President Barack Obama says the bondholders who didn't agree to the administration's Chrysler reorganization plan are "speculators." (Mandel Ngan / Agence-France Presse)
They are being demagogued as "speculators" by President Barack Obama and as "vultures" by Gov. Jennifer Granholm and Oakland County Congressman Gary Peters.
They are the smaller bondholders who have refused to bow to the pressure of the Obama administration and accept a minuscule number of pennies on the dollar as repayment for their loans to Chrysler.
This confrontation could have been avoided if the Obama administration had treated the bondholders as equitably as the United Auto Workers, which gets far more money for the dollar.
The good-faith loans from the bondholders provided the operating capital for which Chrysler pledged its assets as collateral, an important role that the Obama administration wants to ignore as part of its forced restructuring program that favors the politically connected UAW.
These bondholders represent all forms of investors, from pension funds that guarantee the retirement income of workers, to banks and their depositors, to individual investors. It is likely some investors are from Michigan. Companies that invest money in firms like Chrysler have a fiduciary responsibility to represent their best interests.
The heavy-handed tactics of the Obama administration represent another government intrusion into the private sector and attempt to victimize a constituency that does not have the political clout of the unions.
The president is offering to guarantee 55 percent ownership in Chrysler for the union through its health care trust fund, along with an 8 percent stake for the government, while throwing a 10 percent share to the investors who have kept Chrysler alive this long.
Obama is also obsessed with forcing a Chrysler-Fiat partnership, which is a perfect example of government futilely trying to choose winners and losers. The administration would be better off seeking a relaxation of antitrust rules so Chrysler could be consolidated into General Motors, as the two companies last year discussed.
But Obama is clearly fixated on making what he calls "fuel-efficient, clean-energy cars" -- the cars Americans have shunned except when gas was $4 per gallon. These green-technology cars sell in Europe, where the gas tax can add as much as $4 a gallon to the price of fuel. By comparison, the federal gas tax is 18.4 cents.
For all of its problems, the Big Three automakers still have a better than 9 percentage point edge on the Japanese Three (Toyota, Honda and Nissan) in U.S. market sales share despite consumer uncertainty about the future of Chrysler and GM.
In addition, light trucks still represent half of all sales and a huge chunk of any automaker's profits in the United States.
The noncompliant bondholders are going to take their chances on winning back a bigger share of their shareholder investments in bankruptcy court, where the independent role of the judiciary will be expected to fairly judge their claims.
One hopes the Obama administration will not try to bully the courts the way it has private businesses.
It already will be tough to raise desperately needed money in the market for Chrysler to make its future vehicles after Obama's intervention and scapegoating of investors as "speculators." Government intimidation would represent an even greater danger to the country and obstacle to Chrysler's future.