Chrysler to File for Bankruptcy

[Berkut]

Please tell me you're not buying into the Democratic/Baldwin line that we would all be experiencing greater gas mileage if it weren't for the evol Detroit conspiracy.

I'm not. 

I am pretty sure that if Alex Baldwin is saying it, it is a bunch of horseshit, however...

I think we would have better gas mileage if Detroit was not run so badly overall. Mostly I attribute that to:

1. Unions
2. Lobbying and politicization of the industry.

But gas mileage is just one issue among many when it comes to shitty American cars.

[alfred russel]

Question for AR, Syt, or other accountancy-type peeps: with all of these loans being forgiven, I realize that goes away from accounts payable, but is it just a straight strike? In other words, don't all of these forgiven loans actually take away from Chrysler's value?

The value of a company is based on the net present value of its expected cash flows, it isn't strictly based on what the accountants say the book value is or what the accountants say earnings are. My guess would be that the loan forgiveness to Chrysler would have little impact on the value of the company because few would expect those loans to be repaid (in any event, the value of the company is zero, which we can surmise based on it recently going into bankruptcy).

From an accounting point of view, this may or may not impact the book value of Chrysler. It is true if this was a recorded payable for Chrysler, the forgiveness would increase the book value (elimination of a liability without surrendering an asset does that). However, there was an election that was made available recently under the accounting rules that allowed companies to fairly value their debt, which would mean that if Chrysler made the election this loan that was forgiven was probably valued at close to zero already (this is a paradoxical rule that lets a company recognize income as it goes bankrupt, as its liabilities become less and less as third parties realize they will not be repaid and the fair value falls). If Chrysler made the election, and I don't know if they did, the loan forgiveness wouldn't have much impact on their accounting records.

[The Minsky Moment]

On the other hand, it makes sense for Arabs to buy Chrysler.  Demand for oil would plunge through the floor if Chrysler ever stopped making cars.

Please tell me you're not buying into the Democratic/Baldwin line that we would all be experiencing greater gas mileage if it weren't for the evol Detroit conspiracy.

I don't know what line you are referring to but it is true that the Big 3 spent millions over the years lobbying against higher CAFE standards.

[Admiral Yi]

I don't know what line you are referring to but it is true that the Big 3 spent millions over the years lobbying against higher CAFE standards.

Which prevented Americans from buying more fuel efficient cars how?

[Valmy]

Which prevented Americans from buying more fuel efficient cars how?

It didn't.  We did buy more fuel efficient cars, foreign ones, and now the Big three are collapsing.

[Berkut]

Which prevented Americans from buying more fuel efficient cars how?

It didn't.  We did buy more fuel efficient cars, foreign ones, and now the Big three are collapsing.

Indeed.

[Ed Anger]

I'm going to go looking at a dealership that is going down today. I hear there is some bargains out there.

[Savonarola]

I'm going to go looking at a dealership that is going down today. I hear there is some bargains out there.

Maybe you should wait...

Senators press Chrysler to alter dealer closings
By JUSTIN HYDE • FREE PRESS WASHINGTON STAFF WRITER • May 21, 2009

Read Comments(3)Recommend(3)Print E-mail this article Letter to editor Share Facebook
Opposition grew in the U.S. Senate today to Chrysler LLC's plan to shutter 789 dealerships in just under three weeks, with lawmakers calling on Chrysler and the Obama administration to change the terms dictated by the automaker.

An amendment from Sen. Kay Bailey Hutchison, R-Texas, that would block federal aid for Chrysler or General Motors if they didn't give dealers at least 60 days notice before closing had garnered 20 cosponsors, including a number of key Democrats. Hutchison said she had been in talks with the White House and Chrysler Chairman Robert Nardelli on modifications to Chrysler's plans.


"I have not seen a progress report that we (could) come back to the floor and say we will get some help for these dealers," Hutchison said.


It wasn't clear this afternoon whether Hutchison could get a vote on her amendment to a spending bill.


The amendment reflects growing concern in Congress about the painful compromises laid out by the Obama administration's auto task force as part of its rescues of Chrysler and General Motors Corp. The administration also faced questions today over its treatment of GM bondholders, whose $27 billion in GM debt would be swapped for 10% of a reworked GM under the government's plan.


Chrysler has said it would reject the 789 dealership contracts as part of its plan to transfer the remaining dealer contracts to a Chrysler-Fiat partnership before the end of June. The rejected dealers have until June 9 to wind down their businesses, after which they will have no rights to sell new vehicles, parts or perform warranty repairs.


Because of its bankruptcy, Chrysler said it could not buy back the vehicles or parts at the affected dealerships. Dealers would either have to find buyers among surviving dealers or liquidate their inventory in a fire sale.


