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To: ild who wrote (304)	4/20/2003 4:50:28 PM
From: Joan Osland Graffius	Respond to of 4905

ild, Chrysler common stock was sold off during the period of the bailout because it was nip in tuck if they could get the financing required. They pulled together 36 banks to cook the deal with government guarantees. It was one of the better stock purchase opportunities for those who bought the stock close to the bottom. IMO, it was the management at Chrysler that made the difference between getting the financing and of course the ultimate option of bankruptcy. US Air was also a good buy when one of their planes went down close to the airport. Stock sold at $4 and ran to above $50 in the next 10 or so years. Those were different times as we were not in a debt bubble like we are now.

To: ild who wrote (304)	4/20/2003 9:51:13 PM
From: EL KABONG!!!	Read Replies (2) \| Respond to of 4905

ild, Okay, I'm doing this mostly from memory, but here goes... The Chrysler bailout occurred circa 1979/1980. The nation had been stung (in recent prior years) by inflation, by gasoline shortages, by labor unrest and by an oil embargo. At that time, Chrysler sold mostly very large vehicles, which were gas guzzlers, not at all a selling feature when gasoline prices were going through the roof. Chrysler sales plummeted, threatening the very solvency of the company, or so it was claimed at the time. Compounding problems for Chrysler were mounting competition from foreign automakers, in particular the Japanese, and Chrysler was uncompetitive (price-wise) against the cheap labor vehicles coming in from overseas. Carter was President at the time, and the Congress was decidedly Democratic as well. Volcker came in to take over the Fed, which promptly raised interest rates (somewhere near 20% as I recall), which in turn killed off business (not only for Chrysler, but other companies as well) resulting in bankruptcies and imminent bankruptcies across the entire plane of the US economy. The Republicans argued against bailing out Chrysler, largely because the act was a reward to Chrysler for failing miserably. But the Democrats, recognizing the large union voting bloc in Detroit, eventually pushed the thing through Congress. In order to save their jobs, the union (UAW???) virtually signed away workers' rights accumulated over the prior 2 decades, and negotiated downwards pay rates and benefits to levels, which to this day (adjusted for inflation, etcetera) the union workers have never seen since. Remember, as this piece of legislation was going through Congress, the Iran hostage situation was beginning. And remember also that this was a Presidential election year, and Carter (as well as incumbent Congressmen) was doing poorly in the polls. Basically, the bailout gave Chrysler direct loans and loan guarantees of something over a billion dollars, a huge sum of money at that time. The government received Chrysler stock or warrants (I think) that were later sold by the government at a profit for taxpayers. I'm can't remember exactly when they were sold, or exactly how much profit was realized, but I'm fairly certain the government did not lose money on the deal. Chrysler was saved, for the foreseeable future anyway, only to be later bought out by Daimler, which (to this day) continues to put the thumbscrews to the Chrysler autoworkers. (My opinion only, and my opinion is coming from a guy who is about as anti-union as they come)... So to answer your question, the stock eventually did recover, but the recovery benefited only wealthy executives and eventually Daimler. Relatively little of the Chrysler stock price increase benefited Joe-6-Pack, as the stock (at the time) was not widely held by the common guy. KJC

To: ild who wrote (304)	4/21/2003 12:06:52 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to 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).