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Say Buddy, Can You Spare a Dime?

December 9th, 2008

If you’re a Chrysler worker, like say… me, this morning there’s more than snow falling from the sky:

Chrysler Canada Inc. has warned Ottawa and Queen’s Park that it could close its two assembly plants in Canada, eliminating more than 8,000 direct jobs, and shift the work to the United States if the two governments fail to provide $1.6-billion in emergency financial help.

A submission for government money and the best business case these guys can come up with is blackmail?

Meanwhile, in the US, Chrysler has hired bankruptcy specialists, with expectations that they can’t make it to the end of the month:

Chrysler LLC has hired a prominent law firm to provide counsel on a possible bankruptcy filing, people familiar with the matter said, adding to concerns the auto maker could go into default by the end of the month.

It’s worth noting that Chrysler is owned by Cerberus Capital Management, L.P. one of the largest private equity investment firms around. They have mucho dinero, but won’t move money into the Chrysler arm. The question the Canadian Government needs to ask itself: if Cerberus won’t throw good money after bad, should you?

Interestingly, in the comments to the Globe article sentiment is running at almost a consensus to let them fail.

I’m not going to comment further, because I can’t possibly be objective, but I will add this: Previously production decisions were made on a month to month basis, even quarter to quarter. Recently, that changed to week to week. It now appears to be day to day. Whatever their plan is, it’s not long term.

I Love My Job

  1. Thucydides
    December 9th, 2008 at 10:04 | #1

    While I feel for your situation, I cannot accept the idea that a private corporation would attempt to blackmail the Government of Canada.

    As well, the math doesn’t work out anyway; $1.6 billion dollars is the resources needed to create 32,000 full time jobs. Using that money to save 8,000 jobs represents a huge net loss to the Canadian economy.

    So long, Chrysler

  2. Simeon (Sam) George Drakich
    December 9th, 2008 at 10:14 | #2

    Living in Windsor knowing how intricate the auto industry is to the economy it is difficult to be objective.
    Chrysler is most definitely looking to leave Canada- bail out or not.

  3. Skuleman
    December 9th, 2008 at 10:23 | #3

    I have two concerns with any bailout.

    First, and most important, I fully expect that no matter how “great” the Canadian plants may be, Obama promised the rust belt that he would re-patriate jobs, and the US bailout is going to have a US jobs first clause.

    Second, and bad for Canada, is that under US Chapter 11 rules all contracts, including loans, are effectively null and void when Chapter 11 is granted, then after a successful reorganization creditors get equal footing and line up for pennies on the dollar. Any money the Canadian government loans the big three will effectively be a gift to increase US jobs.

    The only terms under which Canada should lend the big three money is if that loan is a mortgage on real assets located in Canada at a discount from their market value. Then if they do pull the jobs back to the US we at least own the plants and equipment our workers can work in. There are other car manufacturers currently looking for a North American location.

  4. Scott Merrithew
    December 9th, 2008 at 11:00 | #4

    Unfortunately, socialist policy has been taxing industry out of Canada for decades, and although most manufacturers have already gone, the auto industry has repeatedly managed to tighten up and cut corners to pay the CAW blackmail.
    However, it is no longer possible to absorb such selfishness, so the last remnant of actual production in Canada is finally submitting to insolvency. Let’s see what the CAW does for its captives, er, workers now. Will people start blaming the Union bosses for leading them into this crisis?
    I hope we don’t need the same kind of collapse in Canada to show the left what happens when socialist agendas are allowed to progress to their natural conclusion. Surely people will wake up to common sense policies before Canada itself collapses.

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