The Regenerated DuO in DetrOit

Will a marriage between labour and a Democratic gOvernment friendly to unions and financed by tax payers money be good for business in general?

What happens when labour and government become partners? At General MOtors, the shareholder structure would be as follows: gOvernment holdings approximately 50%, UAW 39% and bondholders 10%.

Fairness is already in question as the gOvernment will receive an equity interest of 50% to convert their loans of $10 billion, whereas the bondholders will receive only 10% for their $24 billion.

Within the context of the outline of the potential Chrysler proposal, due on Friday, the banks will write off close to $5 billion of secured loans. Some of those banks, Citi in particular, are recipients of TARP money. Recent chatter is that Citi will be requiring an additional infusion of cash, in the immediate future. In essence, the government will lend Citi additional funds, while they are taking a loss in a government imposed restructuring at Chrysler. Conflict of interest.

Even from a lay person’s perspective, there are serious questions which should be raised.

The Chrysler proposal would give the UAW a majority holding of 55%. Based on the performance of the UAW over the past decade or so, it would be difficult to foresee Fiat buying into a 35% minority shareholder position.

On Friday, as Chrysler will be presenting it's proposal to the gOvernment, the results of car and truck sales will be released.

The next few weeks should prove to be very interesting. Perhaps, the main stream media will start asking questions.


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