Fiat to pull Chrysler out of Bankruptcy

2006 Chrysler 300 Series Photo: CNN

2006 Chrysler 300 Series Photo: CNN

The collapse of car company Chrysler’s has been the topic of media discussion this week – the American company filing for a Chapter 11 bankruptcy on April 30th. The first car company to go under during the current economic recession has made international news, however I did find some interesting facts about the Chrysler history that makes one think the media could have predicted the downfall of the company.

The Sydney Morning Herald reported that President Barrack Obama had ordered Chrysler to conduct a quick bankruptcy, with an auction for the company’s assests hoping to be completed in 3 weeks. As a result of lenders refusing to reduce debts the company has no money to continue trading but instead of totally closing it’s doors an alliance will be formed with Italian car company Fiat over the following weeks.

The transaction would help create the world’s sixth-largest carmaker, a merger Chrysler wasn’t able to do outside bankruptcy because of opposition by some of its secured lenders.

The SMH said that no other buyers had showed any interest in the company. They also said that this was the fifth largest bankruptcy in American history! I think that’s quite a massive set back to the American economy. And I do think the move should have been more premeditated – Chrysler is a ‘luxury’ car brand with ridiculous prices and not much practicality to the average consumer so who can really afford to splurge on these kind of cars right now?  The US and Canadian Government are going to give the company a total of US $6 billion in taxpayers money to start the new alliance with Fiat. The SMH seems to consider this a positive move as it will keep some jobs for those who originally worked for Chrysler but if I was an American taxpayer I would be a little bit peeved. I would prefer my money to be going towards the education or health system as opposed to a car company.

CNN said that Chrysler was king of the hill only a few years ago with their 300 series, but a string of uninspired products destroyed their reputation.

In remarks at the White House, President Obama said that the bankruptcy filing is not a failure for the company but “one more step on the path to Chrysler’s revival.”

Obama really does have a positive outlook on everything doesn’t he!

I did find a really interesting article on Chrysler from 1983 from the Heritage Foundation and it reported that Chrysler nearly went bankrupt in 1987 but was bailed out by the American Government with $1.2 billion in loan guarantees. The article tries to reveal the myths surrounding the bail out – and raises one serious question about the American Government:

It shows that if the bailout is indeed the model for an American industrial policy the consequences could be disastrous

I agree with this article and think it is relevant to the situation today; does the the American Government need to take a closer look at industrial policy and business-government relationship? With the near bankruptcy in 1983 was the amount invested back then an absoloute waste? Why didn’t the media pick up on this issue sooner? We will have to wait and see how the formation of Fiat and Chrysler pans out…Stay tuned!

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Published in: on May 4, 2009 at 10:19 am  Comments (1)  

Whining about the Swine

A couple in Mexico City Photo: The Guardian (UK)

A couple in Mexico City Photo: The Guardian (UK)

The media has been going crazy with week with reports that the Swine Flu has hit Australia. The “pandemic” has been front page news of the Sydney Morning Herald two days in a row, as well as international papers. While it is no doubt that the flu has been very lethal in Mexico, with over 90 deaths, I don’t think it has quite reached the “pandemic” status in Australia that media representations are implying.

I read an article in the Sydney Morning Herald yesterday that said the Swine Flu was going to further push the economy into recession.  The SMH reported that Crude Oil stocks had fallen alot this week from the concern that the flu breakout would curtain air travel. It is a possibility that the Swine flu could affect the economy but I think it is a bit too soon for the media to be making these predicitons – it only creates more worry and concern for us!

An article in Time made me feel a lot more confident when they agreed that the media was overexaggerating the effects of the swine flu on the economy.

The odds that tens of thousands of people will die from the flu are low. Advances in medicine and public health policy have made a big difference in the ability to monitor emerging serious illnesses. The fact that the new disease seems not to be terribly virulent outside of Mexico is another factor that supports the opinion that this will not be a major epidemic. However, in the minds of some analysts, the world can still look forward to trillions of dollars in financial losses and an economic depression.

Yep another trillion dollars down the drain. I understand it is the media responsibility to report on the outbreak of the Swine flu – which has had one or two confirmed cases in Australia – but I think at this stage our economy will remain in relatively the same situation based on other factors.

Published in: on April 28, 2009 at 9:56 am  Comments (1)  

Is Margin Lending still a safe bet?

I read a great article in the IFA – Magazine for Independant Financial Advisors – Has Margin Lending Gone too Far?

