Here's the detail of the Chrysler deal:http://www.foxnews.com/video/index.html ... d=playlist
Chrysler owed the union $6.5B. The union received in the Obama deal, $4.6B in a 9% note, .6B from Daimler, and 55% of the common stock.
Bankruptcy will eliminate the $4.3B of TARP funds owed to the FED. If the company survives and becomes profitable, they will receive another $8B in funds from the Federal government. The Federal gov't gets an 8% stake in common stock.
Fiat will most likely get the company for a mere $2B in the "bidding" process of the bankruptcy court. (Although I am not certain exactly what they are buying....hard assets or common stock? If stock, the union will not have a controlling interest, if hard assets, the union's interest won't have any hard assets. )
Cerberus Capital and the hedge fund investors will get $.29 on the dollar while the taxpayer gets shafted for $12, meanwhile Fiat, a foreign company, gets a sweet deal and the union gets assets worth $6.3B (plus interest worth maybe another $4.6B). It's true that the union will have to earn most of it by keeping the company afloat
but what really does the taxpayer get for it's $12B? It gets to bail out, for the second time in history, a second rate auto company that has no strategic importance.
Had the company been allowed to fail, the taxpayer would have saved $12B in TARP funds, lost a portion of the $6.5B on the union obligations of the company after selling the assets to Fiat. GM and Ford would have picked up their forgone business and thus eliminated some of their own need for TARP funds and, most importantly, management, labor and investors all would understand that there is a real risk of demise and they should watch their p's and q's better. Instead, we will delay the fall of Chrysler for another decade for the chance to do it again later. They also get to bail out the wealthiest workers in America making more than the average taxpayer.
The trillion dollar question is this: will the union, if they remain the major stockholder, after cutting management salaries and bonuses, and after cutting dividends, cut its own wages and benefits to stay in business? Their actions will determine whether unions are a rational entity in a capitalistic society or just a mob.