Under state laws, dealers have several ways to fight an automaker if it wants to end their contract, but bankruptcy law typically gives companies broad power to reject any contract.


Hutchison said Chrysler should either make arrangements to buy back inventory or extend the deadline for the dealers to wind down. Such changes would have to be made in Chrysler's bankruptcy case, where U.S. Judge Arthur Gonzalez has yet to approve the plan.


GM has told 1,100 dealers that it would end its contracts by October 2010. Yet its unclear how GM's efforts might change should the company file for bankruptcy and pursue the same kind of quick sale of assets to a "new" entity, a strategy it says it will use if it does not win concessions from bondholders over the next several days.

The National Automobile Dealer Association said the combined cuts would eliminate nearly 100,000 jobs. It said it was asking the Obama administration and automakers "to ensure that these dealerships and the people who work there have enough time to properly close their businesses and find new jobs."

[Berkut]

Lovely, maybe Congress could just replace the Chrysler BoD with a committee.

This is what plenty of us said back when the entire idea of pumping money into the Big Three came up. We are going to end up with Congress second guessing every decision, and really, does ANYONE think they know what is best for a business?

[MadImmortalMan]

Uh-oh. Not so fast:

Funds move to halt Chrysler restructuring

By Bernard Simon in Toronto and Nicole Bullock in New York

Published: May 20 2009 20:39 | Last updated: May 20 2009 23:11

Three of Chrysler's secured creditors are mounting a fresh attempt to thwart the carmaker's Chapter 11 reorganisation on the grounds that it violates their legal rights and the US government's authority under the Troubled asset relief programme.

The three – all Indiana state pension funds – are among a group of 46 creditors that had appeared to back away this month from efforts to derail the process under which a "new" Chrysler would emerge from bankruptcy protection by July 1. The new entity would be owned by a union healthcare trust, the US government and Italy's Fiat.

Chrysler, with backing from the US Treasury, had offered its secured creditors just under 30 cents on the dollar to settle claims totalling $6.9bn. Four big banks, holding the bulk of the claims, accepted the offer following political pressure from Washington.

However, the Indiana State Teachers' Retirement Fund said on Wednesday that it had a fiduciary responsibility to its members to continue the fight. The fund stands to lose $4.6m under the current settlement proposal and has teamed up with Richard Mourdock, Indiana state treasurer, to try to recover those losses.

The latest objections could galvanise other lenders to renew their challenge. "I fully support their motion and believe a number of lenders (including us) will ultimately join their group," said George Schultze of Schultze Asset Management, one of the creditors that had abandoned an earlier legal fight.

In a court filing on Wednesday, the Indiana funds accused the government of adopting a strategy of "the ends justify the means".

They also said the Treasury "has taken constructive possession of Chrysler and is requiring it to adopt a sale plan in bankruptcy that violates the most fundamental principles of creditor rights – that first-tier secured creditors have absolute priority".

The Indiana funds say the current plan will strip their collateral into the new company, benefiting more junior creditors. The funds also allege that Tarp funds were meant to be funnelled only to financial institutions.

"Whatever powers the Treasury department may have under Tarp," the funds said, "it does not have the power to control the entire restructuring of a company to the detriment of the company's secured creditors and for the benefit of other interest groups so that certain broader policy and political objectives may be achieved."

A US bankruptcy judge on Wednesday denied their attempt to halt proceedings in bankruptcy court, but a district court needs to rule on the funds' request for the case to be heard in district court instead.

The group also can oppose the final sale agreement, which under the current timeline must be approved by May 27.

[Savonarola]

Obama auto bailout draws fire
Dozens of lawmakers fear impact on dealers, workers, lenders
Gordon Trowbridge and Deb Price / Detroit News Washington Bureau
Washington -- Members of Congress, who left GM and Chrysler on the brink of collapse five months ago, sought Friday to take control of the auto bailout, with dozens of lawmakers pressing claims for dealers, workers and lenders.

The complaints came from the political left and the right in a series of indignant press conferences and letters to administration officials: Rep. Dennis Kucinich, D-Ohio, one of Congress's most liberal members, compared the Obama's auto rescue to smothering a hospital patient with a pillow.

And Rep. Jeb Hensarling, R-Texas, a staunch conservative, wrote Treasury Secretary Tim Geithner accusing the administration of waging "a war on capital" in seeking concessions from lenders.

Another letter, signed by Kucinich and fellow Ohio Rep. Steve LaTourette, Michigan Reps. John Conyers and Thad McCotter, and others called for the administration to hand authority over the bailout back to Congress, repeating the 1979 Chrysler bailout, which came in the form of congressional legislation.

