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QuoteChrysler to file for bankruptcy
Backed by $3.5 billion more in aid, Chrysler-Fiat to emerge in 30-60 days
By Justin Hyde and Greg Gardner • Free Press Business Writers • April 30, 2009

WASHINGTON – President Barack Obama said today that Chrysler LLC will file a historic bankruptcy shortly, backed by up to $3.5 billion in new government aid designed to allow a Chrysler-Fiat partnership to emerge from court in 30 to 60 days.

The move also sends a strong signal to bondholders at General Motors Corp. that the Obama auto task force will act on its vow to take GM into a similar bankruptcy if they do not agree to swap their GM debt for shares in a reworked GM.

"The necessary steps have been taken to give one of America's most storied companies a new lease on life," Obama said.

Under Chrysler's bankruptcy, to be filed in New York in a matter of hours, the two automakers along with the UAW, Fiat and a majority of lenders will ask a judge to force a swap of $6.9 billion in debt for $2 billion in cash. The number of Chrysler dealers, now about 3,200, will be reduced through bankruptcy, but the administration officials did not say how many would be eliminated.

The agreement with Fiat will allow the Italian company to take a 20% stake in Chrysler that will grow as Fiat meets certain milestones, such as building new models in Chrysler plants. In addition to the $3.5 billion in financing to keep Chrysler operating while in bankruptcy, the government will also provide up to $4.7 billion for the new Chrysler once it emerges.

The Obama administration will also give additional aid to GMAC so that it can take over lending to Chrysler's customers and dealers from Chrysler Financial, which the government has deemed not viable. And the Canadian government will also provide new financial aid to Chrysler's operations in that country in return for 2 per cent in the new Chrysler.

The administration portrays its "surgical" bankruptcy of one of Detroit's major automakers as just a legal chore, rather than the threat to Chrysler's existence and the entire U.S. auto industry that Chrysler itself had described less than three months ago. Administration officials said Chrysler would operate as usual during bankruptcy, and that no additional job cuts were anticipated as of now.

The government will take a stake in the company and have a say in helping Chrysler and Fiat select a new board of directors. Chrysler Chief Executive Robert Nardelli has said he would step down after the partnership was cemented.

The decision to take Chrysler into bankruptcy came after three lenders -- Oppenheimer Funds, Perella Weinberg Partners, and Stairway Capital – balked at the original $2-billion offer, as well as an increase of $250 million from Treasury on Wednesday evening. The White House and Michigan's congressional delegation pressed the holdouts to agree by 6 p.m. Wednesday, but no deal was reached.

"A group of investment firms and hedge funds chose not to make sacrifices. In fact they wanted to qualify for an injustified government bailout," Obama said. "Some demanded twice the return other investors would have received."

The lack of an agreement will not "impede the new opportunity Chrysler now has to restructure and emerge stronger going forward," the official said.

The U.S. Treasury had guaranteed the warranties of Chrysler and General Motors Corp. in part to assuage worries of customers who might think twice before buying from a bankrupt automaker. GM has a June 1 deadline to reach its own debt agreement or go through a similar move.

President Obama said Wednesday that "even if they (Chrysler) ended up having to go through some sort of bankruptcy, it would be a very quick type of bankruptcy and they could continue operating and emerge on the other side in a much stronger position."

The UAW late Wednesday night overwhelmingly ratified cost-cutting changes in its labor contract that freeze wages for Chrysler's 26,000 U.S. hourly workers and slash more than $5 billion from what Chrysler was to pay into a retiree health care trust next year. That trust would own 55% of the new Chrysler, while Fiat would start with a 20% stake and the government would own another large portion.

Fiat will ratify its agreement with Chrysler today to share technology and engineering resources Chrysler and the UAW have valued at $8 billion to $10 billion.

The Obama auto task force had been pressing for GMAC LLC to step into the role held by Chrysler Financial. It was not immediately clear how much additional aid or regulatory help GMAC would receive for taking on the role, nor what would happen to Chrysler Financial.

Another lingering question: whether Fiat would sell vehicles under its own brands through Chrysler, even as the government pressed GM to cull its brands due to shrinking U.S. market share.

An administration official said the case would be filed in New York because the bankruptcy court there has extensive experience with large cases, including those of Delphi Corp. and Northwest Airlines.

Quote from: Barrister on April 30, 2009, 01:26:06 PM
There is no way in hell Chrysler will emerge from bankruptcy.

QuoteBehind the Chrysler bankruptcy
By: Michael Barone

04/30/09 12:33 PM
Chrysler is going into Chapter 11 bankruptcy, despite the Obama administration's efforts to keep it out.

The problem was that a group of small bondholders rejected the deal that car czar Steven Rattner and his deputy (and it seems the real dealmaker) Ron Bloom.

The bondholders made a good point. They are secured creditors, and in our bankruptcy law secured creditors get paid off in full before unsecured creditors get anything. That's a sound legal principle: why would secured creditors lend anyone anything unless they can get their security back if the loan isn't paid off? In this case, the small bondholders were willing to settle for only 60% of what they were owed. But, they complain, the government wouldn't negotiate directly with them, but only through JPMorganChase, which (unwillingly) took TARP money on October 13 and thus is under pressure to do what the government wants.

Translation into politispeak: The government squeezed the small bondholders too hard in order to protect the United Auto Workers, which of course has over the years been a bounteous source of money (and manpower) for the Democratic party. The government can muscle the big banks, but it can't (at least not yet) muscle creditors whom it hasn't forced to take its money.

Quote from: Hansmeister on April 30, 2009, 06:50:34 PM
[snip tard trolling]

Quote from: DontSayBanana on April 30, 2009, 09:13:03 PM
If you had actually bothered to listen to Obama's comments earlier, he was oddly specific about who the holdouts were- largely hedge fund managers who were holding out against the prospect of bailout compensation.

Quote from: DontSayBanana on April 30, 2009, 09:13:03 PM

Quote from: Hansmeister on April 30, 2009, 06:50:34 PM
[snip tard trolling]

Hans, shut it. Not only did the UAW take a hit on their collective bargaining agreement, in doing so, they're taking a 55% share in Chrysler, so they're taking on a hefty burden in addition to relinquishing some of their compensation.

If you had actually bothered to listen to Obama's comments earlier, he was oddly specific about who the holdouts were- largely hedge fund managers who were holding out against the prospect of bailout compensation.

Due to the nature of my former job, I know of several of the holdouts who went to the table fully prepared to sabotage talks; I do not consider them worthy of any pity.

Normally, I'm pretty critical on the UAW, but in this case, I'm going to side with them because they tried to take the high ground and got cock-blocked by a few greedy assholes.

Quote from: Hansmeister on April 30, 2009, 09:19:07 PM
You seem to be the one with ADD since i originally pointed out that Obama was blaming the evil capitalists for failing to fall on their swords.  Funny that those small investors didn't want the government to illegally confiscate their property.  People can be silly like that.

Quote from: DontSayBanana on April 30, 2009, 09:28:24 PM

Quote from: Hansmeister on April 30, 2009, 09:19:07 PM
You seem to be the one with ADD since i originally pointed out that Obama was blaming the evil capitalists for failing to fall on their swords.  Funny that those small investors didn't want the government to illegally confiscate their property.  People can be silly like that.

There's a big difference between falling on a sword and trying to manipulate a government aid program for benefit. METAPHOR FAIL.

Quote from: DontSayBanana on April 30, 2009, 09:28:24 PM

Quote from: Hansmeister on April 30, 2009, 09:19:07 PM
You seem to be the one with ADD since i originally pointed out that Obama was blaming the evil capitalists for failing to fall on their swords.  Funny that those small investors didn't want the government to illegally confiscate their property.  People can be silly like that.

There's a big difference between falling on a sword and trying to manipulate a government aid program for benefit. METAPHOR FAIL.

Quote from: Hansmeister on April 30, 2009, 09:39:11 PM
You really are quite clueless.  It is their right to demand payments on their bonds - that's why they're bonds.  if crysler is unable to pay then a bankruptcy court has to determine the equitable distribution of assets to the debtors - not the President deciding to hand over the majority of the assets to his union-buddies, who have less of a claim to the assets under the law and keep the rest of it for himself.  Nor does the President even have the authority to do so - it was neither granted to him by Congress, nor is it a constitutional power.

It is pure and simply corruption by the President.

Quote from: DontSayBanana on April 30, 2009, 09:45:25 PM

Quote from: Hansmeister on April 30, 2009, 09:39:11 PM
You really are quite clueless.  It is their right to demand payments on their bonds - that's why they're bonds.  if crysler is unable to pay then a bankruptcy court has to determine the equitable distribution of assets to the debtors - not the President deciding to hand over the majority of the assets to his union-buddies, who have less of a claim to the assets under the law and keep the rest of it for himself.  Nor does the President even have the authority to do so - it was neither granted to him by Congress, nor is it a constitutional power.

It is pure and simply corruption by the President.

Name-calling isn't helping your case, dude. You're partially right; they have every right to demand repayment... from the debtor. Largely, these people tried to bypass Chrysler and wanted the money straight from the government's hide.

What you're failing to understand here is we're not talking about creditors who demanded repayment from the debtor, we're talking about guys who are being forced into another round after getting smacked away from the government teat.

QuoteIt was the gov't that wanted to buy them out so that they coukld take control of the company

Quotethe bondholders have every right to demand to be paid for what they believe is the fair value of the bonds

QuoteFor obama to turn around and demonize the investors for refusing to cave in to his offer is sheer thugginesh,.  Obama is acting like a mafiosi instead like a President.

Quote from: DontSayBanana on April 30, 2009, 09:13:03 PM
Hans, shut it. Not only did the UAW take a hit on their collective bargaining agreement, in doing so, they're taking a 55% share in Chrysler, so they're taking on a hefty burden in addition to relinquishing some of their compensation.

