Autoblog: Obama to announce Chrysler bankruptcy tomorrow

Spectre said:
Which begs the question - why did we just toss $30+ billion down the hole to save a $1.1 billion company?????
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Because we're an impulsive society that- ooo, shiney.
 
Spectre said:
why did we just toss $30+ billion down the hole to save a $1.1 billion company?????
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We didn't throw 30 bil at it despite the fact it's worth only 1.1 billion, a 30 bil investment was made because it's only worth 1.1 bil. The Obamanible Snowman wants to turn a worthless company into a worthwhile company.

Do I think it can happen? Sincerely doubtful, and that's putting it lightly.
 
Chrysler Bankruptcy Updates

Chrysler Bankruptcy Updates

Been busy with work and visiting my friend in the hospital this week, so I haven't been able to post up the updates on the Chrysler story. Here's a round up for everyone.



From the "So Much For A Quick Bankruptcy Like Obama Promised" department via the Wall Street Journal:

Chrysler's Salaried Retirees Hire Chicago Law Firm
Wall Street Journal ^ | May 4, 2009 | By Jeff Bennett

Posted on Mon May 4 16:56:21 2009 by Oldeconomybuyer

DETROIT (Dow Jones) Chrysler LLC's non-union salaried retirees will be represented by the Chicago law firm Stahl, Cowen, Crowley Addis LLC as the auto maker continues through the bankruptcy process. {snipped for brevity - you want to read the whole thing, go look for yourself}

"On one hand, in bankruptcy Chrysler will seek to cut off every liability that it can," National Chrysler Retirement Organization President Chuck Austin said in the statement. "On the other, the United Auto Worker-represented retirees have protection and government support that salaried retirees don't have. Our goal is to assure balanced and even treatment for all retirees."
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Yeah, that's not going to go well. Looks like they're going to volley lawsuits around like artillery shells in WW1.



From the "We told you that we'd never get that 'loan' money back'" department, via CNN:

Chrysler won't repay bailout money
An administration official confirms that a $4 billion bridge loan and $3.2 billion in bankruptcy financing won't be paid back by Chrysler following bankruptcy.


By Chris Isidore, CNNMoney.com senior writer
Last Updated: May 5, 2009: 7:01 PM ET


NEW YORK (CNNMoney.com) -- Chrysler LLC will not repay U.S. taxpayers more than $7 billion in bailout money it received earlier this year and as part of its bankruptcy filing.

This revelation was buried within Chrysler's bankruptcy filings last week and confirmed by the Obama administration Tuesday. The filings included a list of business assumptions from one of the company's key financial advisors in the bankruptcy case.

Some of the main assumptions listed by Robert Manzo of Capstone Advisory Group were that the Treasury would forgive a $4 billion bridge loan given to Chrysler in the closing days of the Bush administration, a $300 million fee on that loan, and the $3.2 billion in financing approved last week by the Obama administration to fund Chrysler's operations during bankruptcy.

An Obama administration official confirmed Tuesday that Chrysler won't be repaying the loans, though a portion of the bridge loan may be recovered by Treasury from the assets of Chrysler Financial, the former credit arm of the automaker which is essentially going out of business as part of the reorganization.
0:00 /2:06Chrysler then and now

"The reality now is that the face value [of the $4 billion bridge loan] will be written off in the bankruptcy process," said the official, who added that the 8% equity stake that Treasury will be receiving as part of the company's reorganization is meant to compensate taxpayers for the lost money.

"While we do not expect a recovery of these funds, we are comfortable that in the totality of the arrangement, the Treasury and the American taxpayer are being fairly compensated," said the official.

The company filed for bankruptcy Thursday as part of a deal with the federal government, unions, some lenders and Italian automaker Fiat to keep the company from being shut down.

The Canadian government also agreed to kick in about $900 million in bankruptcy financing. According to the filings, Chrysler's advisor assumes that this loan will be forgiven as well.

The Obama administration official said that other money being made available to Chrysler, such as the $4.7 billion that will go to the company as it exits bankruptcy, will be a loan that the government expects to be paid back. In addition, that loan will be secured by company assets, unlike the previous loans to Chrysler.

According to the filing, the company's financial advisor also foresees the need for an additional $1.5 billion loan from the Treasury Department by June 30, 2010.

Lori McTavish, a spokeswoman for Chrysler, said some of the assumptions made by the company have changed since its bankruptcy filing on April 30. But she could not say specifically if the company still hoped for the additional federal loan in 2010.

"The content of the document needs to speak for itself. We are simply not in a position to comment," she said.

