -- if I was him, out of both spite and pride). He's going to lose his pension as well. He's in his 80s, and deserves better last days but business is business and bankruptcy is too. One more toll of the bell, please, as the present becomes the past.
|6.8.09 @ 9:51PM|#
The UNION is going to get about 2/3rds of the company, Fiat a
1/5th, the governments splitting the rest (6% to USA).
The pensioners would get what, 30 cents on the dollar? It's great
to save the company and jobs, but why should it be the PENSIONS
with secured loans paying for it?...and the unions, unsecured
profiting all the way? The Federal Gov. is trying to FORCE the
penions to pay instead of collect on debts. What will the Supreme
Court do? IF the court does the right thing, the deal falls through
unless Obama comes up with more money, along with Canada, and
Chrysler liquidates for say, $20billion, and then GM might have
challenges. Breaking the unions would be a good thing, get the
wages down to $20/hr w/o legacy costs would be a good thing.
|6.8.09 @ 10:13PM|#
The unions are of course going to be broke. But they will break
themselves. We're in for a delicious bit of schadenfreude as the
union pensioners and the union's current employees devour eachother
and the company in the process.
It will be like watching a swarm of dung beetles feeding off a
carcass and then eating their own young.
|6.8.09 @ 10:48PM|#
You had to grant anonymity in order to quote someone saying
that the temporary stay while the Supreme Court considers the
request was doing so in order to make a determination of the merits
of the request?
Yeah, I noticed that too. What's even more pathetic is that they
felt the need to ask an administration official about the meaning
of a judicial term.
Next thing we know, they'll be asking an administration official to
tell them whether the sun rises in the west.
Norbert Sluzewski|6.8.09 @ 10:50PM|#
Could it be that finally a ray of hope has peeked through the
dark clouds of insanity that was the initial decision about
re-ordering creditor priorities in the Chrysler settlement. And of
all places, from the left-leaning court? It would indeed be a
breath of fresh air to see someone at least paging through our
Constitution to understand what our laws are about. Let's hope this
is not just a momentary relapse but a first step toward righting
the original decision to comply with our long-standing and
time-proven bankruptcy laws.
www.nakedliberty.com
Lester Hunt|6.8.09 @ 11:30PM|#
What amazes me is that the petitioner in this case is a state pension fund. In other words, the feds are preparing to screw, not merely evil capitalists or defenseless private investors, but a state government. It gets more and more shocking.
Mike Farmer|6.9.09 @ 12:11AM|#
Hazel Meade is correct -- the justice will come from the results of the clusterfuck with the union and gov. in the middle strangling the company lifeless.
|6.9.09 @ 2:03AM|#
Yeah, I noticed that too. What's even more pathetic is that they felt the need to ask an administration official about the meaning of a judicial term.
Next thing we know, they'll be asking an administration official to tell them whether the sun rises in the west.
It's actually quite upsetting to me. While obviously this
particular tidbit isn't a big deal, it speaks of a journalistic
habit of just being mouthpieces for various people in power.
When you grant anonymity for the most banal statements imaginable,
we can hardly expect that you weigh the benefits of anonymity when
it's a crucial story. When you lean on an administration source for
utterly mundane analysis, are we really to believe that you'll be
critical when they say something controversial?
|6.9.09 @ 3:09AM|#
When you lean on an administration source for utterly
mundane analysis, are we really to believe that you'll be critical
when they say something controversial?
You're presuming they actually know which statements are
controversial and which aren't.
From what I've learned over years of reading the newspapers,
magazines, and blogs, most professional journalists have at best
only a laymans understanding of the fields they cover. At worst,
they have a personal, ideologically driven agenda.
They are frequently duped by misinformation spread by interested
parties, and nearly incapable of carrying out any serious critical
analysis. What passes for critical analaysis is a journalist
covering statements he disagrees with.
|6.9.09 @ 7:42AM|#
http://www.landroversonly.com/forums/f19/brilliant-why-didnt-we-think-32223/
...I recently attended a breakfast meeting where the
speaker/guest was David E. Cole, Chairman Center for Automotive
Research (CAR). You have all likely heard Cole CAR quoted, or
referred to in the auto industry news lately.