If you had actually bothered to listen to Obama's comments earlier, he was oddly specific about who the holdouts were- largely hedge fund managers who were holding out against the prospect of bailout compensation.

Quote from: Hansmeister on April 30, 2009, 09:19:07 PMFunny that those small investors didn't want the government to illegally confiscate their property.  People can be silly like that.

QuoteGM bondholders protest plan
   
By SARAH A. WEBSTER
FREE PRESS AUTOMOTIVE EDITOR

Ted Dobski, 65, did a lot of research before he invested a fourth of his retirement savings in GM bonds about five years ago.
Bonds, he figured, were less risky than stock, and as someone who retired from GM after 33 years, he never doubted the company would deliver as promised.

"I thought the company was solid as a rock," said Dobski, a former senior buyer in GM's purchasing department.

But now, Dobski and other GM bondholders stand to see the value of their investment slashed as President Barack Obama's automotive task force helps GM, which is operating on a $15.4-billion federal loan, restructure its debt, along with other aspects of its business, so it can survive long term.

More than 200 of these average investors — many of whom are retired salaried and hourly workers at GM — turned out today to protest the plan at Warren City Hall.

The event was organized by the 60 Plus Association, which is an advocacy group based in Alexandria, Va., that bills itself as a "conservative alternative to the American Association of Retired Persons."

The 60 Plus Association is now forming a group called the GM Main Street Bondholders Coalition.

According to event organizer Steve Mitchell, one-fourth of all GM bondholders are "average American citizens" who invested in the bonds to pay for their retirement, college, medical expenses and small businesses, and they have been shut out of the negotiations about GM's future.

Under the current GM restructuring plan, investors like Dobski will be given a small stake in the company in return for the debt they are owed. Under that plan, bondholders would get stock and cash that GM values at about 11 cents on the dollar of the bonds. Earlier this week, a group representing large bondholders complained the company offer was "neither reasonable nor adequate" pointing out that that UAW was receiving more than three times the value for the debt the company owes the union for funding health care.

The U.S. government does not view the offer from GM as a "negotiation," said a source familiar with the discussions.

With shares of GM were trading at $1.81 midday, Dobski has no hope that he'll ever get back what he's invested. And he doesn't expect it will ever be enough to support his retirement, as he had planned.

"Not in my lifetime," Dobski said.

Dobski said that he and his wife, Elaine, have been frugal their entire lives, carefully saving and planning their investments over the years. Losing the income they had expected to receive from GM bonds will only make them more so.
"It's just going to make things tighter," said Dobski, who has been raising extra money by driving a car for a transportation company. "We're not going to be able to do some things, and at 65, that's tough."

QuoteChrysler Goes to Court
Bankruptcy – not Treasury – is the fairest venue for all parties..Articlemore in Opinion ».EmailPrinter
President Obama's broadside against bankers yesterday illustrates better than any argument ever could that bankruptcy court, and not the political arena, is where Chrysler belongs. Yesterday's filing isn't the end of the U.S. auto industry, or even necessarily of Chrysler, and it offers the best chance to protect all parties under the rule of law.

"I don't stand with those who held out when everyone else is making sacrifices," Mr. Obama nonetheless declared, blaming what he called "a small group of speculators" for the car maker's Chapter 11 filing. To hear the President tell it, you'd never know that Chrysler had borrowed, and since frittered away, the $6.9 billion that it owes to those "speculators." The Administration had only offered $2 billion to those secured creditors as part of its proposed restructuring for the car maker. So it's hardly a surprise that many lenders would rather take their chances in bankruptcy court.

Chrysler's finances can now be restructured in a less political atmosphere in the New York courtroom of federal Judge Arthur Gonzalez. This is how the Chrysler collapse should have been worked out last December, when the auto maker first went looking for taxpayer cash. Treasury could have saved the $4 billion it lent the car maker at that time, to which we can now add another $8 billion that Mr. Obama promised yesterday to keep the company going.

The Administration is hoping the judge will do little more than rubber stamp the restructuring deal it has worked out among the Treasury, the United Auto Workers and the Italian car maker, Fiat. It could play out that way, if Judge Gonzalez determines that $2 billion is the highest and best value that can be obtained for Chrysler's assets.

But that is now the legal test that the Administration's plan must satisfy, not the political standard of whether the creditors "worked constructively" in a spirit of "shared sacrifice" that Mr. Obama set out yesterday. And let's hope Judge Gonzalez ignores Michigan Representative John Dingell, who yesterday called the investors "vultures" and warned darkly that they "will now be dealt with accordingly in court." Someone should tell Mr. Dingell that the debt-holders aren't on trial in a bankruptcy proceeding.

It's especially rich for Mr. Obama to blast the creditors for seeking "an unjustified taxpayer-funded bailout" while offering the UAW a 55% majority stake in Chrysler. He also praised the large banks that hold most of the Chrysler debt and supported the government plan. But of course J.P. Morgan and the other big banks are also recipients of billions of dollars in taxpayer cash and have a strong interest in playing nice with their creditor, Uncle Sam Obama.

The Chrysler creditors at least represent teachers, pensioners and retirees, among others. The Administration is advancing its own social and political agenda through its ever-deeper entanglement with Chrysler and General Motors. That explains why the government is giving 55% of the new Chrysler to the UAW's retiree-benefit trust, a junior creditor, while those ahead of the trust in line get a mere 30 cents on the dollar.

A senior Treasury official described the decision to give majority ownership to the union's health-care trust as simple pragmatism -- that keeping the union happy is essential to the long-term health of the car maker. A skeptic might respond that this is precisely the kind of political-business calculation that helped to drive Detroit's auto makers into this ditch.

Meanwhile, over at Detroit's other ward of the state, General Motors, the Treasury was dismissive of a counter-offer that GM's private creditors made Thursday. Earlier this week, the Administration (via GM) made an offer to give those creditors about five cents on the dollar while taking 50% of the equity for the government. And it justified that offer by saying taxpayers needed to be protected for the $16.2 billion Treasury has already lent to GM.

So GM's creditors offered to take 50% ownership themselves in exchange for canceling their $27 billion in debt. The UAW would still get about 40% of GM, but the new private owners would control the firm. And the Treasury's own loans would be kept whole, helping to ensure that taxpayers get all their money back.

"The company can't sustain all that debt," a senior Treasury official told us, explaining why the government's share of the debt load needs to be reduced. That could well be true, but if the Treasury knew that $16.2 billion was too much debt for GM to carry, it had no business lending the company that much in the first place.

The GM drama will play out in the coming weeks before an end-of-May deadline, and it may also end up in bankruptcy court if Treasury doesn't make a better offer to creditors. That would be painful, but an independent judiciary is also the place where the rule of law and sound financial judgment can best prevail. That will ultimately serve taxpayers best as well.

QuoteA Chrysler Bankruptcy Won't Be Quick
It will be difficult for a judge to sort through the many conflicting claims..Articlemore in Opinion ».EmailPrinter
By MARK J. ROE
Yesterday, Chrysler filed for Chapter 11 bankruptcy protection in preparation for a partnership with Italy's Fiat. President Barack Obama says he hopes the bankruptcy proceeding will be quick and efficient, and that the Fiat deal "will give Chrysler a chance not only to survive, but to thrive in a global auto industry."

I hope so too. But a Chrysler bankruptcy has many moving parts -- and with Chrysler unable to make money selling cars, it just doesn't have enough nongovernment cash to grease those moving parts to facilitate a smooth bankruptcy. Chrysler is in worse shape than GM. And remember, Fiat has yet to offer a penny for its 20% share in Chrysler. Thus far, it's only offering access to its fuel-efficient technology.

This could get messy. First off, in a bankruptcy any single creditor is entitled to get the liquidation value of its claim. So any creditor can assert that what it would get if Chrysler sold its factories quickly would be more than the 32 cents per dollar that Treasury had guaranteed Chrysler's secured creditors before the government deal fell apart this week.

Valuation proceedings are notoriously difficult in Chapter 11. Although the judge doesn't actually need to liquidate Chrysler, the judge must determine what it would have gone for if there were a liquidation. Some creditors appeared ready to bring that case to the bankruptcy judge.

On top of liquidation value, the whole class of secured creditors is entitled to the "fair value" of their claims. Usually fair value -- the money that can be obtained from operations -- is greater than liquidation value, though Chrysler may be an exception.

The government thinks the fair value issue will be resolved easily. That's because in a bankruptcy proceeding the creditors whose claims amount to two-thirds of the total amount of debt can bind the rest to take the deal. Indeed, the judge doesn't have to figure out whether value is fair, if the class of creditors votes in favor. And since two-thirds have already raised their hands in favor of 32 cents on the dollar, it seems to be a done deal.

But this time it might not be so easy. Not all of those who've already raised their hands in favor prior to bankruptcy, especially the smaller investors, will still be raising their hands inside Chapter 11. They can change their mind, and some just didn't want any negative publicity before the bankruptcy.

Worse, there could be a legal fight over whether the vote of Citibank and the other "big four" creditors -- J.P. Morgan Chase, Morgan Stanley and Goldman Sachs, who together hold 70% of Chrysler's debt -- should be counted toward the two-thirds threshold that would bind the company's other 42 creditors. The Bankruptcy Code requires that the votes of creditors be given in "good faith." It won't be hard for the smaller creditors to argue that Citibank and other TARP recipient's votes aren't in full good faith. In agreeing to Treasury's offer of 32 cents for each $1 of their debt, the objectors would say, Citibank and some others were influenced by the fact that Treasury was keeping them afloat with federal subsidies. If this type of litigation begins, it won't be easily resolved.

Meanwhile, Fiat will want to rationalize Chrysler's bloated dealership network. Indeed, this once seemed a core aspect of any effort to reconstruct Chrysler, so the last day's focus on a few secured creditors seems misplaced. But terminated dealers won't go quietly. They'll argue that their contracts can't be easily rejected by a bankruptcy judge because they're protected by state franchise laws. And in any event, they are entitled to some form of payment (reduced or otherwise) from a bankrupt Chrysler if their dealerships are terminated.