Bob Corker, R-Tenn., who took the lead among Senate Republicans in challenging the auto bailout last December, said he was disappointed but not surprised that Chrysler would not be paying back the money.

"I've known for sometime that with the capital structure of the company and the situation it was in, we would not be paid back," he said. "There were several secured lenders ahead of us, and they're not getting most of their money."

Major banks and hedge funds that loaned Chrysler $6.9 billion were offered only $2.25 billion to settle those loans by Treasury. While major banks accepted the offer, hedge funds rejected it, forcing the company into bankruptcy.

Typically lenders who loan bankrupt companies funds to operate during reorganization go to the front of the line on getting the money they are owed repaid. But Corker said Chrysler's dire financial situation left it no chance to even pay back the bankruptcy financing.

He said the fact that Chrysler isn't paying what is owed should be a warning that the $15.4 billion loaned to General Motors by Treasury since December, as well as any bankruptcy financing it might need, is also at risk.

"Certainly there are red flags," he said.
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Hm... What do you call it when you loan someone money and then never get it back?

Also, that related poll at the CNN link is interesting, check out the results.



From the "Wow, that's really bad" department via the Financial Post:

Chrysler must restructure in 60 days or die, court hears

Nicolas Van Praet, Financial Post Published: Monday, May 04, 2009

Chrysler LLC warns it will die if it can't revamp its operations in bankruptcy court by July 1 because Canada and the United States won't fund the automaker if it lingers in creditor protection.

"The U.S. and Canadian governments have conditioned their financial commitment on the consummation of a deal with Fiat within 60 days, and are willing to provide debtor-in-possession financing for only that truncated period," lawyers for the Auburn Hills, Mich.-based Chrysler said in a court filing.

Chrysler filed for bankruptcy protection April 30 after failing to secure eleventh-hour agreements from a group of secured creditors to swap US$6.9-billion in debt for US$2.25-billion cash. Those creditors, led by Oppenheimer Funds, are now trying to block Chrysler's moves to restructure in bankruptcy court by selling itself to Italian automaker Fiat SpA. They argue the whole process, engineered by the U.S. government, is illegal.

Almost all of Chrysler's North American manufacturing factories are now shut down pending the outcome of the court case, taking place in lower Manhattan under Judge Arthur Gonzalez. The company has little revenue coming in other than the loans provided by the governments of the United States, Canada and Ontario.

Chrysler argued in court documents that its suppliers and dealers still have to be paid while the sale to Fiat is worked out.

"Even with the help of the U.S. and Canadian governments, the Debtors [Chrysler] can sustain that support for only a short period of time," Chrysler's legal counsel said in the filing. "When that period expires, so does Chrysler."

Some Canadian suppliers like Mahle Industries Ltd. in Tilbury, Ont. stopped shipping parts almost immediately to Chrysler plants in Ontario last week following its U.S. bankruptcy filing, according to an industry source. Canada's supplier trade group, the Automotive Parts Manufacturers' Association, is readying another push to ask Ottawa for bridge loans to help its more financially-troubled members survive.

Under a reorganization proposal hatched by the administration of U.S. President Barack Obama, Chrysler would sell its best assets to a new company owned 55% by the United Auto Workers union, 20% by Fiat, and 10% by the U.S. and Canadian governments. Fiat would ramp up its stake to 35% if it meets certain targets like building a new line of fuel-efficient Fiat engines in the United States.

Ottawa and Queen's Park are providing Chrysler a $1.45-billion loan specifically to get the automaker through a bankruptcy restructuring, part of a joint Canada-U.S. financing worth US$4.5-billion. The Canadian governments will offer Chrysler up to $1.12-billion more if it exits creditor protection. In all, they have pledged to loan the automaker $3.78-billion.

Chrysler employs roughly 9,400 people directly in Canada. It builds vehicles at two Ontario plants in Windsor and Brampton.

The automaker's bankruptcy may be a preview of what happens at General Motors Corp., which could also be forced into creditor protection by the end of May if it fails to cut debt and recast its future with a new viability plan. In many ways, Chrysler's court battle is GM-light - a more focused reorganization involving fewer players and a much smaller potential economic fallout.

"It's going to establish for the creditors what a bankruptcy judge is likely to do in the case of GM," said Chris Piper, associate professor of business at the University of Western Ontario. "That seems to be the big thing right now."

GM's Canadian arm said Monday it drew down $500-million of a short-term loan facility provided by the federal and Ontario governments to help pay suppliers and fund other normal operations. The aid is part of $3-billion in financing the two levels of government pledged to the company.
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Ouch.
 
