Tuesday, May 5, 2009

Harper can’t negotiate: Why only 2% of Chrysler? Why not 20%?

Quite distinct from the philosophical question of whether Harper should be using $3.8 billion of Canadian taxpayers’ money and burdening our children with a like amount of debt., is the question of what we are getting in return? Today we learn in the Globe that “'Low likelihood' Chrysler loans will be repaid” (see below). The possibility that this $3.8 billion loan may never get repaid only bring the bad into sharper focus, since this injection of much needed capital was only garnering Canada with a lousy 2% stake in Chrysler and implies a value for near bankrupt and moribund Chrysler of $188 billion. There aren’t too many companies out there that couldn’t be acquire for $188 billion. So why Chrysler and why not a 20% stake for $3.8 billion rather than a measly 2% stake? And why not warrants/options to increase Canada’s upside and compensate Canadian taxpayers for the enormous risk they are taking here?

Obviously Harper can’t negotiate. Why am I reminded of Brian Mulroney and his total capitulation on the negotiation of NAFTA in which he fave away Canada’s sovereignty over our energy resources in which the US has a ratcheting mechanism that entitles then to no less than that percentage of Canada’s energy consumption that the US last consumed (at the “high water mark”)?

Harper can’t negotiate.

Valuing Chrysler at $188 billion is 4 times what Chrylser’s entire enterprise value was in 1998 at the time of the merger with Daimler Benz and Daimler took a massive write down on that investment, which was 25 cents on the dollar of what Daimler paid, and some 10 cents on the dollar of the price at which Daimler exited.........when the car industry was in a boom!

It is very clear that Harper can’t negotiate. Nor does he practice what he preaches, such as his macho advice to John Tory when Tory was attempting to preserve the leadership of the Ontario wing of the CON party and Harper’s advice was “Kick some ass”

The only ass being kicked on this Chrysler deal is the ass of Canadian taxpayers and our childrens’ asses who have to repay these loans that Chrysler is apt to default on. This reminds me of Harper’s lame negotiating on the bailout of ABCP, where taxpayers were stuck with another $1.5 billion bill to put the cheque kiting scheme cum financial alchemy known as Asset Backed Commercial Paper.

Harper can’t negotiate.

Meanwhile Harper has no trouble whatsoever, in bending over to the narrow interests on Bay Street and his buddy buddies in the life insurance industry and give the boot to income trust investors on the false pretense on which he broke hos promise to never raid seniors nest eggs by taxing income trusts, ie this fraudulent analysis by Mark Carney that leaves out 38% of the taxes paid by income trusts, to concoct the argument that tax leakage exists.

The only tax leakage that exists is all this taxpayers money that Harper is drunkenly throwing at Chrysler for a mere 2% stake, when it should be at least a 20% stake with warrants to partake of more of the upside or the $1.5 billion of ABCP to bail out Canada’s banks and absolve them from their civil liability associates with that house of cards scheme from Wall Street gone predictably wrong.

So Mr. “Kick some ass” Harper is willing to kick the asses and nest eggs of innocent law abiding and tax paying income trusts investors, but in any other circumstance, such as the bailout of Chrysler and ABCP, he gets his ass handed to him...and we are the one’s burdened with his mistakes and his total inability at negotiating.

‘Low likelihood' Chrysler loans will be repaid


The Globe and Mail
With files from AP, Bloomberg

May 5, 2009

NEW YORK AND OTTAWA -- Canadian and U.S. governments aren't likely to recover much, if any, of several billion dollars in bankruptcy loans to Chrysler LLC, an adviser to the embattled auto maker conceded yesterday.

More here

1 comment:

WesternGrit said...

The explanation for the 2% is simple: Harper himself admitted "Canadians don't want to own a car company" (in HIS opinion). He simply paid "lip service" to ownership, so it would get mentioned as the government/taxpayers owning a piece. Reality IS: that tiny portion is a pittance.

IF Chrysler is still around (and asking for money) within the next year, the Ignatieff government should ask for a 51% stake, then convert the company to create Canadian green cars..