Chrysler to File for Bankruptcy

[Ed Anger]

Fiat's CEO is a Canuck.

Even worse.

[Zanza]

I wonder why anybody would ever want to invest money in a company where 55% of the equity is held by one shareholder who probably doesn't have profitability as his highest goal.

[Hansmeister]

I wonder why anybody would ever want to invest money in a company where 55% of the equity is held by one shareholder who probably doesn't have profitability as his highest goal.

Well, Fiat won't actually have to pay any money for their share of the company, so they can walk away at any time with no risk.

[Barrister]

I wonder why anybody would ever want to invest money in a company where 55% of the equity is held by one shareholder who probably doesn't have profitability as his highest goal.

Well, Fiat won't actually have to pay any money for their share of the company, so they can walk away at any time with no risk.

You sure about that?

I know Fiat doesn't have  to put any money on the table, but once they assume ownership they can't just walk away.  Ask Daimler how hard it was to get rid of Chrysler...

[Hansmeister]

I wonder why anybody would ever want to invest money in a company where 55% of the equity is held by one shareholder who probably doesn't have profitability as his highest goal.

Well, Fiat won't actually have to pay any money for their share of the company, so they can walk away at any time with no risk.

You sure about that?

I know Fiat doesn't have  to put any money on the table, but once they assume ownership they can't just walk away.  Ask Daimler how hard it was to get rid of Chrysler...

D-B owned Crysler outright, which is a big difference versus only being a minority shareholder.  And of course D-B didn't get Crysler for free, so they had to write off a massive loss. 

[DGuller]

Still, you'd think that D-B would be used to writing off massive losses.

[Zanza]

You sure about that?

I know Fiat doesn't have  to put any money on the table, but once they assume ownership they can't just walk away.  Ask Daimler how hard it was to get rid of Chrysler...

Easy. Just pay someone a couple of billions so they take it. 

[Savonarola]

I'll give Barack credit; his demagoguery gets results:

Chrysler creditors claim death threats, win hearing delay
David Shepardson / Detroit News Washington Bureau
New York -- Creditors objecting to Chrysler LLC's efforts to speed the company's move through bankruptcy won a delay in a key hearing today, and a lawyer said some had received death threats.

The major proposal on tap for today was winning approval of the company's plan to establish bidding procedures -- in an effort to quickly allow the "good" assets of Chrysler to be auctioned off so the company can quickly emerge from bankruptcy.

But Chrysler filed that request on Saturday -- not Friday -- so U.S. Bankruptcy Judge Arthur Gonzales agreed to delay that hearing until 2:30 p.m. on Tuesday.

The U.S. Treasury and Canadian government have agreed to loan Chrysler $10.5 billion to restructure and complete a tie-up with Italian automaker Fiat SpA -- after the Auburn Hills automaker sought court protection on Thursday.

A lawyer for the objecting creditors, Thomas Lauria, told Gonzales that some creditors had received death threats -- and those had been referred to the FBI and local police. Lauria wants court permission to keep the identities of some of those creditors secret.

The biggest obstacle Chrysler faces to a quick exit from bankruptcy is the objections of secured creditors, who hold roughly 10 percent -- or $700 million of its $6.9 billion in first-lien debt.

The Treasury Department convinced the four major banks holding 70 percent of Chrysler's secured debt to accept $2 billion in cash for the $6.9 billion.

The creditors filed their first objections today to some of Chrysler's preliminary requests.

First on the witness stand was Robert Manzo, an outside financial consultant to Chrysler, who has written the company's bankruptcy budget.

Manzo, of Capstone Financial Group, disclosed today that the Treasury Department required all of Chrysler's salaried employees to take a two-week unpaid furlough over the planned nine-week stay in bankruptcy -- a move that would reduce salaried workforce pay by 25 percent and save the automaker $21 million.

Manzo also said the U.S. government and Canadian governments are not charging the company interest on its $4.5 billion debtor in possession financing.

He also said there was a "low probability" that Chrysler would be able to repay that loan. That means the U.S. Treasury could end up losing as much as $8 billion in loans issued to Chrysler -- including the $4 billion loaned in January.

But Fiat would have to repay the $6 billion in loans made after the company emerges -- a practice known as exit financing -- before it could take a majority stake in Chrysler.

Under the terms of Chrysler's reorganization effort, it plans to use Section 363(b) of the bankruptcy code to quickly sell the "good" assets of the automaker into a new company, leaving behind bad assets including eight plants and a chunk of the company's dealer network.

"The survival of Chrysler's business is at stake in these proceedings, as is the fate of hundreds of suppliers and thousands of Chrysler dealers around the country," Chrysler's lead bankruptcy attorney, Corinne Ball, said in a court filing Sunday. "Absent immediate action, (Chrysler) will lose the only opportunity available to them to preserve their business as a going concern and to avoid the economic devastation that will occur if Chrysler's business, and Chrysler's suppliers and dealers, are forced to shut down."

In court papers late Sunday, Chrysler disclosed it has boosted its estimate of its legal and professional fees. Last week, it said it expected to spend $20 million a month. Now, a new forecast by a financial advisor says its first month's legal and other fees will total at least $30 million.

Chrysler assumes none of its dealers will order new vehicles for at least four weeks, and that it won't pay any dealers. It plans to cut incentive payments by 25 percent in May and 50 percent from June 1 through July 5.

Chrysler plans to "only pay incentives to those dealers that they believe will have value to the acquiring company."

From this article it looks like Fiat will have to put up $6 Billion to assume majority ownership.

[Neil]

I'll give Barack credit; his demagoguery gets results:

Of course.  It's his thugs who are issuing the threats.

[DontSayBanana]

Of course.  It's his thugs who are issuing the threats.

Uh-huh. And now, not only are they not required to disclose CDS ownership, they're gunning for keeping their identity sealed, making it even harder to point out potential conflicts of interest.

[The Brain]

Unprofitable At Any Speed

[DGuller]

Unprofitable At Any Speed

[alfred russel]

Of course.  It's his thugs who are issuing the threats.

Uh-huh. And now, not only are they not required to disclose CDS ownership, they're gunning for keeping their identity sealed, making it even harder to point out potential conflicts of interest.

If a private investor has insured his debt and doesn't want to reveal that, all the identification in the world isn't going to reveal a conflict of interest.

[DontSayBanana]

If a private investor has insured his debt and doesn't want to reveal that, all the identification in the world isn't going to reveal a conflict of interest.

*sigh* Sadly true. I realize there's a certain amount of expedience to be desired from a bankruptcy, but the lack of disclosure required of the creditors really is pathetic. The votes must be in good faith, but with so little room for disclosure, how do you prove that the votes aren't being made in good faith?

[alfred russel]

If a private investor has insured his debt and doesn't want to reveal that, all the identification in the world isn't going to reveal a conflict of interest.

*sigh* Sadly true. I realize there's a certain amount of expedience to be desired from a bankruptcy, but the lack of disclosure required of the creditors really is pathetic. The votes must be in good faith, but with so little room for disclosure, how do you prove that the votes aren't being made in good faith?

It's a dog eat dog world. The debt agreements Chrysler extended to the creditors were likely inch thick documents filled with terms and conditions for Chrysler to follow and a list of nasty things if they didn't. When Chrysler asked for the money, it knew that most of the creditors weren't interested in anything other than making a buck, and they would break the company if they could get a few more pennies for it.