Cerberus appears to be seeking to capitalize on the woes of the auto industry to do two things: first help its Republican buddies break the UAW, and after doing so, pawn off its unwanted "investment" in Chrysler onto the same union. I’m not sure I understand all the steps in this process, yet, but here are three data points.
Cerberus Protects Client Retirees But Not Chrysler Retirees
Let’s start with Cerberus’ statement on Friday in response to the bridge loan announcement. It celebrates the bridge loan as an opportunity to wring concessions from two stakeholders: bond-holders and union labor.
In addition to this, Cerberus believes that concessions by all relevant constituencies will be required to facilitate a full restructuring and recapitalization of Chrysler. In order to achieve that goal Cerberus has advised the Treasury that it would contribute its equity in Chrysler automotive to labor and creditors as currency to facilitate the accommodations necessary to affect the restructuring. Unless Chrysler’s labor costs can achieve parity with the foreign transplants, and without the restructuring of Chrysler’s debt, Chrysler cannot be restored to long-term health and the government loan will be unlikely to be fully repaid.
As seems to be true of all Republicans talking about concessions from stake-holders, Cerberus fails to mention any concessions from dealers, a critical requirement for any successful restructuring.
But what I like best about Cerberus’ statement (as in, like not at all) is the way it excuses its unwillingness to put any Cerberus money into Chrysler by appealing to America’s retirees.
Cerberus’ investors are comprised of pension and retirement plans (including funds invested for teachers, organized labor and municipal employees), charitable and educational endowments, fund-of-funds, and individual family savings. Cerberus is, therefore, entrusted with the life savings of many retirees, teachers, municipal workers and ordinary citizens.
As I’ve suggested, one of the two ways the UAW can meet
Bob Corker’s Cerberus’ demands is to agree to allow Chrysler to renege on its promises to Chrysler retirees.
In short, Cerberus is pleading that it may require UAW retirees to give up their pensions because it must protect the pensions of other retirees. For some reason, Cerberus must have thought that logically inconsistent argument would nevertheless be more persuasive than admitting it might demand UAW retirees to give up a piece of their retirement so as to protect the current earnings of John Snow and Dan Quayle.