Sergio Marchionne, chief executive of Chrysler and Fiat, said today that the rescue of Chrysler by the U.S. government included "shyster" loans with tough interest rates. Do you really want to go there, Sergio? UPDATED
By there, we mean using a racially loaded term for a crooked lawyer. We're not going to reargue the past; the word dates from the New York underworld and the German term for excrement, applied to criminal lawyers preying on perps of the 1840s. It's origins, although not in any way anti-semitic, today comes off as anti-Semitic in many circles, especially when aimed at Jewish lawyers, several of whom crafted Chrysler's bailout (Ron Bloom and Steve Rattner are two mishpacha who come immediately to mind). It's not a good choice of words for any CEO, and especially not for one that heads a company which built airplanes and tanks for the Axis powers in World War II.
Marchionne's full remark — "I want to pay back the shyster loan" — expresses his frustration that $1.4 billion in interest payments on the U.S. loans kept Chrysler from profitability last year. And yes, the interest rates are pretty steep, since there was no other entity in the world in 2009 outside the Obama administration willing to let Marchionne take $7.4 billion and try to restart Chrysler.
"All the loans to Chrysler and GM were made at rates at or below market rates," former auto task force chief Steven Rattner told us. "No one would be happier than members of Team Auto if Chrysler chose to refinance the government out."
But the bigger issue with the remark here is that it took two sides to sign off on those terms. One belonging to the U.S. government and the other signature belonged to Sergio Marchionne. Fiat didn't have to put any cash into Chrysler up front for its stake, and if Chrysler rebounds strongly, the risk would have been well worth the cost of owning it — especially if Chrysler and Fiat eventually merge into one U.S. firm, as Marchionne said they could. Kvetching about a deal better than any other you could get is for schmucks.
UPDATE #2: Sergio Marchionne, CEO of Chrysler Group LLC has issued the following statement:
"Yesterday, in responding to a question about Chrysler's government loans, I used a term in reference to the interest rate being charged on our government loans that has raised concern. I regret the remark which in hindsight I consider inappropriate.
"I have repeated on numerous occasions, on behalf of all the people at Chrysler, our gratitude to the US and Canadian governments for the financial assistance that was critical to the recovery of our Group.
"As the only parties willing to underwrite the risk associated with Chrysler's recovery plan, the two governments levied interest rates that, although appropriate at the time, are above current market conditions. This was done with the full support and understanding of the members of Chrysler Group LLC.
Because of these changed market conditions as well as the improvements in our performance and outlook made possible through the support of the US and Canadian governments, Chrysler intends to repay these loans in full at the earliest opportunity."
Photo Credit: AP