Mr. Cole, who is an engineer by training, told many stories of
the
difficulty of working with the folks that the Obama administration
has sent to
save the auto industry. There have been many meetings where a 30+
year
experience automotive expert has to listen to a newcomer to the
industry, someone with zero manufacturing experience, zero auto
industry experience, zero business experience, zero finance
experience, and zero engineering
experience, tell them how to run their business.
His favorite story is as follows:
There was a team of Obama people speaking to Mr Cole (Engineer,
automotive experience 40+ years, Chairman of CAR). They were
explaining to Mr. Cole that the auto companies needed to make a car
that was electric and liquid natural gas (LNG) with enough combined
fuel to go 500 miles so we wouldn't "need" so many gas stations (A
whole other topic). They were quoting BTU's of LNG and battery life
that they had looked up on some website.
Mr. Cole explained that to do this you would need a trunk FULL
of
batteries and a LNG tank at big as a car to make that happen and
that there were problems related to the laws of physics that
prevented them from...
The Obama person interrupted and said (and I am quoting here)
"These laws
of physics? Who's rules are those, we need to change that. (Some of
the
others wrote down the law name so they could look it up) We have
the congress and the administration. We can repeal that law, amend
it, or use an
executive order to get rid of that problem. That's why we are here,
to fix these sort of issues".
Alan Vanneman|6.9.09 @ 8:18AM|#
The Supreme Court should do the Obama Administration and us a favor and put the kibosh on both the Chrysler and GM deals. I so do not want Barney Frank running GM. And I don't even own a car!
MNG|6.9.09 @ 8:59AM|#
"In other words, the feds are preparing to screw, not merely
evil capitalists or defenseless private investors, but a state
government."
Yeah, those state governments are in the Real Libertarian Hero
category...
MNG|6.9.09 @ 9:03AM|#
"We're in for a delicious bit of schadenfreude as the union
pensioners and the union's current employees devour eachother and
the company in the process."
A proposal to help out the car companies.
Everybody bitches and moans and says that the company will just go
belly up anyway.
Because of the resistance to the proposal it gets watered down and
more and more half assed.
It fails to turn around the companies. They fail. Then the bitchers
and moaners proclaim "see, we told you it could never work!"
Remember that our car companies foriegn competition got massive and
fundamental assistance from their governments when they needed
it.
|6.9.09 @ 9:32AM|#
MNG,
Really, how is any of this getting "watered down" or "half asses".
For that matter how does any of it actually "help" the car
companies? It helps the unions. They get a teat to keep sucking off
for a while, until they've sucked it dry. Zero effort to actually
make a profit is going on here.
Furthermore, exactly how did the Japanese car companies get
assistance?
Citation needed.
robc|6.9.09 @ 9:34AM|#
Remember that our car companies foriegn competition got
massive and fundamental assistance from their governments when they
needed it.
That made them weaker than the upstart that would have replaced
them otherwise.
Fascitis Necrotizante|6.9.09 @ 9:36AM|#
Then the bitchers and moaners proclaim "see, we told you it
could never work!"
And this is why Communism failed.
|6.9.09 @ 10:17AM|#
For that matter how does any of it actually "help" the car
companies? It helps the unions. They get a teat to keep sucking off
for a while
"Employers", as the name suggests, exist solely to provide jobs;
preferably jobs which pay above market wages.
|6.9.09 @ 10:32AM|#
Just for my own pleasure, I've done a bit of research and looked
up some articles on japan's industrial policy.
What I find is that in the economics literature, the data tends to
dispute the popular notion that efforts to help domestic industry
through trade barriers and subsidies are, on average,
helpful.
I can link to the full articles here, but I can post some
links....
http://www.jstor.org/pss/2109930
Has an image - can't copy the text, but it basically says that on
average japan's industrial subsidies and import quotas had a
negative effect, statistically speaking, on growth. Japan
subsidized everything, not just the auto companies. Only some
sectors suceeded.
http://wbro.oxfordjournals.org/cgi/content/abstract/21/2/267
What are the underlying rationales for industrial policy? Does
empirical evidence support the use of industrial policy for
correcting market failures that plague the process of
industrialization? This article addresses these questions through a
critical survey of the analytical literature on industrial policy.
