tag:blogger.com,1999:blog-197345115652214342.post1335296833484188276..comments2010-06-09T16:32:44.763-04:00Lawrence D. Loebhttp://www.blogger.com/profile/05600981191177652648noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-197345115652214342.post-72122620170532961202009-06-07T17:15:42.729-04:002009-06-07T17:15:42.729-04:00Thank you for your comment.<br /><br />I would appreciate it if you could further explain why you believe the UAW interest is an arms length transaction by NewChrysler (instead of a payment by the Chrysler estate).<br /><br />What asset is being created with that purchase?<br /><br />Would you really pay, what is effectively, a signing bonus of $10.337 billion to hire the UAW with the modified contract?<br /><br />If so, can you please hire me? You would be more generous than anyone I&#39;ve ever worked for!<br /><br />I&#39;m not sure why you put Cerberus&#39; purchase of Chrysler in quotes, but the value of the assets would have been, potentially, increased at the sale date.<br /><br />Subsequently, if there was an impairment in the value of the assets that was not reflected through depreciation or amortization (or, if appropriate, depletion), then the auditors would require Chrysler to write down the value of the assets and recognize the expense on their income statement.<br /><br />Your seem to be arguing that Chrysler&#39;s December 31, 2008 financials (a mere four months prior to the bankruptcy) should reflect a write down of up to $37 billion?Lawrence D. Loebhttp://www.blogger.com/profile/05600981191177652648noreply@blogger.comtag:blogger.com,1999:blog-197345115652214342.post-77123699264628656602009-06-07T16:55:55.425-04:002009-06-07T16:55:55.425-04:00Very good analysis, although I disagree with your conclusion. To date, there have been no countervailing opinions concerning the value of the assets in questions, or any credible challenge to the process of determining that value. Indeed, all of the credible positions I have seen with respect to the valuation conclude that the Capstone revised estimate may in fact be generous (due to the vast majority of the assets being plant and equipment which is both antiquated and potentially a liability do to years of manufacturing waste by-products.<br /><br />Having a book value grossly out of whack with a market value is not all that uncommon, especially since Cerebus &quot;purchased&quot; Chrysler just a few years ago. The debt assumed as part of the purchase price would elevate the basis Cerebus had in assets, which would have been allocated in a reasonable way across the asset base - with a portion even being attributable to &quot;goodwill&quot; which, by the way would be accounted for as an asset on the books of the company, and part of that $39B.<br /><br />The penultimate question then is the 1) the validity of the process of valuation (and, as I have said, no one has yet provided an alternative process or result) and 2) whether the UAW interest in NEW Chrysler was an arms length transaction, or a subterfuge to give priority to unsecured claim in OLD Chrysler. Part of that will depend on the opinions of the other investors in NEW Chrysler (US, Canada, Fiat) as to whether they would be investors, but for the new labor deal. I would suggest the answer is no, and hence the issue is moot.Anonymousnoreply@blogger.com