The sudden Capitol Hill interest came months after the previous Congress, largely on party lines, rejected pleas for aid from General Motors Corp. and Chrysler LLC -- to the dismay of some Michigan lawmakers.

"It was my hope that some of my colleagues would have gotten involved a long time ago," said Rep. Gary Peters, D-Bloomfield Township. "Some of my colleagues from around the country are realizing the auto industry is not just about the Midwest or Michigan."

McCotter, R-Livonia, accused his fellow GOP leaders of "selective sympathy" for GM lenders.

There were few signs the White House was altering its course, which already has put Chrysler into Chapter 11 bankruptcy protection and is all but certain to do the same with GM -- whose CEO it pushed out -- by early June.

The rush of activity before Congress's Memorial Day recess came as GM announced a crucial agreement with the Canadian Auto Workers to restructure wages and benefits, and amid published reports that a group of GM bondholders has decided to reject a bond exchange offer from the company designed as a last-gasp effort to avoid a bankruptcy filing.

A source familiar with the bondholders' discussions denied the bondholder reports. Still, it seemed highly likely that GM would not get the 90 percent approval that CEO Fritz Henderson has said the company needs to stay out of court.

Meanwhile, Ford Motor Co., the sole Detroit automaker not receiving federal aid, extended a buyout offer to hourly workers that was to have expired Friday. Workers now have until June 26 to consider an offer worth up to $75,000.

'Selective sympathy'
Conyers, D-Detroit, and other members of the Congressional Black Caucus, as well as Cleveland-area Reps. Kucinich and LaTourette, met with Obama auto task force adviser Brian Deese and others Friday, a day after the House Judiciary Committee that Conyers chairs suggested the administration has treated consumers and minority dealers unfairly.

After the meeting, LaTourette told The Detroit News that White House officials promised more consultations. "They said they were going to get back to us," he said.

It was unlikely the White House would accede to his request for the auto task force to end its dominant role in the companies' restructuring: White House spokeswoman Amy Brundage said the task force "will continue to work with all stakeholders."

In the Senate, Sen. Jay Rockefeller, D-W.Va., chair of the Finance Committee, and ranking Republican Sen. Kay Bailey Hutchison of Texas said they would summon GM and Chrysler officials to testify next month on the plan to cut nearly 2,000 dealers, which the lawmakers said unfairly left small businesses nationwide in peril.

Hutchison was among 35 Senate Republicans who in December blocked consideration of a bill that included aid to keep Chrysler and GM solvent. Days later, the Bush administration stepped in with temporary loans to stave off possible liquidation of both.

Other Republicans focused on GM bondholders, who have been offered just 10 percent of a rebuilt GM in exchange for more than $27 billion in debt, while a United Auto Workers fund for retiree health care gets a larger share.

"Contractual rights of investors are being trampled by the government," said a letter from Reps. Hensarling, Eric Cantor of Virginia and Mike Pence of Indiana, as well as other conservatives.

That set off an angry written statement from McCotter, normally those lawmakers' ally.

"The selective sympathy ... would be more compelling if they had expressed similar concerns for the auto workers' and retirees' who invested their lives in earning benefits from a health care fund that is owed $20 billion by GM," McCotter said.

But Sen. Carl Levin, D-Detroit, was less upset by his colleagues' 11th-hour interest.

"People have a right to complain and to hold hearings," Levin said.

All eyes turn to bondholders
The deal between GM and its Canadian Auto Workers union clears an important hurdle for the governments of Canada and Ontario to aid GM's restructuring. The governments could provide up to $8.5 billion in assistance to GM. On Thursday, GM reached a concessions agreement with the United Auto Workers union, whose members will vote next week on whether to approve it.

That turns attention to the bondholders, who face a 11:59 p.m. Tuesday deadline to approve GM's exchange offer.

I'm glad Dennis Kucinich returned from Jupiter to share the wisdom of the elders of his race.   

Congressional hearings, on the other hand, are

It's disappointing that the wise guardians of the poor in Congress didn't understand that the automotive bankruptcies would impact the entire nation until dealerships closed down.

[Savonarola]

Chrysler bankruptcy defies the experts
Lawyers ask judge to close deal as early as Thursday
BY GREG GARDNER • FREE PRESS BUSINESS WRITER • June 2, 2009

Chrysler's bullet-train ride through bankruptcy defied experts and frustrated dealers, suppliers and creditors, but demonstrated that a powerful government and an impatient buyer can achieve radical change quickly.

