Bankruptcy Looks Likely for Chrysler

Source: The New York Times

By ZACHERY KOUWE and MICHELINE MAYNARD
Published: April 29, 2009

DETROIT — Last-minute efforts by the Treasury Department to win over recalcitrant Chrysler debt holders failed Wednesday night, setting up a near-certain bankruptcy filing by the American automaker, according to people with direct knowledge of the matter.

Barring an agreement, which looked increasingly difficult, Chrysler was expected to seek Chapter 11 protection on Thursday, most likely in New York, these people said.

The automaker, which is in talks with the Italian automaker Fiat, would file for bankruptcy first. It subsequently would present an agreement with Fiat to the court for approval, possibly on Monday, these people said. They requested anonymity because they were not authorized to speak for the government.

To win over several hedge funds, which have been holding out for better terms, the Treasury increased its cash offer to holders of Chrysler’s secured debt by $250 million, to $2.25 billion, these people said. If all of the secured holders would agree to the new deal, which would give them the cash in exchange for retiring about $6.9 billion of debt, Chrysler would still have a chance of restructuring out of court.

Read more: http://www.nytimes.com/2009/04/30/business/30auto.html?ref=global-home

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I hope things work out. I admit that I was convinced Chrysler was going to go into liquidation, but right now it looks like it actually may survive in some form (for now).

I'll also add something else: given that the UAW has agreed to both Chrysler and GM's restructuring plans, can people stop calling the UAW the guilty parties here? If GM or Chrysler goes into bankruptcy at this point, it's because of the bondholders, NOT the UAW.

I want to know who they are so I can avoid ever doing business with them again.

Bondholders are going to take the gaspipe. Those who think that's cool don't understand why we have a credit crunch, and how illiquidity is snuffing our economy. No one wants to lend money when they realize they might not get paid back.

If you had a bond, would you take 5% if Chrysler stays in business or would you want to vote to break up Chrysler and get 15%. Just arbitrary #'s but that is pretty much the situation.

Or get 100% payout from taxpayer owned AIG?

places like AIG are given a whole different set of rules then American auto manufacturers. I'm still waiting for AIG's sustainability plan.

So if Chrysler goes belly up, AIG shells out cash to the CDS counterparties. Hence the incentives these hedge funds have to want to see Chrysler's bankruptcy are artificially inflated.

What's perverse about this is that because AIG is a charity case, the tax dollars of UAW members are being used to help create these distorted incentives.

She was just furious and named three of the big hedge funds that were holding out. She reminded them not to be greedy and to take the concessions like the workers have already done. Judging by the events that occurred overnight, they are still being greedy and the company will have to file for bankruptcy today. How incredibly sad.

The same people with the endless bag of money for Wall Street. :hi:

without debt reduction and an alliance with Fiat. I trust that the Obama administration has seen the inside of the financial aspects and we have not.

About 2 months ago was laid off ..

Now he's a salesperson at Chrysler , Dodge dealership
at a paycut ...

Hopefully all of this will work out and he can make a living
LOL selling cars again someday .

Extend the deadline (even if the government needs to loan a small amount of money).

Its the unreasonable deadline that will result in the bankruptcy, and will ultimately do serious damage to supporting industries and the workers involved.

that is the uncomfortable question,

:eyes:

If the Bush bailout policy continues all were going to end up with is a Japanese style zombie economy with British style deficits and nothing to show for it.

The announcement is tomorrow. It's bankruptcy.

:argh:

And the Media will send out the Propaganda Blitz as to how this proves the Recovery is here because "This is the worst it can possibly get, so things should be back to normal and full employment will occur within the next 72 hours."

All sarcasm aside, if this DOES actually happen, it will be devastating for the country and for the economy.

Like the OP, I hope it doesn't happen either.

The Banks and Wall Street will continue to voraciously loot, rob, and steal no matter WHAT happens to Chrysler, GM, or the Real Economy at large.

Main Street has suffered enough.

Its hit this little town Im in pretty hard.

I was born here. I'm going to die here if the city doesn't die first.
I took in $14K (adjusted) last year, and I'm doing better than probably 20 percent of the people here. I own my house, don't own (can't afford) a car and I still have it better than a lot of my neighbors.
Billions for Wall Street -- and the back of the hand for Detroit (and Saginaw and Flint and Pontiac, et al).
Of course, it doesn't go without notice that the folks in charge of the "economic bailout" include Tim Geithner (former head of the New York Fed) and Lawrence Summers (formerly of Goldman Sachs) -- the same people who helped get us into this mess.
And it sure doesn't escape attention that in order for Detroit to get any aid, GM and Chrysler have to cut even more jobs. Sure haven't seen any of that on Wall Street. But I'm seeing the effects here every day.
John
Wouldn't be the least surprised if Michigan goes Republican in 2012 -- and by a wide margin. Especially if Mitt Romney, son of the former CEO of American Motors and later Michigan governor George Romney (who was a pretty good governor at that, Republican though he was), comes and asks for our votes. Jennifer Granholm's been useless as nipples on a boar hog for six years now, so don't expect any (D) coattails.

Nobody else.

No business in the United States, or the rest of the world for that matter, would ever go bankrupt unless it's the will of the OBAMA ADMIN.

I guess they want nothing instead of something. Bankruptcy of a firm headed by private equity is fine by me.

They will get more if Chrysler is broken up and its profitable pieces sold off.

I don't know if it has any "profitable" pieces. Those probably would've been spun off already if it were possible.

Even AIG has some very profitable UNITS currently.

The government will keep propping them up. But the bond holders will get a bigger equity share in bankruptcy than they are being offered today. They are senior debt holders and the courts will back them up.

Complain about greed all you want, but if the bond holders get screwed in this deal look for credit to really dry up. Who is going to lend money if you don't think you'll get paid back in a fair manner?

Isn't that the form of bankruptcy where they keep operating to turn themselves around financially? Like several airlines have done? I think Chapter 7 is where total liquidation takes place. That's not what's happening here.

First it comes to Uncle Sam for a emergency loan in 1979/80. It claims that if it is allowed to go under, among other considerations, the US will lose one of four automakers and that would reduce "competition." We bail them out, then it promptly buys American Motors in 1987, thereby reducing the very "competition" it said it's projected demise of seven years earlier would usher in.

Then we hear about the practice of Chrysler managers disconnecting odometers in new vehicles so they could drive around for a few weeks in the new cars, then reconnect them and sell them as "new." It was originally touted as a "quality-control practice" :eyes:, but later Lee Iaccoca admits it was a dumb/stupid idea. But we American consumers still got the shaft.

Then we hear about the Daimler/Chrysler merger in 1998. The media touted this as a "win-win" situation: Chrysler would get Daimler technology and Daimler would benefit from Chrysler marketshare. I thought at the time Daimler was crazy to consider this. But now Daimler admits it was a mistake, and dumped Chrysler less than ten years later.

Now Chrysler wants to merge with Fiat. I say Fiat should tread cautiously before it hangs the Chrysler albatross around its neck.

Such mis-management has hurt auto workers. What was once an institution in American auto history has now turned into some pariah and unless its whole management culture improves, it will continue to be so.

Wonder if it will get sold?