Wendelin Wiedeking, chief executive of Porsche, said it could be only a matter of time before hedge funds took majority control of one of the US car manufacturers that had inflicted damage on themselves with ruinous discounts and hugely subsidised leasing rates. Cerberus, who owns Chrysler, is a hedge fund; so we know what that means...
Wiedeking also stated at Porsche's annual press conference: "We need banks to give credit, not just talk about credit ratings but start real actual lending to companies. These rules are choking us today.
"Stabilisation of the financial system has to take place rather than banks shifting hundreds of billions of euros to the European Central Bank to earn interest. They should be injecting money so healthy companies survive."
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Shut up. Seriously.
Hedge funds? I don't think so.
1) Most hedge funds are drying up, especially those that were not truly "hedged" - most weren't, and of course those who foolishly invested in CDO/CLO's and got burned on the sub-prime mortgage mess. There have been many billions of dollars in capital calls at hedge funds, with investors wanting their money back NOW. As a result, not only do most hedge funds have no cash to invest in acquiring companies, they have had to unwind much of their investments at a steep loss.
2) Those few hedge funds that do have cash to invest in struggling companies would not be interested in buying an automaker that is losing tons of money with no quick and easy fix in site, and saddled with massive legacy healthcare and retirement costs, and burdened by unions who behave not unlike terrorists. Only if there is SIGNIFICANT break-up value in the company. And I don't see significant break-up value in any of the Big Three.
I thought Porsche and the Germans were supposed to be smart. Porsche's CEO doesn't sound too bright, based on his latest comments.
Agreed with Stingray.
Why would a private group, like a hedge fund, voluntarily purchase a business entity with massive unfunded long-term liabilities, absurd labor contracts, and an apparent inability to weather even a few months of bad times? Even Cerberus seems to have been misled as to the health of Chrysler. Even if they weren't, they don't exactly serve as an example that other funds will want to emulate.
Sounds like a case of economic ignorance. Banks "injecting" money? Like governments "injecting" money wherever they want and have such an unlimited supply of it? Not.