Well well well. I was wondering when a group of bond holders would have the courage to hire an attorney and go to court over their rightful position in line as creditors. Looks like the U.S. Supreme Court will take a peek at some Indiana bond holders and their case in the Chrysler bankruptcy proceedings. See this Reuters article for details:
http://www.reuters.com/article/newsOne/idUSTRE55608Q20090608
I am truly amazed at how well thought out the founding fathers of our great country were when they drafted our Constitution. They put in a system of checks and balances to make sure that no one branch of the federal government runs a muck with their power.
The classic chess match is at hand my friends. This is our system of checks and balances at work. The rule of law says that these creditors are first in line in the Chrysler bankruptcy. The executive branch of government takes a totally different opinion. They mistakenly believe that they can decide who gets what percentage of the New Chrysler. We shall see who is right. I believe that American Capitalism is at stake with the outcome.
The stakes are very high. If major corporations cannot go to the bond marketplace to raise capital, then we have a serious problem. What type of bond investor would put their hard earned dollars in a corporation, if the executive branch of government can come in and move you down the food chain?
Bond investors are not stupid. You do not have to tell them twice. If the Supreme Court rules against the Indiana bond holders, then Houston, we have a problem. If you think we have a financial credit problem now, then wait to see what could happen if the executive branch wins this argument. Credit for major corporations will dry up. Major corporations would have to raise their yields to attract investors which would in turn increase their borrowing costs. The end result is a huge drag on corporate earnings. More bankruptcies are sure to follow.
Keep the faith. I do believe that the Supreme Court will do the right thing for the Indiana bond holders while at the same time, provide a glimmer of hope for American Capitalism. They should rule in favor of the Indiana bond holders and stop this runaway freight train of cronyism. Let us all pray that they do.
Showing posts with label Chrysler. Show all posts
Showing posts with label Chrysler. Show all posts
Tuesday, June 9, 2009
Monday, June 1, 2009
Bankruptcy Predicted in KYATMA
My book, Keep Your Assets Take My Advice (KYATMA) predicted the bankruptcy filings for General Motors and Chrysler. I follow publications from the U.S. Treasury and the Chicago Federal Reserve. One of the email pdf files that I receive shows the auto sales for the nation. The automakers were selling about 17 million units per year, then the bottom hit. It is down to around 9 million units a year now. You cannot have a business built on the top of the scale. You have to have a business built where you can still profit on weak sales. Rosy scenarios do not work in business. You have to face the cold hard facts. I would not be surprised to see auto sales dip further from here. Consumers will not buy cars they do not want to own.
I lived in Detroit in the early 1980's for a short while. I was only 24 years old at the time. My job was General Manager of a large nightclub called Nitro. Back in the early 1980's, there were a lot of layoffs in the auto industry. However, when auto workers were laid off back then, they only had to go out and apply for a job every week and they would continue to receive most of their pay. Every week, while I was the General Manager, I would have about 30 to 40 auto workers come apply for a job. Of course, they were dressed in army fatigues, t-shirts, raggedy blue jeans and other well worn clothes. They had no intention of really getting a job. They were only complying with the requirements of their union agreement. You cannot hardly blame them for acting this way. After all, they still needed to feed their families and pay their bills.
It makes you wonder though, what kind of management would agree to such a fiasco? It boggles my mind how auto management could ever agree to such a labor agreement. I hope that when they crunch the numbers they base their profitability on 7 million cars sold instead of 17 million. If they cannot be profitable at 7 million cars sold annually, then why are they in business?
It seems like they still have this same agreement in place. All an auto worker who has been laid off has to do is go apply for a job and still get paid the bulk of their pay. Hopefully, they will change this in the new Government Motors.
I lived in Detroit in the early 1980's for a short while. I was only 24 years old at the time. My job was General Manager of a large nightclub called Nitro. Back in the early 1980's, there were a lot of layoffs in the auto industry. However, when auto workers were laid off back then, they only had to go out and apply for a job every week and they would continue to receive most of their pay. Every week, while I was the General Manager, I would have about 30 to 40 auto workers come apply for a job. Of course, they were dressed in army fatigues, t-shirts, raggedy blue jeans and other well worn clothes. They had no intention of really getting a job. They were only complying with the requirements of their union agreement. You cannot hardly blame them for acting this way. After all, they still needed to feed their families and pay their bills.
It makes you wonder though, what kind of management would agree to such a fiasco? It boggles my mind how auto management could ever agree to such a labor agreement. I hope that when they crunch the numbers they base their profitability on 7 million cars sold instead of 17 million. If they cannot be profitable at 7 million cars sold annually, then why are they in business?
It seems like they still have this same agreement in place. All an auto worker who has been laid off has to do is go apply for a job and still get paid the bulk of their pay. Hopefully, they will change this in the new Government Motors.
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