By: Tom Watson

The former merger of Chrysler to Daimler-Benz was billed as a “marriage made in heaven,” so perhaps we should not get too excited about the recently arranged union to Fiat, which is a doomed relationship forged out of desperation.

With all due respect to the new guy in the White House, it takes a skilled sophist to claim (at least straight-faced) that Chrysler’s bankruptcy filing in the United States wasn’t a sign of weakness. That’s almost as silly as any expectations of public understanding by the small group of Non-Tarp Lenders who attracted President Obama’s wrath for looking out for their own investors (which include teachers unions, major pension and retirement plans and school endowments).

Understood or not, this group of bondholders are senior secured creditors, who are typically paid in full before anyone else in a restructuring gets anything at all. In this case, they claim to have “offered to take a 40% haircut even though some groups lower down in the legal priority chain” were being offered recoveries of up to 50%. And yet, they are blasted for expecting their legal right to get more than non-secured creditors.

That’s almost as ridiculous as CAW head Kenny Lewenza, when he stated it is “shocking that a company with Chrysler’s stature and history should be forced into bankruptcy protection.” Hmmm. Isn’t this the Detroit automaker’s fourth kick at the viability can? Didn’t it lose something close to US$8 billion last year? And hasn’t it been living off the public purse for months? The only thing surprising here is the U.S. government’s claim that Chrysler’s bankruptcy process will be clean and quick.

It will be surgical, but with plenty of complications.

Lewenza, of course, wasn’t really shocked. He is another self-serving rhetorician. After aggressively demanding a taxpayer bailout to save Chrysler jobs, the new CAW head actually claimed his union went above and beyond the call of duty when agreeing to cuts (apparently worth $19 per hour) that do not touch wages or pensions. He didn’t mention that saving Chrysler puts healthier automakers and the jobs of other autoworkers at risk.

Simply put, the North American auto sector needs fewer players, not more. That’s why the Chrysler restructuring is a fiasco with no noble sides and little justification beyond the votes it is designed to buy for politicians.

Fiat will not help. It isn’t even bringing any cash to the marriage. In fact, Chrysler’s shining corporate knight lost almost US$800 million in the first quarter. For this union to work, Americans must fall in love with small Italian cars (which will never happen) from a company with a brand that put a bad taste in the mouths of North American consumers decades ago. For this union to work, Chrysler must make small cars profitable in North America, which would be shocking. Meanwhile, whether it works or not, Fiat now has instant access to a shrinking market that is supposed to support a restructured General Motors and keep Ford out of the insolvency garage.

READER CONTEST: A free one-year subscription to Canadian Business magazine (paid for by me) goes to first poster to this blog who knows what jokesters used to say Fiat stood for the last time it tried to win over North American customers. Winner must email me name and address.

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DOUBLE TAKE: Aside from trying to promote myself while generating Web traffic that helps put bread and butter on my table, this blog aims to stir debate by taking a harder look at current news and events. I obviously enjoy voicing my own opinions, but I am a big boy and I welcome all comments that don’t require R ratings. So let me have it via this blog or send me an email at tom.watson@canadianbusiness.rogers.com. I reserve the right to post email comments without disclosing the sender’s name. If you don’t think I am a total twit, follow my DOUBLE TAKE posts via my NotSOCRATES Twitter site at http://twitter.com/NotSocrates. THOMAS WATSON is a Senior Writer and editorial board member at Canadian Business magazine. Since winning a community journalism award as a cub reporter with the Hamilton Spectator in the early ’90s, he has covered business, finance, politics and technology for various news outlets. Prior to joining CB in 2001, he reported on the steel and automotive sectors for the Financial Post. Watson received his first magazine award nomination for exposing a stock manipulation plot aimed at Waterloo, Ont.-based Open Text in 2000, when he was head of investor relations for an international venture capital outfit in the City of London. Watson holds graduate degrees in journalism, international relations and public finance and undergraduate degrees in history and politics.