If the bankruptcy court could sell Chrysler's core operations intact, many of these bankruptcy frictions could be left behind. That would be the best operational outcome, but it's not clear that there's any real buyer -- Fiat is prepared to take a major stock position in a reorganized Chrysler, but it doesn't seem ready to pay any cash for it. Sales of divisions of a bankrupt firm are common in bankruptcy and often the best solution. But these kinds of sales typically are done via an auction, where other players can outbid Fiat. If Fiat isn't paying anything, then it may be easy to outbid. The question then would become whether the judge would be willing this time to forego a real auction.

If Chrysler could make cars that more people wanted to buy, bankruptcy would be much easier -- and probably not necessary. But that's not the case, so figuring out who will bear what amount of the losses will take place in a bankruptcy court, where too many players have leverage under the law, and where the reality of Chrysler's weak operational prospects makes a fast and easy resolution unlikely if the company can't be quickly sold.

Mr. Roe is a professor at Harvard Law School, where he teaches bankruptcy and corporate governance.

QuoteValuation proceedings are notoriously difficult in Chapter 11. Although the judge doesn't actually need to liquidate Chrysler, the judge must determine what it would have gone for if there were a liquidation. Some creditors appeared ready to bring that case to the bankruptcy judge.

On top of liquidation value, the whole class of secured creditors is entitled to the "fair value" of their claims. Usually fair value -- the money that can be obtained from operations -- is greater than liquidation value, though Chrysler may be an exception.

QuoteDay 1 for new Chrysler is anything but ordinary
Alisa Priddle / The Detroit News
The Obama administration says the bankruptcy of Chrysler LLC should not affect "ordinary" operations of Detroit's No. 3 automaker.

But Day One of Chrysler's Chapter 11 era was anything but ordinary -- two top Chrysler executives said they will leave, nervous suppliers refused to ship parts and Chrysler said it will shutter most plants during bankruptcy and disclosed plans to close six U.S. factories as part of its restructuring, including three in Metro Detroit by 2010.

"Once you pull the bankruptcy trigger, there's no such thing as business as usual," said Aaron Bragman, a Troy-based auto analyst with IHS Global Insight.


Chrysler's plan to emerge includes new management, a new board, an Italian partner, a revamped product lineup, less plant capacity, fewer workers and dealers and, potentially, a new name.

An agreement has been signed with Fiat SpA to establish an alliance. The "NewCo" as Fiat and others are calling it, would emerge from bankruptcy in 30 to 60 days shorn of burdensome debt agreements and underperforming dealers, plants and models. A full review of assets has been done and the work must begin Monday, said Chrysler Vice Chairman Tom LaSorda.

"Can they pull it off in 60 days?" Bragman said. "Most experts say no. Six months is more likely."

Already there are casualties.

Chairman Robert Nardelli said he will leave once the restructuring is complete and return to Cerberus Capital Management LP as an adviser. Nardelli said the U.S. Treasury did not ask him to step down. Last month, the government asked Rick Wagoner, former chairman and CEO of General Motors Corp., to leave.

LaSorda, who started the product partnership talks with Fiat a year ago, planned to announce his retirement today, and said he was unlikely to stay through the restructuring.Vice Chairman Jim Press will remain.

The new company will be run by a nine-person board with six independent members appointed by the government and three appointed by Fiat, including an employee. The board will elect a chairman and select a CEO "with the concurrence of Fiat," Nardelli said. The post could be held by Fiat CEO Sergio Marchionne.

Fiat will start with a 20 percent stake, in value and voting rights, in the new company, increasing it to 35 percent as it supplies global distribution and builds small vehicles and engines in the U.S.

The governments of the U.S. and Canada comprise a collective 10 percent stake and an independent health fund trust to be run by the United Auto Workers will hold a 55 percent stake but without equivalent voting rights.

Chrysler is filing "First Day" motions with the court so it can pay workers, suppliers, dealers, and provide incentives to buyers. It expects approvals quickly.

Pension plans will not be terminated and newly negotiated union contracts remain intact.

Chrysler said all plants in the U.S. and Canada will be idled effective Monday. But some nervous major suppliers jumped the gun Thursday and refused to deliver parts without payment.LaSorda said if emergence from bankruptcy takes over 60 days, plants can be returned to duty as needed. More permanent capacity reductions are planned, LaSorda said, and hourly employee buyout offers have been extended to May 25.

According to court documents, the six plants to be closed include Sterling Heights Assembly Plant, Detroit Axle and the Connor Avenue plant, also in Detroit. Sterling Heights and Detroit Axle are to be leased back to Chrysler until they close by December 2010, according to court documents.

The three other operating plants to close are St. Louis North, Kenosha Engine in Indiana and Twinsburg Stamping in Ohio.

The financial documents disclose that Chrysler plans to cut its marketing budget by 50 percent.

Quote from: alfred russel on May 01, 2009, 09:01:04 AM
The government is in a tough spot in negotiating with the bondholders of GM and Chrysler. The liquidation value for the bondholders may be minimal, and in ordinary circumstances that would be what the bondholders would be left with as they likely wouldn't be able to get debtor in possession financing.

But in this case, the government is promising to reconstitute the companies as viable and profitable going forward. Since they have an equity claim in bankruptcy, many of the bondholders probably want to hold out for a significant equity stake.

Quote from: DontSayBanana on May 01, 2009, 09:06:15 AM

Quote from: alfred russel on May 01, 2009, 09:01:04 AM
The government is in a tough spot in negotiating with the bondholders of GM and Chrysler. The liquidation value for the bondholders may be minimal, and in ordinary circumstances that would be what the bondholders would be left with as they likely wouldn't be able to get debtor in possession financing.

But in this case, the government is promising to reconstitute the companies as viable and profitable going forward. Since they have an equity claim in bankruptcy, many of the bondholders probably want to hold out for a significant equity stake.

Which would be how likely, really? This was even bolded in the SEC article itself:

Q: What will happen to my stock or bond?

A: ....In most instances, the company's plan of reorganization will cancel the existing equity shares....

Quote from: Barrister on April 30, 2009, 01:37:32 PM
Nah - with all that government money it'll emerge from bankruptcy some day.

But 30-60 days? :lmfao:

I think Delphi (which primarily makes auto parts) has been in bankruptcy protection for years.

Quote from: DontSayBanana on April 30, 2009, 09:13:03 PM

Quote from: Hansmeister on April 30, 2009, 06:50:34 PM
[snip tard trolling]

Hans, shut it. Not only did the UAW take a hit on their collective bargaining agreement, in doing so, they're taking a 55% share in Chrysler, so they're taking on a hefty burden in addition to relinquishing some of their compensation.

If you had actually bothered to listen to Obama's comments earlier, he was oddly specific about who the holdouts were- largely hedge fund managers who were holding out against the prospect of bailout compensation.

Due to the nature of my former job, I know of several of the holdouts who went to the table fully prepared to sabotage talks; I do not consider them worthy of any pity.

Normally, I'm pretty critical on the UAW, but in this case, I'm going to side with them because they tried to take the high ground and got cock-blocked by a few greedy assholes.

Quote from: alfred russel on May 01, 2009, 09:12:35 AM
Of course--equity (ie stockholders) get virtually wiped out in bankruptcy and creditors (eg bondholders) take over. What signifies ownership in a corporation is stock.

Quote from: DontSayBanana on May 01, 2009, 09:18:15 AM

I dunno. I'm smelling a rat. I can't see the UAW accepting 55% equity in the company only to relinquish it in bankruptcy a month later. I have a feeling that both sides of the creditors are going to accuse the other of not voting in good faith and this is going to have to get sent to further arbitration.

Quote from: Savonarola on May 01, 2009, 09:16:11 AMIf they stick to their plan of shuttering their plants througout bankruptcy and if the bankruptcy lasts for six months are they going to be able to emerge?  I'm not an expert in manufacturing, but six months sounds like a long time to produce nothing and then re-enter the market.

Quote from: MadImmortalMan on May 01, 2009, 10:45:59 AM
How are the unions supposed to represent the interests of the workers when they're also the owners? How does the collective bargaining process work when the same guy is on both sides of the table, anyway?

Quote from: MadImmortalMan on May 01, 2009, 10:45:59 AM
How are the unions supposed to represent the interests of the workers when they're also the owners? How does the collective bargaining process work when the same guy is on both sides of the table, anyway?

Quote from: The Minsky Moment on May 01, 2009, 03:01:42 PM

The dissenters are not exactly "small" investors.  My understanding is that the concern is that hedge funds bought up the bonds and CDS protection at the same time and hence had an incentive to wreck any deal.   If that is true, it a huge problem and those responsible deserve verbal condemnation (even though they acted lawfully).

Quote from: alfred russel on May 01, 2009, 03:23:46 PM
If that is the case, there may not be a problem. If the CDS protection payout occurs in the event of bankruptcy (I don't know that, but it would seem a logical trigger), the parties that dragged Chrysler into bankruptcy may now be indifferent to whatever to their bankruptcy compensation and it may be the quick proceeding the administration promises.

Quote from: The Minsky Moment on May 01, 2009, 03:32:02 PM

Quote from: alfred russel on May 01, 2009, 03:23:46 PM
If that is the case, there may not be a problem. If the CDS protection payout occurs in the event of bankruptcy (I don't know that, but it would seem a logical trigger), the parties that dragged Chrysler into bankruptcy may now be indifferent to whatever to their bankruptcy compensation and it may be the quick proceeding the administration promises.

My concern is the ex ante incentives before filing.  Normally the assumption would be that the creditors of the company have an incentive to avoid bankruptcy if an acceptable deal can be reached.  But if some of the creditors have (confidential) CDS holdings, they have an incentive to be obstructive and blow the deal up.