The article discusses how margin lending works and the pros and cons of it as a true wealth building strategy. At this point in time, with the economy and shares in recession, it’s probably not a great idea to add margin lending to your financial portfolio, however there are benefits of it if it is handled properly and monitoring closely by yourself and your financial advisors. This article gives varied opinions from financial advisors on the risks of margin lending, including interviews with Suncorp and the Professional Investment Services directors. 

Take a look at this article before you totally throw away the idea of margin lending after the Storm Financial fiasco. But ensure you recieve advise from a totally trustworthy source and you are aware of the risks it involves.

You can find this article in the March 02-08 / 2009 issue, or if you are a member of IFA you can access it online at www.ifa.com.au

Published in: on April 22, 2009 at 9:37 am  Leave a Comment  

Bill O’Reilly and the American Economy

I think you might find this video clip quite interesting.

Bill O’Reilly conducted this interview in September 2008, and he looks at one reason why the American Economy has fallen into recession. It’s a very debateable reason but I think it does need to be considered – are our overextended bank loans and credit card debts responsible ? O’Reilly has a habit of really laying into his interviewees and this is no different. While he may cross a few lines his argument is justifiable and worth our attention.

Let me know what you think of O’Reilly’s video.

Published in: on April 20, 2009 at 6:41 am  Leave a Comment  

Malaysia Airlines – 80% discount off fares

Qantas is clearly not the only airline suffering reduced travel sales – suffering a 71% decline in profit since 2008!

The Australian reported that the airline will be slashing up to 80% off selected ticket prices in a hope to boost domestic and international passenger traffic. Managing director Idris Jala said radical action was needed to survive in the current economic climate.

“I am very convinced that must be the way to survive in this environment – to tailor (the products) based on the size of the customers’ wallet.”

All airlines across the globe are being severly affected by the travel drought with some of the lowest prices available for passengers in a long time. Despite the lowerest costs ,I seriously doubt the average person can afford to travel right now, let alone take a holiday from their jobs!

Published in: on April 15, 2009 at 10:36 am  Leave a Comment  

The Big G20

The big 2-0. The G-2-0.

Everyone is waiting for the results of the leaders summit, but a few people are concerned it will be useless information in terms of pulling the economy out of the current recession. Blogger Simon Johnson thinks the summit  will not be able to pin down the cause of the crisis or what will be able to sustain a recovery

Almost all the important issues are kept off the table by anachronistic diplomatic niceties: monetary policy around the world, Europe’s impending crisis, and how to escape the overweening power of major banks in almost all industrial countries.  The G20 summit has substantially failed even before it begins.

The Australian Financial Review also voices concerns for the event, fearing that it will be a failure if the leaders cannot agree on bold stimulus targets.

Let’s cross our fingers and hope that we have something left up our sleeves. With the highest unemployment rate in 4 years its clear we definitely need something!

Published in: on March 31, 2009 at 2:05 am  Leave a Comment  

Qantas announces a second wave of redundancies

Qantas is rumored to be announcing a reconstruction plan this week which will include a second wave of redundancies within a year. The Financial Times reports that the airline plans to make cuts in senior and middle management, a decision made under new chief executive Alan Joyce.

 Staff and unions will be told the job losses are needed to match reduced capacity requirements as passenger revenues have deteriorated.

Over 100 senior jobs are likely to be cut in addition to the 1500 cuts that Qantas announced last year.

An analyst for the Sydney Morning Herald said that the airline was too overstaffed in its senior executive ranks.

What has Qantas got? They’ve got a chief executive, chief financial officer, a treasurer, they’ve got a couple of people in investor relations, a few in media relations, then there is government relations….

They were set up for a slightly different era as they were once a government department and these things take years and years to unwind.

Airlines around the world have been witnessing a massive drop in passenger loads in February, with Singapore Airlines reporting one of its biggest monthly drops on record. European airlines Air France-KLM and Lufthansa also announced more capacity reductions. 

The Centre for Asia Pacific Aviation, an industry consultancy, last week warned that airlines in Asia could only be weeks away from grounding up to 10 per cent of their fleets as they contend with weak revenues, falling passenger loads and excess capacity. 

While Australian Airlines are all suffering under the economic recession, the news will only further damage Qantas’ reputation with the Australian public. It’s hard to find positive articles about Qantas at the moment, but seeing as they are Australia’s largest airline (and would probably employ the largest amount of staff) it’s no wonder the media is critiquing their recent job cutbacks.

Published in: on March 23, 2009 at 11:20 am  Leave a Comment