Chrysler to File for Bankruptcy

[Berkut]

And Berkut, I wonder how you believe liquidating the company and destroying 150,000 jobs plus suppliers trumps 40,000 in the dealership network, which is already proven to be glutted?

Say what?

[Hansmeister]

What struck me in particular is that when the airline companies went bankrupt (such as US Airways and United Airlines) the first thing they did is eliminate their retiree health care plans and dump their pension onto the federal pension insurance corp.  Crysler and GM are planning to morgage any possible future they have to finance these retirees, turning itself even moreso into a pension plan that happens to sell some cars.  Nor will the carmakers be able to raise money on the bond market because only a moron would lend money in ostensibly secured loans that can be turned into unsecured ones at the whim of the administration.

Indeed, I foresee that a ripple effect of this lawless act will be that all corporations with powerful unions will have a hard time raising cash from investors.

[JacobL]

If they dump the pensions and the US govt doesn't keep them roughly the same then the Government of Michigan will pretty much nearly collapse.  Atm the last reported official unemployment rate was 13.4% iirc and that is currently a couple months old.  As of today we could easily be over 15% and that is without all the auto job hits coming this summer.  Michigan already is at early depression unemployment levels and depending on how these bankruptcies go, even without pension hits we could hit peak depression type levels of unemployment. 

[Hansmeister]

If they dump the pensions and the US govt doesn't keep them roughly the same then the Government of Michigan will pretty much nearly collapse.  Atm the last reported official unemployment rate was 13.4% iirc and that is currently a couple months old.  As of today we could easily be over 15% and that is without all the auto job hits coming this summer.  Michigan already is at early depression unemployment levels and depending on how these bankruptcies go, even without pension hits we could hit peak depression type levels of unemployment.

I'm pretty sure that it would affect Florida much more than Michigan.  A couple of years ago when the airlines went broke the max the feds would pay out was $36,000 per year.  It is probably around $40,000 a year today.

[DontSayBanana]

And Berkut, I wonder how you believe liquidating the company and destroying 150,000 jobs plus suppliers trumps 40,000 in the dealership network, which is already proven to be glutted?

Say what?

You're advocating letting it die. Chapter 11 bankruptcy is called reorganization for a reason. For a company to successfully reorganize, it needs to show streamlining to prevent future cashflow crisis; regrettably, that means shaving some of the jobs to save the majority of them.

Dealerships are glutted. In just the three major cities in my county, which is the poorest in NJ, there were authorized new-car dealerships in 2005, for a population only slightly above the 100,000 mark, where the median income was only around $39,000 (average, one of the cities had a median income of $23k!). While there is a new car market, there is a huge oversaturation of dealerships- the market just can't support all of them.

[Zanza]

What struck me in particular is that when the airline companies went bankrupt (such as US Airways and United Airlines) the first thing they did is eliminate their retiree health care plans and dump their pension onto the federal pension insurance corp.  Crysler and GM are planning to morgage any possible future they have to finance these retirees, turning itself even moreso into a pension plan that happens to sell some cars.  Nor will the carmakers be able to raise money on the bond market because only a moron would lend money in ostensibly secured loans that can be turned into unsecured ones at the whim of the administration.

Indeed, I foresee that a ripple effect of this lawless act will be that all corporations with powerful unions will have a hard time raising cash from investors.

I don't get that either. Why would any reasonable person invest a single dollar into Chrysler now? 

[Berkut]

And Berkut, I wonder how you believe liquidating the company and destroying 150,000 jobs plus suppliers trumps 40,000 in the dealership network, which is already proven to be glutted?

Say what?

You're advocating letting it die. Chapter 11 bankruptcy is called reorganization for a reason. For a company to successfully reorganize, it needs to show streamlining to prevent future cashflow crisis; regrettably, that means shaving some of the jobs to save the majority of them.

Dealerships are glutted. In just the three major cities in my county, which is the poorest in NJ, there were authorized new-car dealerships in 2005, for a population only slightly above the 100,000 mark, where the median income was only around $39,000 (average, one of the cities had a median income of $23k!). While there is a new car market, there is a huge oversaturation of dealerships- the market just can't support all of them.

I could not care less about Chrysler dealerships. Really, I couldn't.

[Berkut]

What struck me in particular is that when the airline companies went bankrupt (such as US Airways and United Airlines) the first thing they did is eliminate their retiree health care plans and dump their pension onto the federal pension insurance corp.  Crysler and GM are planning to morgage any possible future they have to finance these retirees, turning itself even moreso into a pension plan that happens to sell some cars.  Nor will the carmakers be able to raise money on the bond market because only a moron would lend money in ostensibly secured loans that can be turned into unsecured ones at the whim of the administration.

Indeed, I foresee that a ripple effect of this lawless act will be that all corporations with powerful unions will have a hard time raising cash from investors.