Quote from: The Minsky Moment on May 01, 2009, 03:32:02 PM

Quote from: alfred russel on May 01, 2009, 03:23:46 PM
If that is the case, there may not be a problem. If the CDS protection payout occurs in the event of bankruptcy (I don't know that, but it would seem a logical trigger), the parties that dragged Chrysler into bankruptcy may now be indifferent to whatever to their bankruptcy compensation and it may be the quick proceeding the administration promises.

My concern is the ex ante incentives before filing.  Normally the assumption would be that the creditors of the company have an incentive to avoid bankruptcy if an acceptable deal can be reached.  But if some of the creditors have (confidential) CDS holdings, they have an incentive to be obstructive and blow the deal up.

Quote from: alfred russel on May 01, 2009, 03:34:58 PM
Bond insurance (or credit default swaps functioning in that role) increase the risk of bankruptcy. It is just the nature of the beast.

Quote from: The Minsky Moment on May 01, 2009, 04:06:39 PM

Quote from: alfred russel on May 01, 2009, 03:34:58 PM
Bond insurance (or credit default swaps functioning in that role) increase the risk of bankruptcy. It is just the nature of the beast.

But the legal structure of the bankruptcy process doesn't take that into account.  Although it is accepted that creditors in a CC don't all have identical interest, the system does not take into such massive conflicts of interest. If CDS were required to be disclosed, then the problem could be fixed by having separate committee - but they aren't.

Quote from: KRonn on May 01, 2009, 07:15:03 PM
I have to wonder if Chrysler will really be saved, or if this just staves off the inevitable. I read a report on their bankruptcy, which went on to list auto quality among the companies. No Chrysler products were anywhere in the lists, and basically they're still playing catch up to get to decent quality. And we're trying to save this company? Pres Obama lamented the poor quality and lack of autos that consumers wanted; hardly a ringing endorsement. What is he trying to save, with thinking like that? Well, at least they are bound to pay back the taxpayer, if they do make a come back.

Quote from: Hansmeister on May 01, 2009, 08:22:13 PM

Quote from: KRonn on May 01, 2009, 07:15:03 PM
I have to wonder if Chrysler will really be saved, or if this just staves off the inevitable. I read a report on their bankruptcy, which went on to list auto quality among the companies. No Chrysler products were anywhere in the lists, and basically they're still playing catch up to get to decent quality. And we're trying to save this company? Pres Obama lamented the poor quality and lack of autos that consumers wanted; hardly a ringing endorsement. What is he trying to save, with thinking like that? Well, at least they are bound to pay back the taxpayer, if they do make a come back.

You're so fucked when you rely on Fiat to be your saviour.  :lol:

Quote from: alfred russel on May 01, 2009, 05:19:13 PM
I don't understand because:
a) I don't know what CC means, and
b) if we are talking about this specific case (and assume the CDSs exist and were the cause of the bankruptcy), won't they be without any incentives for a good outcome in the bankruptcy and be inclined to sign off on whatever is politically expedient? Which in this case seems to be the previous plan they have torpedoed and the other parties signed off on. From which I would assume that this could be a relatively painless bankruptcy, as now everyone will be willing to jump onto the president's plan.

Quote from: Sheilbh on May 02, 2009, 07:18:06 PM
I got a lot of joy reading that 'Chrysler was taken over by Fiat' :lol:

Quote from: Admiral Yi on May 02, 2009, 06:28:19 PM
Why is it relevant if the CDS's are disclosed or undisclosed? 

Quote from: Sheilbh on May 02, 2009, 07:18:06 PM
I got a lot of joy reading that 'Chrysler was taken over by Fiat' :lol:

Quote from: The Minsky Moment on May 03, 2009, 12:43:43 PM
b/c it is impossible to know a party's true agenda

Quote from: Admiral Yi on May 03, 2009, 03:07:43 PM

Quote from: The Minsky Moment on May 03, 2009, 12:43:43 PM
b/c it is impossible to know a party's true agenda

Seems to me the only party that cares about the creditors' true agenda is the Obama administration, so that they don't waste any time proposing settlements that the covered creditors are not going to accept anyway.

Quote from: The Minsky Moment on May 03, 2009, 03:55:04 PM
No that is not entirely so.  The five big bank creditors all supported the deal and presumably they thought the deal was in the interests of creditors generally.  They would probably be interested to know who else in the creditors group had a secret or semi-secret agenda to crater any deal.

Quote from: Admiral Yi on May 03, 2009, 03:57:18 PM
Why?  Would they act differently if they knew this?

Quote from: The Minsky Moment on May 03, 2009, 05:30:14 PM
They might take the position that the CDS holders are not the true party in interest and the writers of the insurance should have the say. 

QuoteThey might decide the process was futile and tell the government there was no point in participating as long as the CDS holders have a say.

Quote from: The Minsky Moment on May 02, 2009, 06:05:34 PM
CC is a creditor's committee

There are two issues here: what happens pre-filing and what happens post-filing.

Pre-filing it isn't uncommon for ad hoc creditor groups to come together to try to negotiate a settlement that keeps the case out of bankruptcy altogether.  That is what happened here.  The assumption is that the creditors have some incentive t oavoid bankruptcy because it is costly and uncertain.  The assumption is also that creditor incentives are roughly aligned.  This is not the case however if some creditors have undisclosed CDS holdings because their only incentive may be to make sure any settlement -- no matter how reasonable - is torpedoed.  This is the concern that Obama's comments seemed to be addressed to.

After filing, the CDS holders collect whatever they are entitled to collect, but there still may be mismatched incentives -- though not as serious as pre-bankruptcy.  That is because the CDS holders probably are interested in just getting whatever cash they can get right away for their bonds (having already been made whole thought the CDS and having little interest in actually holding long term equity states in a reorganizing entity).  Thus, they may have an incentive to vote against measures taken to enhance the long term prospects of the reorganizing entity if it means less cash up front - and more incentive to try to push things into a liquidation posture.

Quote from: The Minsky Moment on May 03, 2009, 05:30:14 PM

Quote from: Admiral Yi on May 03, 2009, 03:57:18 PM
Why?  Would they act differently if they knew this?

They might take the position that the CDS holders are not the true party in interest and the writers of the insurance should have the say.  They might decide the process was futile and tell the government there was no point in participating as long as the CDS holders have a say.

Quote from: The Minsky Moment on May 03, 2009, 03:55:04 PM

Quote from: Admiral Yi on May 03, 2009, 03:07:43 PM

Quote from: The Minsky Moment on May 03, 2009, 12:43:43 PM
b/c it is impossible to know a party's true agenda

Seems to me the only party that cares about the creditors' true agenda is the Obama administration, so that they don't waste any time proposing settlements that the covered creditors are not going to accept anyway.

No that is not entirely so.  The five big bank creditors all supported the deal and presumably they thought the deal was in the interests of creditors generally.  They would probably be interested to know who else in the creditors group had a secret or semi-secret agenda to crater any deal.

Quote from: alfred russel on May 03, 2009, 10:15:51 PM
Anyway, I thought that the reason Americans should support the Big Three was that we need American management and American engineering, not just the transplanted assembly line jobs. Under this plan, those attributes will be coming from Fiat. Plus we are putting billions into Chrysler to get it into a condition that Fiat will take it over for free.

Quote from: Sheilbh on May 03, 2009, 10:26:47 PM

Quote from: alfred russel on May 03, 2009, 10:15:51 PM
Anyway, I thought that the reason Americans should support the Big Three was that we need American management and American engineering, not just the transplanted assembly line jobs. Under this plan, those attributes will be coming from Fiat. Plus we are putting billions into Chrysler to get it into a condition that Fiat will take it over for free.

Indeed.  The engineering jobs will go and there's no sign that they come back (the assembly line jobs do return to the US in cheaper states).

Although I was reading a thing today about how weirdly preposterous it is that incredibly globalised companies still, overwhelmingly, have 'national' management - especially at the very top.  It seems like globalisation only goes so far up the payscale and, for some reason, it's essential that Nestle's run by a Swiss Gnome.

Quote from: Admiral Yi on May 03, 2009, 05:50:16 PM
You can't be serious. :huh:

QuoteIs the process of voting yes or no to a settlement proposal really that onerous that it would make a difference?

Quote from: Hansmeister on May 03, 2009, 07:50:17 PM
Alternatively, the big five bank creditors supported the deal because they were large recipient of TARP money and had to dance by the gov'ts tune.

Quote from: Sheilbh on May 03, 2009, 10:26:47 PM

Quote from: alfred russel on May 03, 2009, 10:15:51 PM
Anyway, I thought that the reason Americans should support the Big Three was that we need American management and American engineering, not just the transplanted assembly line jobs. Under this plan, those attributes will be coming from Fiat. Plus we are putting billions into Chrysler to get it into a condition that Fiat will take it over for free.

Indeed.  The engineering jobs will go and there's no sign that they come back (the assembly line jobs do return to the US in cheaper states).

Although I was reading a thing today about how weirdly preposterous it is that incredibly globalised companies still, overwhelmingly, have 'national' management - especially at the very top.  It seems like globalisation only goes so far up the payscale and, for some reason, it's essential that Nestle's run by a Swiss Gnome.

Quote from: The Minsky Moment on May 03, 2009, 10:48:36 PM

Quote from: Hansmeister on May 03, 2009, 07:50:17 PM
Alternatively, the big five bank creditors supported the deal because they were large recipient of TARP money and had to dance by the gov'ts tune.

That's a fair point.  It's safe to say the existing system did not take into account the present realities.

I still think the US govt should have nationalized the two sick men late last year before they burned through another 30 billion or so in cash.  It would have been cheaper and more honest.

QuoteUnion Takes Rare Front Seat in Deal for Chrysler
By MICHELINE MAYNARD
DETROIT — Labor unions usually dread bankruptcy, and for good reason. Their pay, benefits and pensions typically suffer significant cuts, as airline and steel workers can attest.

