The Canadian government has pledged almost $3.8 billion dollars to save Chrysler now that it has declared bankruptcy:
Industry sources said there would be no filing for creditor protection in Canada. Instead, Ontario and Ottawa will together spend $1.45-billion in debtor-in-possession (DIP) financing to keep Chrysler running, mirroring a proportionate move by U.S. Treasury authorities. Another $1.116-billion is an "exit loan" for when the new parent company emerges from Chapter 11 in the U.S., the sources said.
Combined with the $1.21-billion in bridge loans pledged in December, of which more than $700-million has already flowed, Canada and Ontario will have handed the company $3.775-billion in financial support.
Chrysler employs about 9,400 people in Canada. At that rate, Canadian taxpayers are shelling out over $404,000 per employee.With no guarantee that the company will survive in the long run. Maybe it would just be more efficient to hand the money directly to each employee and save waste in the middle. Some of them might actually make good use of it.
The thing that I found most disconcerting is the way that bankruptcy protection is now being used as a tool to threaten investors, by the President of the United States no less:
President Obama said he fully supports Chrysler’s decision to also file for bankruptcy protection as a way to wring concessions from a "small group" of rogue creditors who refused to reduce the company’s debt burden.
After praising Chrysler’s unions, management and big lenders for agreeing to sacrifices, President Obama heaped scorn on a "group of investment firms and hedge funds" that were holding out in the hopes of benefiting from a new infusion of U.S. and Canadian taxpayer aid.
I don’t know anything about these creditors except that they were trying to make a profit on their investment just like everybody else. And they owe a fiduciary duty to their customers – many average citizens – who were also trying to make a profit. But the President basically paints them as greedy capitalists, so they must be bad.
Out of curiosity, what sacrifices did Chrysler’s management make? I guess we won’t know until CEO Bob Nardelli gets his golden handshake.
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