Despite an appeal by three Indiana pension funds, lawyers for Chrysler and Fiat have asked U.S. Bankruptcy Judge Arthur Gonzalez to close the transaction as early as Thursday. Gonzalez concluded his 47-page opinion by saying, "The sale motion is granted in its entirety."

"What happens next is in the hands of their executives, managers and workers," President Barack Obama said Monday. "What the completion of this alliance means is that tens of thousands of jobs that would have been lost if Chrysler had liquidated will now be saved."

But the pain is far from over. Chrysler has eliminated tens of thousands of jobs over the last two years. And eight factories, including three in the Detroit area, are to be closed or sold.

If Gonzalez approves Chrysler's new dealer network later this week, 789 dealers likely will lose their Chrysler, Jeep or Dodge franchises, potentially putting another 40,000 dealership employees out of work.

"I will not pretend the hard times are over," Obama said. "More jobs will be lost."

Then, there is the staggering investment of taxpayer money. At closing, the U.S. Treasury will pay $2 billion to about 45 banks, investment and pension funds that are writing off $6.9 billion in loans. Already, taxpayers have given Chrysler $8.9 billion. Another $4 billion will be paid as it exits bankruptcy. At least $4 billion of that money will not be repaid.

"In the current economic climate, the only alternative would be an immediate liquidation, which the evidence has shown would not bring a higher return to creditors," Gonzalez wrote in his opinion.

Throughout three days of testimony last week, Chrysler's leaders described their fruitless efforts for 18 months to reach partnerships with Nissan, Chery Automobile of China, General Motors Corp. and Fiat.

"The fact is no one was willing to give us a penny," said retired Vice Chairman Tom LaSorda.

LaSorda and Chrysler Chairman and Chief Executive Officer Bob Nardelli also pushed hard for Chrysler to remain an independent company with government support. But Steven Rattner and Ron Bloom, the leaders of Obama's auto task force, refused to invest taxpayer money in that plan.

It was either to be an alliance with Fiat or liquidation. And Fiat was threatening to walk away if the deal was not done by June 15.

"Accompanying that risk is the lender's ability to dictate many of the key terms," Gonzalez wrote. "The hard-fought 'take it or leave it' approach is troubling to some, but such is the harsh reality of the marketplace."

Not all of Chrysler moves to the new company. Eight factories, including the Sterling Heights (Chrysler Sebring and Dodge Avenger) and Conner Avenue (Viper) assembly plants, and Detroit Axle, are to be sold or closed. Proceeds from such sales are to go to repay some of the $4.9 billion in taxpayer assistance Chrysler has received since its April 30 bankruptcy filing.

Fiat will be protected from any product liability lawsuits arising from claims of flaws in Chrysler vehicles sold before the sale's closing later this month. Anyone filing such lawsuits will be able to recover only from the limited assets of the old company.

Fiat did agree to assume responsibility for workers compensation insurance in any states where the new company has operations, such as Michigan, Indiana, Ohio and Illinois.

"The new company will be a vibrant and competitive auto company," Nardelli said.

He will leave Chrysler when the sale closes and go back to work for Cerberus Capital Management, the private equity fund that hired him to run Chrysler in August 2007.

"It will begin operations with significant strategic advantages, including a wage and benefit structure for active and retired employees that is competitive with those of transplant" (Toyota, Honda, Nissan) manufacturers, Nardelli said.

[Savonarola]

Obama lawyer: Chrysler-Fiat must be allowed
U.S. solicitor general asks Supreme Court to ignore appeal of Chrysler bankruptcy made by Indiana pension fund.
Chrysler shuttered 789 dealerships nationwide. Now these dealers and their employees are recovering from the shock and looking to the future.

NEW YORK (CNNMoney.com) – A top Obama administration lawyer urged the Supreme Court on Monday to allow Chrysler's bankruptcy to proceed, noting that the needs of the economy outweigh the needs of the deal's detractors.

U.S. Solicitor General Elena Kagan filed a request that the court deny an appeal by Indiana pension funds that had invested in Chrysler and say they will lose $6 million because of the bankruptcy.

Indiana Treasurer Richard Mourdock argues that the Chrysler case upends long-standing bankruptcy law. He also says President Obama has overstepped his authority by using funds from the $700 billion TARP bailout, originally enacted to rescue the financial sector, for an automaker bailout.

Kagan defended the use of funds from the Troubled Asset Relief Program and argued that Indiana's appeal lacks legal merit. In addition, she said the losses to the Indiana funds "cannot outweigh" the potential broader problems a collapse of Chrysler would present.

"As an economic matter ... blocking the transaction would undoubtedly have grave consequences," Kagan wrote.