But for the United Automobile Workers union, Chrysler's Chapter 11 case, which began in New York on Friday, could turn out to be — if the company survives and thrives — the Cadillac of bankruptcies.

The U.A.W., for example, has received upfront protection from the Treasury Department for its pension plan and the fund that will take over responsibility for retiree medical benefits.

Moreover, that fund, called the voluntary employee beneficiary association, or VEBA, will control 55 percent of the equity in the new Chrysler once it emerges from bankruptcy, and hold a seat on the Chrysler board.

Of course, those hard-fought gains, and the big ownership stake, could be worthless if Chrysler does not make it. And the company's fortunes continued to sag in April, when sales fell 48 percent compared with the same month in 2008. Chrysler will also have to wait roughly two years or more for new cars designed by its partner, the Italian automaker Fiat, to show up in Chrysler dealerships.

But for now, even though Chrysler workers had to agree to lower pay and less generous benefits as part of the deal, the U.A.W. appears to be enjoying relative safety in helping steer the course of the Chrysler bankruptcy.

"I'm very comfortable," Ron Gettelfinger, the U.A.W.'s president, said Friday on National Public Radio. "It's not like we're going into this bankruptcy fighting with Chrysler and Fiat and the U.S. Treasury. We're going in there in lockstep to put our agreements in place."

Labor and restructuring lawyers said such a comprehensive deal going into bankruptcy was rare.

"This is extraordinary, truly extraordinary," said Mary Jo Dowd, a partner in the financial and bankruptcy restructuring practice at Arent Fox in Washington. "I never would have thought a year ago that this would occur. These are truly unusual times."

Asked if he could recall any other union that fared as well, David L. Gregory, a labor law professor at St. John's University, replied: "Nobody's even close."

But the U.A.W. is also no ordinary union. Even though its membership at the Detroit automakers has shrunk to a quarter of its size in 1990, it still maintains tremendous influence in Washington, partly because of its heavy political contributions.

The government, in assessing what was needed to make Chrysler viable, decided it needed to support workers, as well as suppliers, and guarantee the warranties on Chrysler vehicles.

Because the union agreed to negotiate, it was made a partner, with the government and Fiat, in developing the plan to restructure the company.

In contrast, other companies often use bankruptcy as a way to gain leverage over labor, so that they can lower their costs. Workers at Bethlehem Steel, United Airlines, Delta Air Lines and US Airways lost all or most of their traditional pension benefits when those employers sought bankruptcy protection in this decade, though some of the shortfall was covered by the federal government. Retiree health care coverage was also cut.

None of those cases, filed during the Bush administration, had the kind of federal support offered to the U.A.W.

In the case of Chrysler, the Treasury said Chrysler is giving a VEBA a $4.6 billion note, payable over 13 years at a 9 percent interest rate, helping to fund roughly $10 billion in liabilities. The rest will be paid in Chrysler stock. Chrysler's pension plans will be preserved, with the help of $600 million from Daimler, Chrysler's former owner, the Treasury said.

If Chrysler goes under, pensions will be covered in part by the federal pension agency, but workers will receive much less than they are owed. The VEBA would be in dire straits, since it would owe the Treasury and have nothing to pay it back with.

The U.A.W. was ready for the probability of a Chrysler filing as far back as two months ago, people involved in the negotiations said. Its stand was clear: for it to support a bankruptcy case, workers' health care and pensions had to be protected.

But the administration, advised by Ron Bloom, the veteran restructuring expert, also insisted that the union make sacrifices. On Wednesday, Chrysler workers approved concessions, including work rule changes, that would result in lower pay and less generous benefits than in the 2007 contract.

Significantly, the VEBA can begin adjusting workers' health care benefits in 2010, two years sooner than the previous contract allowed.

Chrysler workers' concessions, similar to those granted earlier this year at Ford Motor, form the basis of a prenegotiated labor agreement with the new Chrysler, people involved in the negotiations said.

Chrysler's pension liability will shift from the defunct company to the new one, these people said, and workers will continue to have a lucrative contract.

Despite the concessions, Chrysler's most senior workers, like those at Ford, still have healthy wages and benefits; bountiful health care coverage, at least until it is adjusted; and subsidies to help bolster unemployment benefits they receive while plants are closed, as they will be at Chrysler for weeks until the sale is final.

That carryover is unusual, Ms. Dowd said, since the buyers of assets in bankruptcy cases normally try to purchase them free and clear of their existing liabilities.

It also means the union will not have to come to terms with Fiat once it takes over the company, or risk having its contracts abrogated.

None of this sat well with some Chrysler's debtholders, who questioned the fairness of the 55 percent stake granted to the VEBA. They did not raise objections in bankruptcy court on Friday, however.

Professor Gregory said the U.A.W.'s position still carried risk.

"Chrysler may be worth nothing, and 55 percent of nothing may be worth nothing," he said. But a comeback by Chrysler after it emerges from bankruptcy could ensure the security of the retiree health care fund, which will begin selling its Chrysler shares as soon as possible, Mr. Gettelfinger said Friday.

His legacy, and that of the union, could also could benefit, Professor Gregory said — if Chrysler and G.M. are able to successfully restructure.

"It's walking a very tight rope without a safety net, and a very high wire," he said. "But if this can get some traction, they could be the envy of not just organized labor, but a lot of folks."

Quote from: Grey Fox on May 04, 2009, 07:44:30 AM
Fiat's CEO is a Canuck.

Quote from: Zanza2 on May 04, 2009, 09:32:28 AM
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.

Quote from: Hansmeister on May 04, 2009, 09:59:33 AM

Quote from: Zanza2 on May 04, 2009, 09:32:28 AM
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.

Quote from: Barrister on May 04, 2009, 10:15:09 AM

Quote from: Hansmeister on May 04, 2009, 09:59:33 AM

Quote from: Zanza2 on May 04, 2009, 09:32:28 AM
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...

Quote from: Barrister on May 04, 2009, 10:15:09 AMYou 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...

QuoteChrysler 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."

Quote from: Savonarola on May 04, 2009, 02:00:27 PM
I'll give Barack credit; his demagoguery gets results:

Quote from: Neil on May 04, 2009, 02:29:43 PM
Of course.  It's his thugs who are issuing the threats.

Quote from: The Brain on May 04, 2009, 03:44:11 PM
Unprofitable At Any Speed

Quote from: DontSayBanana on May 04, 2009, 02:43:37 PM

Quote from: Neil on May 04, 2009, 02:29:43 PM
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.

Quote from: alfred russel on May 04, 2009, 07:08:52 PM
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.

Quote from: DontSayBanana on May 04, 2009, 07:48:14 PM

Quote from: alfred russel on May 04, 2009, 07:08:52 PM
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?

Quote from: Faeelin on May 04, 2009, 07:23:22 AM
That would depend on how seriously you believe the unions are responsible for the fall of Chrysler, as opposed to making shitty cars, no?

Quote from: DontSayBanana on May 04, 2009, 07:48:14 PM
*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?

Quote from: MadImmortalMan on May 04, 2009, 10:07:25 PM

Quote from: Faeelin on May 04, 2009, 07:23:22 AM
That would depend on how seriously you believe the unions are responsible for the fall of Chrysler, as opposed to making shitty cars, no?

You can make shitty cars and still be profitable: http://www.kmcir.com/Download/KiaMotors_2008_eng.pdf

QuoteChrysler workers and dealers to feel pinch
Automaker details cuts to survive through June
BY GREG GARDNER and BRENT SNAVELY • FREE PRESS BUSINESS WRITERS • May 5, 2009
The squeeze won't let up on Chrysler workers and dealers during the next two months, as the company tries to fund essential operations on a bare-bones budget.


Salaried workers will take a two-week unpaid furlough. Hourly workers will get 75% of their regular pay, with Chrysler paying about one-third what it has in the past when workers are temporarily laid off. The company will stop reimbursing one-quarter of its 3,200 dealers for rebates and slash incentive spending by 50% beginning June 1.

Those details were spelled out in a court filing that describes how Chrysler will get by until the end of June. Other filings disclosed that Chrysler lost $16.8 billion last year and is burning through $1.7 billion of cash each month.

At a news conference in Sterling Heights, UAW President Ron Gettelfinger said workers will receive about 75% of regular pay, but added, "It's certainly not a paycheck."

Chrysler went into bankruptcy with about $660 million of cash, of which it can spend $400 million to pay suppliers for parts delivered over the last 45 days, reimburse dealers for warranty costs and other essential expenses approved by U.S. Bankruptcy Judge Arthur Gonzalez. The company must maintain a minimum cash balance of $260 million.

Robert Manzo of Capstone Advisory Group, Chrysler's restructuring consultant, said the U.S. Treasury had a "low likelihood" of being repaid the line of up to $4.5 billion Chrysler will use while under bankruptcy protection. He also said the loan was made on far better terms than what Chrysler could have received from private lenders.

If the reorganization is completed with Fiat taking a 20% stake in Chrysler, Manzo estimates that the new company could be profitable by 2012 and earn up to $3 billion by 2016.

Gonzalez issued orders Monday that free up cash for Chrysler to pay suppliers for parts delivered over the last 45 days and to reimburse dealers for warranty costs.

The additional worker and dealer sacrifices come after the UAW agreed last week to accept stock in a reorganized Chrysler in lieu of cash payments to fund a retiree health care (VEBA) fund and freeze wages through September 2011.

Hourly retirees have expressed worry that their health care benefits may be cut.

"This VEBA is going to be on life support initially," Gettelfinger said, but if Fiat Chief Executive Sergio "Marchionne comes in here and turns this company around, then we will be in good shape."

Quote from: Savonarola on May 05, 2009, 09:42:07 AM
That sounds like a paycheck to me, Ron.

Is it normal for the government to simply give away money in loans they know are bad during a bankruptcy restructuring; or is this something unique to Chrysler?

Quote from: Admiral Yi on May 04, 2009, 11:23:25 PM
What do you mean by a vote cast in bad faith?

