Aug 6, 2007
On August 3, DaimlerChrysler, Cerberus and all their bankers signed off on a complicated deal, handing over 80.1% of Chrysler to Cerberus, a private equity firm. The remaining 19.9% remains with Daimler.
The media made it seem like Daimler had lost money on the deal. Lost money? Not by a long shot!
It’s true that Cerberus said it was paying Daimler only 7.4 billion dollars up front, while Daimler had paid out 36 billion when it bought Chrysler.
In the first place, Daimler didn’t pay out 36 billion. It didn’t pay out anything. Daimler CEO Dieter Zetsche even bragged that they’d funded the purchase of Chrysler by issuing stock.
But, more important, during the nine years that Daimler owned Chrysler, Chrysler turned in 15 billion dollars in profit to Daimler’s account, and this doesn’t count the many billions more that flowed into DaimlerChrysler’s finance arm from selling Chrysler vehicles, or the money that went to Daimler for “administrative” expenses, etc. etc. etc.
Finally, the “New Chrysler,” now owned by Cerberus, is supposed to “indemnify” Daimler for the debts it owed to Chrysler workers to cover health care expenses of both active and retired workers. Daimler didn’t put the money aside. Legally, it owed more than 19.9 billion dollars, but it put aside less than 2.5 billion, leaving it in debt to Chrysler workers to the tune of almost 17.5 billion.
So what are they going to do to pay off that debt? Cerberus is going to take out big loans in the name of the New Chrysler company – and hand that money over to Daimler. In other words, they are going to skim money off the wealth Chrysler workers will create in the future in order to pay back Daimler for what it should have been paying out for its workers in the past.
Crooked and more crooked. Cerberus is also looking to take out still more debt – to repay itself and its investors for the money it paid to buy Chrysler and to give them a quick profit on the deal. Once again, the debts will be in Chrysler’s name – and once again, the workers will be left holding the bag to repay these debts.
Cerberus will own the company, and it will have paid out no money to get its hands on it. That’s like buying a car from a dealer, and expecting him to pay you for taking it. Ordinarily, that’s called theft.
Daimler and Cerberus are not the only ones to make billions off this deal. The banks involved, first in selling Chrysler to Daimler, and then in selling it back to Cerberus, then in floating bonds and other loans, will also rake in billions in fees, interest, consultant costs, legal costs, etc. These are some of the biggest banks in the world: J.P. Morgan Chase & Co.; Citigroup Inc.; Goldman Sachs Group, Inc.; Bear Stearns Cos.; and Morgan Stanley. They look at Chrysler as a fountain of gold. The proof is, when they had trouble selling bonds because of problems in the mortgage markets, these banks and investment firms were ready to loan the money to Chrysler themselves.
In March, the Wall Street Journal explained clearly why so many big investors are rushing to buy up and loan money to the auto industry: “Private-Equity investors see in Detroit’s troubled component suppliers and struggling auto giants a way to get access to enormous flows of cash.” Just like a two-bit hoodlum waiting for you to walk out of the bank after cashing your check. They want the workers’ money!
The contract coming due this fall will give workers the way to put an end to this wholesale thievery. An end to concessions, no matter who’s demanding them!