This is the last opportunity for Mourdock to stall Chrysler's bankruptcy process, following his unsuccessful appeal to the U.S. Courts of Appeals for the 2nd Circuit.

Mourdock filed his appeal on behalf of three Indiana pension funds, representing state police and teachers as well as a "Major Moves" construction fund.

The U.S. Supreme Court has until 4 p.m. ET on Monday to either listen to Mourdock's appeal, or ignore it, allowing Chrysler to proceed with its bankruptcy process.

The Indiana funds represent $42 million of Chrysler's $6.9 billion debt, which the automaker is trying to unload through the Chapter 11 process. Mourdock has told CNNMoney.com that it's his duty as state treasurer to oppose Chrysler's bankruptcy, because some $6 million worth of pension funds would get wiped out in the deal.

Chrysler, which filed for Chapter 11 on April 30, is trying get approval to transfer its best-performing assets, such as factories and dealership contracts, to a new company called Chrysler Group, partnering with the Italian automaker Fiat.

Fiat would own 20% of Chrysler Group initially, though this share could eventually increase. The biggest share of 55% would be controlled by a United Auto Workers union trust. A minority stake of 8% would go to the U.S. government, and 2% would be held by the federal and provincial governments of Canada and Ontario.

Fiat has until June 15 to change its mind on the deal. After that date, Fiat is locked in.

Chrysler's asset transfer was approved just hours before the bankruptcy filing of General Motors (GMGMQ) on June 1. The Chrysler bankruptcy process is being closely watched by investors, to see how it might impact GM.

The recession has dried up consumer demand, pushing Chrysler and GM to the edge of survival. Rising fuel prices, job losses and the bank industry's temporary hiatus from offering car loans have all contributed to the decline of the Detroit-based auto industry.

President Obama pushed Chrysler and GM toward bankruptcy, after the auto makers failed to satisfy his expectations for an industry overhaul. Obama has requested that the Chapter 11 process be completed within 30 to 60 days.

I had no idea the solicitor general was a Vulcan.  I would have thought that would have come up at her confirmation hearing.

[Savonarola]

High court temporarily blocks Chrysler sale to Fiat
By JUSTIN HYDE AND GREG GARDNER • FREE PRESS BUSINESS WRITERS • June 8, 2009

WASHINGTON – The U.S. Supreme Court today temporarily blocked the sale of Chrysler LLC's assets to a new partnership with Fiat SpA, the first unexpected delay in the automaker's bankruptcy stage-managed by the Obama administration.

The one-page order by Supreme Court Justice Ruth Bader Ginsburg stopped the sale "pending further order" by her or the full court, based on an appeal by three Indiana pension funds holding $45 million in Chrysler's secured loans. Ginsburg gave no time frame for when those next orders might arrive.

The delay came just ahead of a deadline for the deal to move ahead set by the Second Circuit Court of Appeals, which had ruled against the pension funds but given them time to pursue their case with the Supreme Court.


Ginsburg could still lift the stay and let the sale proceed at any moment, or attempt to have the case heard by the full court, a step that could delay the transaction for months. Four other justices would have to agree with Ginsburg to force a hearing by the full court.


Chrysler and Fiat had said the deal could close as soon as they prevailed over the appeals. Chrysler and the Obama administration did not immediately return calls seeking comment.


The pension funds maintain that Chrysler should have sold itself off in pieces because that would have been better for secured lenders. They also contended that the government wrongly used money from the $700 billion financial industry bailout to rescue Chrysler.


The U.S. government filed a brief with Ginsburg today, arguing that Chrysler held little value absent the Fiat deal, and that the Indiana pension plans had no standing to object to the deal or to the government's $8 billion injection into the new Chrysler-Fiat.


Early Sunday morning, lawyers for a group of citizens with product liability claims against Chrysler filed a brief with Ginsburg that supports the Indiana pensioners' case. Under terms of the sale, the new company, led by Fiat, would face no risk from product liability lawsuits filed against Chrysler related to vehicles produced or sold until the day the sale closes.


Rep. Gary Peters, D-Bloomfield Township, said the state of Indiana was risking losses far greater than its investment in Chrysler's loans should the company be forced to liquidate.


"Other stakeholders, including other secured lenders and Chrysler's autoworkers, accepted shared sacrifice because they recognized their interest was better served keeping Chrysler alive rather than forcing liquidation," Peters said in a statement. "Why the officials who decided to take their objections all the way to the Supreme Court can't recognize this is beyond me."

[Neil]

I just find it interesting that the official position of the Obama administration is that the process of law can be put aside if it relates to the economy.  America gets what it deserves for electing a black guy.  Their very own Mugabe.

Obama is using 'the economy' the way Bush used 'terror'.