QuoteHedge Funds Outraged At Obama Bullying But Also Cowering In Fear
Clifford S. Asness|May. 5, 2009, 12:29 PM|245
PrintTags: White House, Barack Obama, Hedge Funds
Cliff Asness, managing partner at  AQR Capital Management, distributed the following letter after listening to Obama blast the Chrysler hedge-fund holdouts.  We picked the letter up at ZeroHedge.



Unafraid In Greenwich Connecticut
Clifford S. Asness
Managing and Founding Principal
AQR Capital Management, LLC

The President has just harshly castigated hedge fund managers for being unwilling to take his administration's bid for their Chrysler bonds. He called them "speculators" who were "refusing to sacrifice like everyone else" and who wanted "to hold out for the prospect of an unjustified taxpayer-funded bailout."

The responses of hedge fund managers have been, appropriately, outrage, but generally have been anonymous for fear of going on the record against a powerful President (an exception, though still in the form of a "group letter", was the superb note from "The Committee of Chrysler Non-TARP Lenders" some of the points of which I echo here, and a relatively few firms, like Oppenheimer, that have publicly defended themselves). Furthermore, one by one the managers and banks are said to be caving to the President's wishes out of justifiable fear.

I run an approximately twenty billion dollar money management firm that offers hedge funds as well as public mutual funds and unhedged traditional investments. My company is not involved in the Chrysler situation, but I am still aghast at the President's comments (of course these are my own views not those of my company). Furthermore, for some reason I was not born with the common sense to keep it to myself, though my title should more accurately be called "Not Afraid Enough" as I am indeed fearful writing this... It's really a bad idea to speak out. Angering the President is a mistake and, my views will annoy half my clients. I hope my clients will understand that I'm entitled to my voice and to speak it loudly, just as they are in this great country. I hope they will also like that I do not think I have the right to intentionally "sacrifice" their money without their permission.

Here's a shock. When hedge funds, pension funds, mutual funds, and individuals, including very sweet grandmothers, lend their money they expect to get it back. However, they know, or should know, they take the risk of not being paid back. But if such a bad event happens it usually does not result in a complete loss. A firm in bankruptcy still has assets. It's not always a pretty process. Bankruptcy court is about figuring out how to most fairly divvy up the remaining assets based on who is owed what and whose contracts come first. The process already has built-in partial protections for employees and pensions, and can set lenders' contracts aside in order to help the company survive, all of which are the rules of the game lenders know before they lend. But, without this recovery process nobody would lend to risky borrowers. Essentially, lenders accept less than shareholders (means bonds return less than stocks) in good times only because they get more than shareholders in bad times.

The above is how it works in America, or how it's supposed to work. The President and his team sought to avoid having Chrysler go through this process, proposing their own plan for re-organizing the company and partially paying off Chrysler's creditors. Some bond holders thought this plan unfair. Specifically, they thought it unfairly favored the United Auto Workers, and unfairly paid bondholders less than they would get in bankruptcy court. So, they said no to the plan and decided, as is their right, to take their chances in the bankruptcy process. But, as his quotes above show, the President thought they were being unpatriotic or worse.

Let's be clear, it is the job and obligation of all investment managers, including hedge fund managers, to get their clients the most return they can. They are allowed to be charitable with their own money, and many are spectacularly so, but if they give away their clients' money to share in the "sacrifice", they are stealing. Clients of hedge funds include, among others, pension funds of all kinds of workers, unionized and not. The managers have a fiduciary obligation to look after their clients' money as best they can, not to support the President, nor to oppose him, nor otherwise advance their personal political views. That's how the system works. If you hired an investment professional and he could preserve more of your money in a financial disaster, but instead he decided to spend it on the UAW so you could "share in the sacrifice", you would not be happy.

Let's quickly review a few side issues.

The President's attempted diktat takes money from bondholders and gives it to a labor union that delivers money and votes for him. Why is he not calling on his party to "sacrifice" some campaign contributions, and votes, for the greater good? Shaking down lenders for the benefit of political donors is recycled corruption and abuse of power.

Let's also mention only in passing the irony of this same President begging hedge funds to borrow more to purchase other troubled securities. That he expects them to do so when he has already shown what happens if they ask for their money to be repaid fairly would be amusing if not so dangerous. That hedge funds might not participate in these programs because of fear of getting sucked into some toxic demagoguery that ends in arbitrary punishment for trying to work with the Treasury is distressing. Some useful programs, like those designed to help finance consumer loans, won't work because of this irresponsible hectoring.

Last but not least, the President screaming that the hedge funds are looking for an unjustified taxpayer-funded bailout is the big lie writ large. Find me a hedge fund that has been bailed out. Find me a hedge fund, even a failed one, that has asked for one. In fact, it was only because hedge funds have not taken government funds that they could stand up to this bullying. The TARP recipients had no choice but to go along. The hedge funds were singled out only because they are unpopular, not because they behaved any differently from any other ethical manager of other people's money. The President's comments here are backwards and libelous. Yet, somehow I don't think the hedge funds will be following ACORN's lead and trucking in a bunch of paid professional protestors soon. Hedge funds really need a community organizer.

This is America. We have a free enterprise system that has worked spectacularly for us for two hundred plus years. When it fails it fixes itself. Most importantly, it is not an owned lackey of the oval office to be scolded for disobedience by the President.

I am ready for my "personalized" tax rate now.

Quote from: alfred russel on May 04, 2009, 08:10:11 PM
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.

Quote from: The Minsky Moment on May 06, 2009, 11:43:11 AM

Quote from: alfred russel on May 04, 2009, 08:10:11 PM
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.

I'm not shedding too many tears for Chrysler.  But on a systemic level, it is true that the ability to insure via CDS increases systemic instability and combined with confidentiality, complicates the ability to reach pre-bankruptcy filing settlements.  It is also true that to the extent CDS can be written in amount far exceeding the actual outstanding debt issuance, in extreme cases it can start to look like selling fire insurance to arsonists.  Or at least little boys who are very careless with matches.

Quote from: DontSayBanana on May 05, 2009, 11:07:16 PM

Quote from: Admiral Yi on May 04, 2009, 11:23:25 PM
What do you mean by a vote cast in bad faith?

Well, for starters, I actually hate using that phraseology precisely because it's so vague and contributes to the problem. In this instance, I'm referring to a divisive vote cast without regard to the outcome because of a vested interest in sabotaging the overall administrative process.

Quote from: dps on May 06, 2009, 11:58:32 AM
Why should anyone cast a vote that goes against their own vested interest?

Quote from: The Minsky Moment on May 06, 2009, 11:43:11 AM
I'm not shedding too many tears for Chrysler.  But on a systemic level, it is true that the ability to insure via CDS increases systemic instability and combined with confidentiality, complicates the ability to reach pre-bankruptcy filing settlements.  It is also true that to the extent CDS can be written in amount far exceeding the actual outstanding debt issuance, in extreme cases it can start to look like selling fire insurance to arsonists.  Or at least little boys who are very careless with matches.

Quote from: The Minsky Moment on May 06, 2009, 11:43:11 AM
It is also true that to the extent CDS can be written in amount far exceeding the actual outstanding debt issuance, in extreme cases it can start to look like selling fire insurance to arsonists.  Or at least little boys who are very careless with matches.

Quote from: Admiral Yi on May 06, 2009, 02:25:57 PM
How does the amount of coverage affect anything?  Their vote is still based on the value of the bonds.  If they're 100% covered they're going to vote no to any settlement, if they're 500% covered they're going to vote no to any settlement.

Quote from: alfred russel on May 06, 2009, 02:44:28 PM
Whether or not CDS are considered insurance, they are used as a part of risk management strategies and most of the problems discussed here would be present with traditional bond insurance.

Quote from: dps on May 06, 2009, 11:58:32 AM
Why should anyone cast a vote that goes against their own vested interest?

Quote from: DontSayBanana on May 06, 2009, 04:05:25 PM

Quote from: dps on May 06, 2009, 11:58:32 AM
Why should anyone cast a vote that goes against their own vested interest?

It wouldn't be. It would be a vote where they have no substantial interest in either outcome, so the voter simply targets the most divisive outcome. If their primary interests would be served by a breakdown of the process rather than by utilizing the process, then they should be forced to remain in abstention until that occurs.

My issue is not with the process of the CC's voting, but that some disclosure by the creditor should be required before that creditor is admitted to the CC; there's no way to tell how many as of now, but this situation has probably allowed bad actors into Chrysler's CC who are going to act counter to the CC's interests and try to grind the system into a halt so that they can collect on the insurance and screw the other actors on the CC who are playing by the rules.

Quote from: alfred russel on May 06, 2009, 04:30:28 PM
I doubt anyone is against the deal just to blow up the process, or not playing by the rules. Why would you do that, especially when your investors that you have a fiduciary duty to probably have some other exposure to Chrysler and you are facing political pressure.

Out of bankruptcy some may have been motivated to allow Chrysler to enter bankruptcy to be paid out on their CDS, but as those probably pay out on bankruptcy, I doubt they have that incentive anymore.

Any opposition to the plan is probably because some of the secured creditors think the amount they are getting isn't enough in excess of the amount they would get in liquidation to not put pressure on other parties to give them a bigger piece.

Quote from: DontSayBanana on May 06, 2009, 04:54:30 PM
Granted, but the fact that there are secured creditors willing to try this means there's a dangerous element of stupidity and ignorance playing a part in this bankruptcy. Chrysler's numbers are so ugly so far that insolvency seems a serious possibility. If those secured creditors are holding out for value higher than liquidation when there's an even chance that the declaration could come down where they only have a right to the collateral they've fronted, then the only options are that the SCs are being endlessly optimistic/idiotic, or else that they've got concerns about a solvent Chrysler paying up and are deliberately stalling, knowing insolvency would make them the only ones with any entitlements.

