The Industry Standard - U.S. Big Three automakers remain independent companies by June 30, 2009? - Comments

David: The prediction did

Ian Lamont — Wed, 10 Jun 2009 18:19:15 -0400

David: The prediction did not say majority voting rights -- it said "major stake," and defined it as 51% or more. I further clarified this in response to a question from you in late April.

Moreover, the main focus of this prediction -- whether the Big 3 automakers remain independent by June 30 -- can now be determined. Legal arguments against the deal were exhausted, and it formally closed today. By any measure -- boardroom control, executive control, stakeholder ownership -- Chrysler is no longer in control of its own destiny.

Ian Lamont
Managing Editor
The Industry Standard
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@Ian, if you digest the

David Kuan — Wed, 10 Jun 2009 17:53:41 -0400

@Ian, if you digest the information relating to UAW 55%, it will be clear to you that the 55% stake does not translate to a majority voting rights. As such, it does not have the same effect of being a majority shareholder that is capable of setting/overturning decisions. There is not a single stakeholder that holds more than 50% voting rights. As such, the majority criteria is NOT met.

See http://www.detnews.com/article/20090526/AUTO01/905260409 for details.

David: While you are correct

Ian Lamont — Wed, 10 Jun 2009 14:03:00 -0400

David: While you are correct in noting that Fiat does not currently have majority ownership, another entity most definitely does.

As higlighted earlier in the comments section, the new company actually has a majority ownership by the UAW's Voluntary Employee Beneficiary Association. This was confirmed in press reports. This is how the LA Times describes the arrangement:

Fiat will take a 20% stake in the new Chrysler and Fiat Chief Executive Sergio Marchionne will serve as the top official at Chrysler. Chrysler's chairman will be Robert Kidder, who was selected for the role last month.

The largest stakeholder in the company will be the United Auto Workers union, which is receiving a 55% share in exchange for about $6 billion owed to a retiree healthcare trust. The U.S. government, which has lent Chrysler $8.6 billion to date and will contribute more in exit financing, takes an 8% share, while Canada, another lender to the automaker, gets 2%.

The company will have a nine-member board, with four positions chosen by the U.S. government, three by Fiat, and one each by the Canadian government and the UAW.

So, another entity -- the UAW -- now has a majority stake in the new company. The board is made up of other stakeholders including the U.S. government and Fiat, and a Fiat-appointed executive runs the company. Chrysler has clearly lost its ability to run its own operations.

Ian Lamont
Managing Editor
The Industry Standard
twitter.com/the_standard

@Ian, I must strongly

David Kuan — Wed, 10 Jun 2009 10:37:54 -0400

@Ian, I must strongly protest this judgment. The updated verbiage states:

"Fiat's stake would not only have to increase by at least 51% but also Fiat must announce it's taking over control of Chrysler's operations."

The deal that has just closed between Fiat and Chrysler only result in a 35% stake which is under 51%. So, despite Fiat taking control of the operations, it has NO MAJORITY ownership.

Unless there is proof of majority ownership, judgment is premature and incorrect.

Judged. Now that the Supreme

Ian Lamont — Wed, 10 Jun 2009 10:22:35 -0400

Judged. Now that the Supreme Court has backed off, Fiat has closed the deal. Chrysler has emerged as a "new company" under new management, with operations beginning immediately:

http://www.reuters.com/article/newsOne/idUSTRE5592VU20090610

Ian Lamont
Managing Editor
The Industry Standard
twitter.com/the_standard

Now the Supreme Court has

Ian Lamont — Tue, 09 Jun 2009 20:49:23 -0400

Now the Supreme Court has rebuffed the Indiana pension funds:

http://www.bloomberg.com/apps/news?pid=20601103&sid=aYPU_uhbGzA8

The question is now that legal obstacles are removed, when will the new Chrysler come into existence?

Ian Lamont
Managing Editor
The Industry Standard
twitter.com/the_standard

The Supreme Court delays the

Ian Lamont — Mon, 08 Jun 2009 21:29:09 -0400

The Supreme Court delays the Chrysler sale:

http://www.washingtonpost.com/wp-dyn/content/article/2009/06/08/AR200906...

The decision buys the court time to consider objections filed hastily over the weekend, and it comes as the clock is ticking. has the option of backing out of the deal if it is not finalized by Monday, and the government has warned that the only alternative would be to force the nation's third largest domestic automaker into liquidation, throwing the industry in turmoil and leaving tens of thousands of people without jobs.

