The Chrysler merry-go-round

NEW YORK (Fortune) -- Exactly one week ago, Kirk Kerkorian was the flavor of the day. The maverick raider, who'd been on the fringes of the auto industry for a decade, had come from out of nowhere to make a bid of $4.5 billion for Chrysler. Given his record of stirring things up, everyone expected big things from Kerkorian despite his advanced age (he turns 90 in June). But that was last week.

Today the critics have come out of the woodwork. The Wall Street Journal reports that a top DaimlerChrysler (Charts) executive won't be seeing Kerkorian's people when he comes to New York this week to meet with other Chrysler bidders. Kerkorian's bid, with its contingencies for union concessions and a sharing of the $15 billion unfunded pension liability, is deemed too shaky.

That news prompted popular Detroit blogger Peter DeLorenzo to rip Kerkorian in today's edition of Autoextremist for not having Chrysler's long-term interests at heart. "He's in it for The Game, period," writes DeLorenzo. "It is all about the financial action to him. It keeps him going and he just loves to stir things up."

What's remarkable about this is that the other Chrysler bidders seem to be getting a free pass. On the surface, they don't seem likely to have Chrysler's long-term interests at heart either. Getting the immense returns that private equity requires means heaping billions of dollars of debt on Chrysler, stripping it of excess capacity, people and dealers, and then carving up the remains for sale to other buyers or the public.

Does anyone really expect Blackstone Group, Centerbridge Capital Partners or Cerberus Capital Management to rebuild Chrysler and run it for the long haul? Not when they can sell it and reap 20 percent of the profits for themselves (if that is indeed what they intend to do).

Normally you would expect Canadian parts supplier Magna International (Charts), the other potential buyer, to provide the best continuity for Chrysler. Magna is in the automotive business, after all, and presumably intends to remain there. It supplies parts to Chrysler and assembles the Jeep Grand Cherokee and Chrysler Voyager minivan at its plants in Europe. Magna also has experience dealing with the auto workers union -- a must for any company hoping to be successful.

But Magna has some problems. It is partnered in its Chrysler bid with another private equity firm, Ripplewood Holdings, that presumably will be looking to slice, dice and flip its Chrysler stake. Magna's founder, Frank Stronach, remains in charge of the company at age 76 and can be a bit mercurial. He's been criticized for controlling Magna despite owning only a fraction of the equity and taking a hefty pay packet even though he functions only as non-executive chairman.

In short, none of the above - Kerkorian, private equity or Magna - sound like the ideal buyer for Chrysler. As I've written before, the smart play would be for Daimler to hang on to the American company, but that appears to be politically impossible. Sentiment in Germany is overwhelmingly in favor of letting it go and Daimler's share price has risen sharply ever since the prospect of a divestiture was floated.

The wild card remains Big Labor. Union representatives in Germany control half the votes on the supervisory board - the equivalent of an American board of directors - and could try to block any deal. Here in the United States, the United Auto Workers could also play the role of obstructionist by refusing to negotiate with a prospective buyer. It was the UAW after all that started this sale process in the first place by refusing to grant Chrysler the same break on medical costs that it gave General Motors (Charts) and Ford (Charts). It figured that since the German parent had deep pockets, there was no need to. Now that those pockets are about to be closed, the UAW could take out its anger on the new buyer.