Quote from: alfred russel on May 06, 2009, 05:10:39 PM
Lets grossly simplify this: Chrysler is bankrupt, with the following details:
AR: Secured Creditor owed $15
UAW: Unsecured Creditor owed $15
Chrysler value in liquidation: $5
Chrysler value if reorganized (needing UAW support): $12

A plan is presented to offer me $5.50 and the UAW $6.50. Yes I'm better off under this plan, but I'm going to try to scuttle it and counterpropose terms more like me $11 and the UAW $1. Sure, time may be short and the stakes high, but if I can scuttle the deal that will only serve to increase the despiration of the other party and make them more likely to cave to my demands. I would want more money to play along. That is negotiating 101.

A couple of complicating factors: the US government is probably willing to pony up a lot of money ot keep Chrysler from liquidating, and the government is on the side of the UAW. If I'm a lender that is depending on the government for survival the second point may dominate my thinking: I may not want to push the issue. But if I'm a secured lender that is relatively immune from political pressure, if this deal is scuttled the government will possibly pay for any agreement I can get the judge to go along with. I may be thinking I may not only be able to extract concessions from the unsecured lenders, but also from the government.

Quote from: DontSayBanana on May 06, 2009, 05:27:31 PM

What I'm afraid of is, using your setup as an example, AR is already somewhat desperate, decides to get greedy, and remain firm on 11/1, AR/UAW, while UAW decides to take a stand and refuse to settle for less than 7/5. That's a fairly large gap, and the broader the gap, the more likely this becomes to break down if both parties become entrenched.

Quote from: alfred russel on May 06, 2009, 05:52:44 PM
That could happen, but then they are both shooting themselves in the foot. They have more skin in this game than we do, and if the creditors are dumb enough to take each other down, they probably wouldn't do to well as the majority owners of Chrysler anyway.

Plus the current deal may get approved and not get modified at all.

Quote from: DontSayBanana on May 06, 2009, 04:05:25 PM
If their primary interests would be served by a breakdown of the process rather than by utilizing the process, then they should be forced to remain in abstention until that occurs.

My issue is not with the process of the CC's voting, but that some disclosure by the creditor should be required before that creditor is admitted to the CC; there's no way to tell how many as of now, but this situation has probably allowed bad actors into Chrysler's CC who are going to act counter to the CC's interests and try to grind the system into a halt so that they can collect on the insurance and screw the other actors on the CC who are playing by the rules.

Quote from: alfred russel on May 06, 2009, 05:10:39 PM

Lets grossly simplify this: Chrysler is bankrupt, with the following details:
AR: Secured Creditor owed $15
UAW: Unsecured Creditor owed $15
Chrysler value in liquidation: $5
Chrysler value if reorganized (needing UAW support): $12

A plan is presented to offer me $5.50 and the UAW $6.50. Yes I'm better off under this plan, but I'm going to try to scuttle it and counterpropose terms more like me $11 and the UAW $1. Sure, time may be short and the stakes high, but if I can scuttle the deal that will only serve to increase the despiration of the other party and make them more likely to cave to my demands. I would want more money to play along. That is negotiating 101.

A couple of complicating factors: the US government is probably willing to pony up a lot of money ot keep Chrysler from liquidating, and the government is on the side of the UAW. If I'm a lender that is depending on the government for survival the second point may dominate my thinking: I may not want to push the issue. But if I'm a secured lender that is relatively immune from political pressure, if this deal is scuttled the government will possibly pay for any agreement I can get the judge to go along with. I may be thinking I may not only be able to extract concessions from the unsecured lenders, but also from the government.

Quote from: MadImmortalMan on May 07, 2009, 01:54:42 AM

Quote from: alfred russel on May 06, 2009, 05:10:39 PM

Lets grossly simplify this: Chrysler is bankrupt, with the following details:
AR: Secured Creditor owed $15
UAW: Unsecured Creditor owed $15
Chrysler value in liquidation: $5
Chrysler value if reorganized (needing UAW support): $12

A plan is presented to offer me $5.50 and the UAW $6.50. Yes I'm better off under this plan, but I'm going to try to scuttle it and counterpropose terms more like me $11 and the UAW $1. Sure, time may be short and the stakes high, but if I can scuttle the deal that will only serve to increase the despiration of the other party and make them more likely to cave to my demands. I would want more money to play along. That is negotiating 101.

A couple of complicating factors: the US government is probably willing to pony up a lot of money ot keep Chrysler from liquidating, and the government is on the side of the UAW. If I'm a lender that is depending on the government for survival the second point may dominate my thinking: I may not want to push the issue. But if I'm a secured lender that is relatively immune from political pressure, if this deal is scuttled the government will possibly pay for any agreement I can get the judge to go along with. I may be thinking I may not only be able to extract concessions from the unsecured lenders, but also from the government.

Wouldn't the fact that UAW is unsecured mean that the default option legally would be AR $12, UAW $0?

Otherwise, what's the point of paying the premium for secured debt?

Quote from: The Minsky Moment on May 06, 2009, 11:43:11 AMI'm not shedding too many tears for Chrysler.  But on a systemic level, it is true that the ability to insure via CDS increases systemic instability and combined with confidentiality, complicates the ability to reach pre-bankruptcy filing settlements.  It is also true that to the extent CDS can be written in amount far exceeding the actual outstanding debt issuance, in extreme cases it can start to look like selling fire insurance to arsonists.  Or at least little boys who are very careless with matches.

Quote from: MadImmortalMan on May 07, 2009, 01:54:42 AM
Wouldn't the fact that UAW is unsecured mean that the default option legally would be AR $12, UAW $0?

Otherwise, what's the point of paying the premium for secured debt?


Edit: Or AR $5, UAW $0. Whichever. This might actually be the better option for alfred russel, as the assets can change in value in the future, and he would own them and not the UAW.

QuoteChrysler seeks to dump 789 dealers, 14 in metro Detroit
BY GREG GARDNER AND JEWEL GOPWANI • FREE PRESS BUSINESS WRITERS • May 14, 2009

By slashing 25% of its dealer network, including 40 in Michigan and 14 in metro Detroit, the restructured Chrysler-Fiat will eliminate up to 40,000 jobs or more than Chrysler's total U.S. workforce.


In a court filing today, Chrysler asked U.S. Bankruptcy Judge Arthur Gonzalez to reject dealer agreements for 789 dealers throughout the United States in a effort "to conserve cash and pursue transactions that maximize value."

Locally, Chrysler is asking the judge for permission to close 14 dealers including Birmingham Chrysler-Jeep in Troy, Fox Hills Chrysler-Jeep in Plymouth, Meadowbrook Dodge in Rochester Hills, Mt. Clemens Dodge in Clinton Township, Lochmoor Chrysler-Jeep in Detroit and Tamaroff Dodge in Southfield.


Chrysler has signaled its intent to shrink its retail network since filing for Chapter 11 bankruptcy protection on April 30. In 2008, Chrysler's 3,298 dealers sold on average 303 vehicles per showroom, compared with 1,292 for the average Toyota dealer and 1,219 for the average Honda dealer.


"Such larger throughput supports substantially higher average profits, enables dealerships to invest in facilities and other operations and enables competitors to attract the more experienced and highly qualified personnel," said Peter Grady, Chrysler director of dealer operations.


Grady said in a court filing that about 25% of Chrysler's current 3,200 dealers account for about 50% of the company's U.S. sales. Just over 50% of the dealers account for 90% of Chrysler's U.S. sales.


"Chrysler's larger dealer network also substantially increases expenses and inefficiencies in the distribution system," Grady said, "forcing Chrysler to spend additional resources on training ... processes, oversight of the dealer network, auditing and monitoring expenses."


Grady described the rejection of nearly 800 dealer agreements as an acceleration of Chrysler's Project Genesis, which has resulted in consolidation of hundreds of Chrysler-Jeep and Dodge dealerships under one roof. From 2001 to the end of April of this year Chrysler has reduced its dealer network from 4,320 to 3,188.


"We do not have enough production or sales to keep all the dealers alive and prosperous," said Jim Press, Chrysler vice chairman. "This is the way it is. We are a company working its way out of a Chapter 11 situation."


After closing these dealerships and combining some Dodge and Chrysler-Jeep franchises, 84% of all surviving dealership will sell all three brands. About half the dealers that will close sold fewer than 100 vehicles in 2008, Landry said.


In a statement today, the U.S. Treasury said President Barack Obama's automotive task force did not decide which dealers to cut.


The task force "played no role in deciding which dealers, or how many dealers, were part of Chrysler's announcement today," the statement said.


But the Treasury said cuts are necessary.


"The sacrifices by the dealer community ... are necessary for this company and the industry to succeed. And a stronger Chrysler, supported by an efficient and effective dealer network, will provide more stability for current employees and the prospect for future employment growth."

Rejected dealers will have until May 26 to file objections to this motion. Gonzalez will hold a hearing on the matter at 10 a.m. June 3.

There is no appeal process other than through the bankruptcy court hearing. Rejected dealers will receive no compensation for losing their businesses, which will no longer sell new cars and trucks after June 9, said Steven Landry, Chrysler executive vice president for North America sales and marketing.

Quote from: The Minsky Moment on May 07, 2009, 09:38:54 AM
The UAW is not an ordinary unsecured creditor.  If Chrysler were to go into Chapter 11, the reorged  company will still have to make some sort of deal with the union, even if the bankruptcy judge tears up the old agreement.  Agreeing to wage and benefit reductions up front creates value for the other stakeholders -- including the creditors who will be taking equity positions in the new company.  It is not unreasonable for the union to expect some compensation in the form of equity for that concession (though the particular terms of the deal at issue may or may not be - i haven't looked at it carefully enought to judge).

Quote from: garbon on May 14, 2009, 02:23:49 PM
So why did we ever give Chrysler money?

Quote from: alfred russel on May 14, 2009, 02:27:38 PM
To get them on stable enough footing so that Fiat would agree to take them over.

