Boy did the wheels of justice spin quickly to get the Chrysler deal done.
The Supreme Court on Tuesday cleared the way for Chrysler's sale to Italian automaker Fiat, rejecting an appeal by opponents that included consumer groups and three bond-holding Indiana pension plans. A federal appeals court in New York had earlier approved the deal, but offered its opponents until Monday afternoon to persuade the Supreme Court to hear their case.
Justice Ruth Bader Ginsburg offered the bondholders a glimmer of hope late Monday with a temporary delay, putting a scare into the Obama administration and most of lower Michigan. Nevertheless, the trip to the highest court proved to be little more than a speed bump on the way to the deal's completion.
The Court issued a brief, unsigned opinion explaining its action, or lack thereof, simply stating that "the applicants have not carried that burden" which would have required them to intervene. On Wednesday, Fiat closed the deal, handing over the keys to the new entity known as Chrysler Group LLC to new CEO Sergio Marchionne.
We here at the Five Dumbest may not boast legal degrees but quite clearly the idea of due process has been replaced in America's legal corridors by a new judicial notion called Detroit process whereby bankrupt carmakers, Congress and President Obama can ride roughshod over the Constitution all in the name of saving automotive jobs that may or may not be worth saving.
Under the agreement brokered before Chrysler's Chapter 11 filing, Fiat gets up to 35% stake in the new company in exchange for sharing its small-car expertise. Not cash, mind you, but so-called technology. The United Auto Workers union grabs a 55% stake that will be used to fund its retiree health care obligations. And the U.S. and Canadian governments receives a combined 10% stake.
Meanwhile, the automaker's secured debtholders are scheduled to receive $2 billion in cash, or about 29 cents on the dollar, for their combined $6.9 billion in debt. And some of those creditors, including the Indiana funds, have a pretty strong case that they should be getting paid more considering their holdings rank higher than the UAW's in the company's capital structure.
The White House argued that completing the Chrysler deal as soon as possible was in the national interest because the company is bleeding jobs and money. To which we respectfully counter, 'what else is new?'
We also maintain that those bondholders being forced to accept an unjustified - if not unjust - haircut are also part of this nation, and they have interests too. And, more importantly, rights. And were it not for the fact other banks holding Chrysler debt like JP Morgan Chase (Stock Quote: JPM), Morgan Stanley (Stock Quote: MS) and Bank of America were also holding the government's TARP money, then the dissident bondholders would undoubtedly have had more heavy-weight supporters in their protests.
At the very least they deserved the right to be heard by the Supreme Court. And at the very, very least they deserved a decent explanation as to why the Court chose to ignore them.
Dumb-o-meter score: 85 -- We want the truth Ruth. We can handle it. .