Chrysler is going to do an IPO for maybe around $100 million. The deal will be a Freddy Krueger bloodbath à la Halloween. Set aside the fundamentals of the car business and where Chrysler sits in the fray.
Look and then look again at Fiat vs the UAW controlled health care trust. The UAW side controls some 41.5%. Despite what a unionist may think that is not a majority. Fiat which is controlled by Sergio Marchionne. Fiat wants to buy out the union because right now they cannot access Chryslers cash to fund problematic European operations.
Chrysler has some $11.9 billion in cash. Fiat in Europe has some $13 Billion. The union is valuing Chrysler around $4.27. Fiat is saying $1.75. the union trust fund needs cash to pay obligations so they are forcing a capitalist resolution by allowing the marketplace to discover the price. Pretty clever for a trade union. they must have hired some Wall Street firm.
The deal will be a pissing match. Fiat calls the shots and can easily deflate market value with a few opportunistic problems and then make a market value offer. The union is faced with the knowledge that anything they control eventually goes bankrupt. Which would be an excellent price for Fiat.
The problem is reminiscent of a fighter ace going into a downward death spiral trying to ward of an attacker on its tail; all the while hoping to pull up just in time.
The story is very exciting and gets the left-wing right-wing blood lust going. But why the hell would you buy the stock and get on this ride. reading the WSJ daily will be just as exciting.
So whether you are a prospective investor or the union trust trying to raise some cash just remember Sergio Marchionne is not trying to put money in your pocket.
The $100 million is a pawn on this chess table. Pawns are there to be sacrificed.
George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti
Image via CrunchBase
Canadian Auto Workers are negotiating for their new contract. 5 days to go and the sabres are rattling. They may select one of the big three in Canada for strike action. My prediction is Ford (NYSE:F).
General Motors (NYSE:GM) is still weak after their bail out and building plants in China. The big plant on Oshawa is on borrowed time and probably will close in a few years. In the meantime the Oshawa Works are a shadow of their former glorious past. GM is looking for reasons to padlock the place.
Chrysler is controlled by Fiat (LSE:F) which is run by the Agnelli family. The Agnelli family would just sip proseco and act like there was nothing wrong. Picket lines mean nothing. The Canadian Auto Workers would not know how to fight someone like the Italian Kennedy family.
lSo it would be Ford. Large presence. Public shareholders who would take pain. Just enough non government bailout fat to be abused. Like a shark to fresh red meat. Some unionists see the possibility for leverage.
But here are the problems. Managements are very aware of cost structures and the ease of moving offshore. So if its strike first be prepared for a long one with an eventual closure in favour of a right to work state or even something in an underdeveloped country that cannot spell mandatory union dues. Also Canadian foreign exchange advantages have long dried up. Canadian labour is very expensive.
George Gutowski writes from a caveat emptor perspective. Follow him on twitter @financialskepti
Image via Wikipedia
Chrysler (Fiat:FIA) slipped out some massaged messages on its liquidity. In the headline bullets Chrysler reported flat-out they have $10 Billion of liquidity. Its only later deep in the earnings release that investors realize that liquidity from the market place is only $7.4 Billion. The remaining $2.6 Billion is a reliance on government support from the US Treasury, Canada and Ontario. Not a peep about when they will stop relying on the support and actually cut the apron strings. Not a peep about the terms of market place liquidity. How much of it is truly co-dependent? You know how brave lenders can be.
Disclosure: No position in any stocks mentioned in this post.