It also reviews some recent industry successes and argues that
public interventions have played only a limited role. Moreover, the
recent ascendance and dominance of international production
networks in the sectors in which developing countries once had
considerable success implies a further limitation on the potential
role of industrial policies as traditionally understood. Overall,
there appears to be little empirical support for an activist
government policy even though market failures exist that can, in
principle, justify the use of industrial policy.
http://www.springerlink.com/content/r305287411873005/
This article investigates the impact of government industrial
policy and trade protection of the manufacturing sector in Korea.
Empirical results are provided, using four-period panel data for
the years 1963 through 1983, for thirty-eight Korean industries in
which trade protection reduced growth rates of labor productivity
and total factor productivity, while industrial policies, such as
tax incentives and subsidized credit, were not correlated with
total factor productivity growth in the promoted sectors. The
evidence thus implies that less government intervention in trade is
linked to higher productivity growth.
You can always provide individual examples of industries which were
subsidized and protected and turn out to be sucessful. What are
forgotten are the larger number of failures.
Theoretically an all-knowing government might be able to
strategically pick the right industry to protect, and isolate it's
efforts to that one, but in practice, governments simply have no
clue. Personally, i suspect that economies are far to complex for
any government anywhere to ever know in advance which industries to
protect.
KT|6.9.09 @ 10:38AM|#
If they hadn't upheld it, it would have been "judicial activism". Whatever the legislature and executive say goes, god damn it!
|6.9.09 @ 10:47AM|#
You can always provide individual examples of industries
which were subsidized and protected and turn out to be
sucessful.
But it's hard to know whether that success was "because of" or "in
spite of" that government nurturing.
MNG|6.9.09 @ 12:42PM|#
"What I find is that in the economics literature, the data tends
to dispute the popular notion that efforts to help domestic
industry through trade barriers and subsidies are, on average,
helpful. "
Maybe, but did you find that Japan did not offer trade barriers and
subsidies to help their car makers? I doubt you did, because they
did.
MNG|6.9.09 @ 12:48PM|#
So Hazel, have you officially moved your goalposts, no longer denying that Japan and Korea engaged in trade protection, subsidy, etc., to help their auto inudstry, but now arguing that it did no good? I just want to know before I reply...
Chris R|6.9.09 @ 1:01PM|#
It is nice to see someone taking the time to think before making a decision that effects so many people rather than the typical knee-jerk reactions of our elected officials.
C Ronk|6.9.09 @ 1:02PM|#
I hope this sale goes through. Maybe, just maybe they can make some affordable cars that are made well and look good for a change.
Jordan|6.9.09 @ 2:15PM|#
Maybe, but did you find that Japan did not offer trade barriers and subsidies to help their car makers? I doubt you did, because they did.
So Japanese citizens want to pay us to buy their cars. Who cares?
This benefits consumers who vastly outnumber UAW members.
Jordan|6.9.09 @ 2:27PM|#
Not to mention the fact that they're subsidizing a significant number of American jobs at the Japanese manufacturers' American factories.
|6.9.09 @ 3:08PM|#
MNG, I did not "dispute" the notion that Japan offered
subsidies. I asked you to provide citations to support your
argument.
I've heard it said many times that Japan's subsidies helped its
auto industriy. I've just never seen any actual evidence for it,
and I've learned to distrust leftists when they make factual
claims. Their claims are often myths that are frequently repeated
within their own echo chamber that don't actually have a factual
foundation. I can give you numerous examples of this if you
want.
|6.9.09 @ 4:18PM|#
Actually there were articles in Reason back in the eighties that
suggested that Japan's industrial giants thrived in spite of rather
than because of the help that they got from MITI.
That was certainly true of Honda which only started taking
subsidies after it refused to die in spite of MITI's best efforts
to kill it.
State sponsorship of huge industrial concerns is a way of doing
business in Japan with a long history.
It's certainly a way of ensuring that people with the right
connections do well.
But that's the real point of subsidies, isn't it? helping out your
cronies.
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