I don't get that either. Why would any reasonable person invest a single dollar into Chrysler now? 

What do you mean?

Every taxpayer in America is investing many dollars in ChryslerUAW!

Obama is our stock broker.

[MadImmortalMan]

With the economy as bad as it is in Michigan I can give a 99.999999% guarantee they could fill all jobs here quickly and with qualified workers.

Yep. This is probably true.



For me, it's really the abrogation of moral responsibility I have a problem with. It doesn't really matter if giving the UAW control with the inferior claim would turn out to be the best decision ever made by anybody and we'd all go forward into solvent prosperity together as a result. The ends don't justify the means. It's not morally right to shaft the secureds in bankruptcy when they paid extra for that security for exactly this reason. It undermines the trust relationship. No, I'm not one of the secured bondholders. 

[KRonn]

Is this whole Chrysler change a joke, kind of? I mean, the govt and who ever else is trying to save it, but given what they're doing, I just can't get on board with it. UAW and government will appoint the leaders, I think it's nine board members they appoint? One for Canada, a couple for the corp, and most for UAW and govt. Then all the screwing out of money of the investors, vendors, creditors, while keeping UAW intact, though they have also made concessions. I don't know, the whole thing is wacky. And then, Chrysler has to be able to compete in the market place, better than they have been, which is part of their problem, along with onerous legacy costs.

[Hansmeister]

Is this whole Chrysler change a joke, kind of? I mean, the govt and who ever else is trying to save it, but given what they're doing, I just can't get on board with it. UAW and government will appoint the leaders, I think it's nine board members they appoint? One for Canada, a couple for the corp, and most for UAW and govt. Then all the screwing out of money of the investors, vendors, creditors, while keeping UAW intact, though they have also made concessions. I don't know, the whole thing is wacky. And then, Chrysler has to be able to compete in the market place, better than they have been, which is part of their problem, along with onerous legacy costs.

It all has turned into a bizarre freak show, such as when the gov't forced crysler to cut its ad budget in half.  Having political cronies making such minutae decisions for the company doesn't augur well.

Given this heavy-handed approach by Obama how will he be able to walk away from this disaster when it ultmately collapses?  He's invested far too much credibility on this monstrocity.

[dps]

And Berkut, I wonder how you believe liquidating the company and destroying 150,000 jobs plus suppliers trumps 40,000 in the dealership network, which is already proven to be glutted?

Say what?

You're advocating letting it die. Chapter 11 bankruptcy is called reorganization for a reason. For a company to successfully reorganize, it needs to show streamlining to prevent future cashflow crisis; regrettably, that means shaving some of the jobs to save the majority of them.

Dealerships are glutted. In just the three major cities in my county, which is the poorest in NJ, there were authorized new-car dealerships in 2005, for a population only slightly above the 100,000 mark, where the median income was only around $39,000 (average, one of the cities had a median income of $23k!). While there is a new car market, there is a huge oversaturation of dealerships- the market just can't support all of them.

And Berkut, I wonder how you believe liquidating the company and destroying 150,000 jobs plus suppliers trumps 40,000 in the dealership network, which is already proven to be glutted?

Say what?

You're advocating letting it die. Chapter 11 bankruptcy is called reorganization for a reason. For a company to successfully reorganize, it needs to show streamlining to prevent future cashflow crisis; regrettably, that means shaving some of the jobs to save the majority of them.

Dealerships are glutted. In just the three major cities in my county, which is the poorest in NJ, there were authorized new-car dealerships in 2005, for a population only slightly above the 100,000 mark, where the median income was only around $39,000 (average, one of the cities had a median income of $23k!). While there is a new car market, there is a huge oversaturation of dealerships- the market just can't support all of them.

I don't really see how shutting down dealerships is going to help Chrysler.  It may help the remaining Chrysler dealers, because they will each get some customers who would have otherwise bought from some of the defunct dealerships, but I just don't see how it will increase Chrysler's overall sales.

[Hansmeister]

It won't increase crysler's sales, but it will cut down on distribution costs.

[dps]

It won't increase crysler's sales, but it will cut down on distribution costs.

I don't think their distribution costs are that significant that it will make any difference.  I'll grant that I could be wrong about that.

[DontSayBanana]

I don't think their distribution costs are that significant that it will make any difference.  I'll grant that I could be wrong about that.

Actually, it would allow a larger stock of each vehicle to be allocated to the "healthy" dealerships. Also, people are looking at the relative health of their vehicle suppliers much more closely now, and perhaps misunderstanding what they're looking at; there is definitely more of a "bargain-hunting" effect showing up in vehicle purchasing at present, but with the contracts and financial obligations between Chrysler and the dealerships, people are sitting on their hands while waiting for the mythical "bargains" to appear.