Ian Lamont
Managing Editor

Appeal denied, but the deal

Ian Lamont — Fri, 05 Jun 2009 17:21:01 -0400

Appeal denied, but the deal is on hold until Monday to allow the Indiana pension funds to make their appeal to the Supreme Court:

http://www.nytimes.com/2009/06/06/business/06chrysler.html?hp

Ian Lamont
Managing Editor
The Industry Standard
twitter.com/the_standard

Judge approves Chrysler's

Ian Lamont — Mon, 01 Jun 2009 14:01:40 -0400

Judge approves Chrysler's sale motion, but there is still the threat of an appeal:

http://www.washingtonpost.com/wp-dyn/content/article/2009/06/01/AR200906...

Ian Lamont
Managing Editor
The Industry Standard
twitter.com/ilamont

GM files for

Ian Lamont — Mon, 01 Jun 2009 08:56:26 -0400

GM files for bankruptcy:

http://www.washingtonpost.com/wp-dyn/content/article/2009/06/01/AR200906...

But it's not a restructured company yet:

"Under the proposed restructuring, about 60 percent of the new GM would be owned by the United States, about 12 percent by the governments of Canada and Ontario, a union health trust would own 17.5 percent, and the company's current bondholders would get 10 percent."

Ian Lamont
Managing Editor
The Industry Standard
twitter.com/ilamont

@Ian, I was referring to the

David Kuan — Wed, 20 May 2009 14:52:42 -0400

@Ian, I was referring to the "loss of independence status if it files for bankruptcy" criteria which has happened. There were no further clarification that the filing is challenged or resolved.

David I assume you are

Ian Lamont — Wed, 20 May 2009 14:09:06 -0400

David I assume you are referring to the clarification at the end of the prediction. It states:

"An automaker will lose its independent status should another company take a major stake (51% or more)."

Has anyone taken a majority stake in Chrysler yet?

If not, how can I judge this without trampling on the bets of the people who put their $S into the market based on that language?

Ian Lamont
Managing Editor
The Industry Standard
twitter.com/ilamont

@Ian, I am cashed out. I

David Kuan — Tue, 19 May 2009 17:15:13 -0400

@Ian, I am cashed out. I placed my bet based on clarifications made which has now been deemed insufficient.

David: The criteria in the

Ian Lamont — Tue, 19 May 2009 15:26:52 -0400

David: The criteria in the prediction is "[losing] its claim to 'independence,' or ability to run one's own operations," which a filing does not change.

I've read that the UAW is still negotiating with GM, but it's not clear if the union would take a majority stake in GM's operations:

http://www.freep.com/article/20090519/BUSINESS01/905190324/1285

Ian Lamont
Managing Editor
The Industry Standard
twitter.com/ilamont

A GM Chapter 11 still won't

David Kuan — Mon, 18 May 2009 12:24:06 -0400

A GM Chapter 11 still won't satisfy your 'revised' criteria? Is that right?

U.S. Big Three automakers remain independent companies by June 30, 2009?

Yi-Wyn Yen — Tue, 13 Jan 2009 12:04:54 -0500

There's speculation that Ford Motor will have to join the federal aid bailout club due to worsening sales projections for 2009. Congress has already approved $17.4 billion in federal aid for General Motors and Chrysler, who both may be forced to ask for more money this year.

Chrysler appears to be the most in need of a handout. Chrysler chief executive Robert Nardelli has acknowledged that the company's cash reserves are shrinking and that the company won't expect a rebound in Q1 2009.

GM says the $13.4 billion in federal aid it's getting will keep the company afloat through the end of March. GM, like Chrysler, is expected to show a turnaround plan by Feb. 17. Both companies must show that their game plan is working by March 31, or risk giving the loans back.

Prediction: Chrysler, GM, and Ford will remain as independent companies by the end of June. A company is no longer considered independent should any of three announce an acquisition.

Update: To clear up some confusion, any of the big 3 automakers loses its claim to "independence," or ability to run one's own operations, if the company announces an acquisition or files for bankruptucy. An automaker will lose its independent status should another company take a major stake (51% or more). In the case of Chrysler, a privately-held company split between Cereberus Capital Manager (80.1%) and Daimler AG (19.1%), Fiat's stake would not only have to increase by at least 51% but also Fiat must announce it's taking over control of Chrysler's operations.