DETROIT - The story broke Friday morning that the treasury department turned away General Motors on its widely reported, not very substantiated deal to buy Chrysler with $10 billion in federal bailout money. (I write "buy Chrysler" ...the unnamed sources call it a "merger.") And with that, the GM-Chrysler deal may be dead. Done. A huge swing from my report yesterday quoting Grant Thornton that a deal could happen before Tuesday.
Which is why it's done. Despite the lack of named sources in the financial press, it has become exceedingly clear that Cerberus has been the entity leaking news reports of the buyout/merger. And ex-Secretary of the Treasury under President Bush, John Snow, works for Cerberus. If Cerberus and GM can't get Treasury to go along while Bush is in office, they certainly won't get much help when Bush officially becomes a lame duck on Wednesday. And if Barack Obama wins, the chances diminish even further.
The deal would be good for nobody other than Cerberus. I mentioned my friend, Arthur, in a previous post. He admits it's a conspiracy theory, but it appears to be valid: Cerberus buys Chrysler from Daimler, then sells it to GM, which purchases it with federal money (thanks to the John Snow connection), and makes about $1 billion, even as anywhere from 25,000 to 100,000 are laid off. Not bad private equity work, especially with the economy and financial industry in the tank.
It's certainly not over, though. And it's still not a good idea for the GM. So what happens to Chrysler? It should be obvious to everyone now that Cerberus wasn't telling the truth when it said it was in the car business with Chrysler for the long term. Unless it can find a buyer from, say, China, Chrysler will be in big trouble. Like it or not, the Chinese auto industry appears to be Chrysler's best hope now.