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Strategies & Market Trends : Heinz Blasnik- Views You Can Use
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To: ild who wrote (304)4/21/2003 12:06:52 AM
From: Wyätt Gwyön  Read Replies (1) of 4905
 
What happened to Chrysler common stock during bailout?
Chrysler stock rose. altogether the govt provided $1.2 billion in loan guarantees to Chrysler, and labor concessions of more than $1 billion were made. Chrysler received unprecedented UAW concessions, closed 30 plants and sold off assets. the govt received more than 14 million warrants on Chrysler stock struck at $13, and ended up selling them for a profit of $300 million. subsequently, the US autos benefitted from an antilabor tailwind in which another 150,000+ US autoworkers got laid off over the next two decades.

it is hard to imagine a current bailout for US industrials that would work so easily and actually be profitable or only mildly costly to taxpayers. instead of $1.2 billion, the bill might be over $100 billion. some cos face huge pension/OPEB obligations which are severely underfunded, and retirees cannot be "laid off" like workers on the line. the competitive landscape has intensified for some, and they have seen their market share decline, have increased leverage, and are operating huge financial arms where in some cases most of the "profits", such as they are, come from (another source of "profits" being GAAP-approved phantom capital gains on their pension reserves even as their actual portfolios have suffered massive losses in the bear market).
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