Just for the record: I stand to my statement that despite all attempts Chrysler (and GM) will disappear anyway.
 
MacGuffin said:
Just for the record: I stand to my statement that despite all attempts Chrysler (and GM) will disappear anyway.
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Which begs the question (lol), what will take their place? A new American company? Ford expansion? Europe/Japanese takeover (they've already invaded)?

Possibilities, dudes! This is an exciting time!
 
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MacGuffin said:
Just for the record: I stand to my statement that despite all attempts Chrysler (and GM) will disappear anyway.
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I wouldn't bet against that - I would go further and say that all the attempts to "help" will end up doing the exact opposite; GM and Chrysler will either go poof or become government entities like Amtrak.
 
MadCat360 said:
Which begs the question (lol), what will take their place? A new American company? Ford expansion? Europe/Japanese takeover (they've already invaded)?

Possibilities, dudes! This is an exciting time!
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Ford will take up most of their market share as whoever was stupid enough to buy a GM/Chrysler product in the last few years did so cause he wanted to "buy american"! Maybe a new American company will be formed of one of the company's remains, but i guess it would be for a niece market, Corvette or Jeep come in mind here... maybe a mini GM will import whatever Opel and Holden, IF they survive, come up with.
The rest will go to the pseudo-japanese and pseudo-german carmakers (who all have factories in america, thus "pseudo") who dominate the market right now, anyways.
 
You know... when the US government now takes over at least 50 % of GM (according to the latest news), I will lay laughing on the ground, when they suddenly announce that they thought about it and do not want to sell Opel/Vauxhall anymore :lol:
 
MacGuffin said:
You know... when the US government now takes over at least 50 % of GM (according to the latest news), I will lay laughing on the ground, when they suddenly announce that they thought about it and do not want to sell Opel/Vauxhall anymore :lol:
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Supposing you read it on Spiegel online, too, the article is misleading and, on further examination, says that GM wants to be de facto nationalized. No word if the government goes along with it. I certainly hope they don't.

On not completely unrelated news, it looks like Magna, not Fiat, will buy Opel. Sounds good to me.
 
FATMOUSE said:
I hear knowing is half the battle.
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gijoe.jpg

That's right blanco nino. :D

MadCat360 said:
Possibilities, dudes! This is an exciting time!
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I've come around to that line of thinking. I can drown my representatives with letters bitching about how stupid the whole deal is, but nothing is going to change. Chrysler is going to implode from lawsuits and surviving that; UAW mismanagement. GM will probably go the same route, it will just be a slower, more painful, process. Which leaves Ford on top and that's OK because they were the only one of the three who actually showed some foresight. Exciting times indeed.
 
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Stupid question: Has Chapter 11 been filed by now? It's become awfully quiet around Chrysler at the moment.
 
MacGuffin said:
Stupid question: Has Chapter 11 been filed by now? It's become awfully quiet around Chrysler at the moment.
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Yes, they filed Chapter 11 in New York, not Michigan (which pissed off the Michigan government - f**k 'em.)
 
Spectre said:
Yes, they filed Chapter 11 in New York.
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There's some loophole in New York bankrupcy law, i forgot which (if no one here knows, i'll look it up tomorrow), but i'm quite sure that's the reason.
 
Dr_Grip said:
There's some loophole in New York bankrupcy law, i forgot which (if no one here knows, i'll look it up tomorrow), but i'm quite sure that's the reason.
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Actually... It's not being filed under state law. It's being filed in federal bankruptcy court.

The difference is that by filing there instead of in Michigan, Chrysler will most likely get assigned a less labor-friendly (read: not in the UAW's pocket) judge.
 
Spectre said:
Actually... It's not being filed under state law. It's being filed in federal bankruptcy court.

The difference is that by filing there instead of in Michigan, Chrysler will most likely get assigned a less labor-friendly (read: not in the UAW's pocket) judge.
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thx for clearing that up, makes sense to me.
 
How could there be a MORE friendly situation for labor?

A judge that would insist the US Government give VEBA the retirement funds they are owned in cash? Require a wage and benefit increase for UAW worker's post-bankruptcy?

When you have the President of the UAW, Barack Obama, making villains of everyone who objects to his plan to keep organized labor financially solvent while taking over a billion dollars from small investors, I would say that's a pretty favorable situation for labor.

Steve
 
Just thought of something... isn't it a bit conflict of interest for a union to be running the company who's workers it represents? :confused:
 
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