Chrysler's Hidden Coffers - Forbes.com
If Cerberus won’t invest in Chrysler, why should taxpayers be forced to? (Also notes that Dan Quayle is getting paid to lobby for the bailout).
I strongly disagree with this argument, and the general one that just because Chrysler is not public, it is less deserving of a bailout than Ford and GM. You also may be surprised at the actual ownership of Ford and GM - the majority of their shares are held by investment houses similar to Cerberus. 71% of Ford’s outstanding equity is institutionally owned, and in addition, 40% of its voting rights are controlled by the Ford family. GM is 78% institutionally owned.
Also, why are we not aghast that Ford and GM cannot raise additional equity from their existing shareholders? If Ford and GM cannot float additional equity on the public market, why should the taxpayer invest? The answer is that none of the Big 3 can raise additional equity because their market cost of capital is astronomical. This is why the government has to step in - neither the private nor public markets are willing to make any sort of further bet on these companies.
In addition, Cerberus has agreed to forfeit any profit it may make on its Chrysler investment if it receives government money. Ford and GM’s public shareholders have clearly made no such promise.
To be clear - I am in no way in favor of a bailout for any of the big three. These are sick companies, and they need to die. However, discriminating against Chrysler because they are privately held is really uncalled for.
Source: jeffmiller