Quote from: Admiral Yi on May 14, 2009, 02:35:10 PM
Heard on the radio that the secured bondholders caved under threat of having their identities revealed.

Quote from: Berkut on May 14, 2009, 02:37:36 PM

Quote from: Admiral Yi on May 14, 2009, 02:35:10 PM
Heard on the radio that the secured bondholders caved under threat of having their identities revealed.

Wow.

Tough to negotiate when the Unions have the president on their side, and he makes no bones about using his position to fuck you if you don't do as you are told.

Maybe Palin wouldn't have really been so bad...

Quote from: alfred russel on May 14, 2009, 02:48:48 PM
I don't know the details of the plan, but I wouldn't be quick to assume that the bondholders got a raw deal. Without government involvement, the company would have liquidated, and presumably the deal struck is giving the bondholders the pittance they would have gotten in liquidation. The only reason Chrysler has value as a going concern is because of the government's money, and understandably the government shouldn't be keen on that going to bondholders.

I do understand that some bondholders will be upset that they aren't getting anything extra, while the bank and AIG bondholders often were made 100% whole.

Quote from: Berkut on May 14, 2009, 02:37:36 PM

Quote from: Admiral Yi on May 14, 2009, 02:35:10 PM
Heard on the radio that the secured bondholders caved under threat of having their identities revealed.

Wow.

Tough to negotiate when the Unions have the president on their side, and he makes no bones about using his position to fuck you if you don't do as you are told.

Maybe Palin wouldn't have really been so bad...

Quote from: Berkut on May 14, 2009, 02:53:13 PM
Why is it understandable that government money should all be shoveled into the pockets of the UAW instead of the bondholders?

Quote from: Admiral Yi on May 14, 2009, 02:56:32 PM

I'm not shedding any tears for the unsecured bondholders.  But it seems the secured bondholders basically got blackmailed into signing off on the deal.

Quote from: Admiral Yi on May 14, 2009, 02:35:10 PM
Heard on the radio that the secured bondholders caved under threat of having their identities revealed.

Quote from: The Minsky Moment on May 14, 2009, 03:14:51 PM

Quote from: Admiral Yi on May 14, 2009, 02:35:10 PM
Heard on the radio that the secured bondholders caved under threat of having their identities revealed.

They would have to reveal their identities anyway if they wanted to make claims in a bankruptcy proceeding.  Smells a little fishy to me.

Quote from: Savonarola on May 14, 2009, 03:16:31 PM
They had asked to have their identities kept secret; they claimed they had received death threats.

Quote from: Admiral Yi on May 14, 2009, 02:56:32 PM
I'm not shedding any tears for the unsecured bondholders.  But it seems the secured bondholders basically got blackmailed into signing off on the deal.

Quote from: MadImmortalMan on May 14, 2009, 04:21:49 PM
If I were a bondholder, I'd have gone public and been a hero for scuttling the deal. Death threats be damned.

Quote from: The Minsky Moment on May 14, 2009, 03:47:24 PM

Quote from: Savonarola on May 14, 2009, 03:16:31 PM
They had asked to have their identities kept secret; they claimed they had received death threats.

That's all very exciting, but what did they think would happen if there was a bankruptcy?  You can't go to bankruptcy court and say "Hi - I am Mr. X - I have a security interest in this big pile of inventory here - hope you don't mind if i just walk off with it."  You have to prove your security interest and make public filings, and you can't do it under a pseudonym.

Quote from: DontSayBanana on May 14, 2009, 04:26:30 PM

Quote from: Admiral Yi on May 14, 2009, 02:56:32 PM
I'm not shedding any tears for the unsecured bondholders.  But it seems the secured bondholders basically got blackmailed into signing off on the deal.

I'm surprised we're not criticizing the media hype of this more; these disclosures are required with every bankruptcy filing, and it's just the media attention that has drawn the radical nuts to this issue in such large numbers. This is not the first messy bankruptcy, nor will it be the last. I'm also fairly sure it's not the first bankruptcy to involve a company that's been effectively subsidized by the government.

Without seeing the disclosures firsthand, I'm going to presume that these secured creditors were not shafted, that they were given fair liquidation value (that they would try to claim more than such value, citing government subsidies, is more than a little silly), but those are beside the point. The "shaft" came in the form of a decision that the rules would not suddenly be changed for a handful of bondholders to compensate for bad press.

Quote from: Hansmeister on May 14, 2009, 05:07:59 PM
Since the secured bondholders receive less than the unions for their unsecure claim is prove in itself that the creditors were shafted.

Quote from: Hansmeister on May 14, 2009, 05:07:59 PM
Since the secured bondholders receive less than the unions for their unsecure claim is prove in itself that the creditors were shafted.

Quote from: The Minsky Moment on May 14, 2009, 05:17:45 PM

Quote from: Hansmeister on May 14, 2009, 05:07:59 PM
Since the secured bondholders receive less than the unions for their unsecure claim is prove in itself that the creditors were shafted.

It is evidence of it but not proof in itself.  You would have to look at the benefits the union settlement brings to the reorganized entity.

Quote from: DontSayBanana on May 14, 2009, 05:22:06 PM

Quote from: Hansmeister on May 14, 2009, 05:07:59 PM
Since the secured bondholders receive less than the unions for their unsecure claim is prove in itself that the creditors were shafted.

Bullshit. The secured claims are processed according to the terms when the collateral was fronted; the unsecured claims are processed according to the value of the company's assets immediately prior to the bankruptcy- they're two totally different beasts.

Quote from: alfred russel on May 14, 2009, 03:06:27 PM
Maybe so, but from where I sit--which is an uninformed chair--they weren't pressured to give up more than they would have been entitled to in a liquidation; they were pressured not to demand a handout with the threat they would create a messy bankruptcy process.

Quote from: The Minsky Moment on May 14, 2009, 05:17:45 PM
It is evidence of it but not proof in itself.  You would have to look at the benefits the union settlement brings to the reorganized entity.

Quote from: The Minsky Moment on May 15, 2009, 10:33:37 AM
Is it really feasible to reorganize and hire an entire new workforce of non-union labor at the same time?

Quote from: The Minsky Moment on May 15, 2009, 08:57:35 AM
CDS are privately negotiated so what may constitute a triggering event may vary - a bnakruptcy filing is not necessarily required.

There is no connection between status as a secured lender and holding CDS (although secured lenders may indeed also be CDS holders)

A secured lender is just a lender who has obtained a secured interest in an identified asset in return for a loan.  Just like a mortgage in the RE context.  In the case of Chrysler it might be some equipment, or inventories of unsold cars, or real estate holdings, or receivables owed to them.  Holding a CDS is not a secured interest.

Quote from: MadImmortalMan on May 15, 2009, 10:35:12 AM

Quote from: The Minsky Moment on May 15, 2009, 10:33:37 AM
Is it really feasible to reorganize and hire an entire new workforce of non-union labor at the same time?

Only under liquidation and re-start I would think.

Quote from: The Minsky Moment on May 15, 2009, 10:33:37 AM
Is it really feasible to reorganize and hire an entire new workforce of non-union labor at the same time?

Quote from: alfred russel on May 15, 2009, 10:47:02 AM

Quote from: MadImmortalMan on May 15, 2009, 10:35:12 AM

Quote from: The Minsky Moment on May 15, 2009, 10:33:37 AM
Is it really feasible to reorganize and hire an entire new workforce of non-union labor at the same time?

Only under liquidation and re-start I would think.

But how would you do that? You would take over a bunch of plants with idle equipment and no one to run them or maintain them. How would you hire a competent workforce that could get the plants running before the equipment suffered too much damage and you weren't just a memory in the marketplace (after your suppliers and dealers moved on or went under). Even if you did do that, your workers would probably have a large number of ex UAW guys, what would keep them from unionizing again?

It is probably not very practical.

Quote from: The Minsky Moment on May 15, 2009, 12:09:30 PM
they would have to enter into an entirely new set of contracts for every single worker.  And the union would go all out to picket and pressure members against breaking ranks.

I am not saying its impossible.  Just that it is reasonable for a bankruptcy judge or trustee to think that it isn't the wisest course of action.

Quote from: KRonn on May 15, 2009, 11:23:14 AM
So, who is going to buy a Chrysler soon, or in the near future? Probably some good deals right now, and more in the future. I'm not a Chrysler fan and so far this all has an even more negative affect (on me) about buying Chrysler autos.

Quote from: Berkut on May 15, 2009, 12:15:32 PM
They would enter into the same set of contracts that every other employer in America uses - here is the deal, take it or leave it. Or they would take it, because at that point the union would no longer have any power.

And sure, the union would scream and yell, but that is kind of the point. The union needs to be broken, and given that the union IS the problem, to a great degree, I think it is certainly the wisest course of action.

Quote from: DGuller on May 15, 2009, 12:18:00 PM
Why do you need a contract for every single worker? 

Quote from: The Minsky Moment on May 15, 2009, 03:10:13 PM

Quote from: Berkut on May 15, 2009, 12:15:32 PM
They would enter into the same set of contracts that every other employer in America uses - here is the deal, take it or leave it. Or they would take it, because at that point the union would no longer have any power.

And sure, the union would scream and yell, but that is kind of the point. The union needs to be broken, and given that the union IS the problem, to a great degree, I think it is certainly the wisest course of action.

That will take time, and time is the biggest enemy of a reorg.

Quote from: The Minsky Moment on May 15, 2009, 03:10:45 PM

Quote from: DGuller on May 15, 2009, 12:18:00 PM
Why do you need a contract for every single worker? 

b/c most people won't work for free?

Quote from: DGuller on May 15, 2009, 03:47:32 PM
I think you're being deliberately obtuse now.  Majority of people work without contracts.  I don't have one, and I'm not working for free.

Quote from: DontSayBanana on May 15, 2009, 04:29:32 PM
Wrong. Almost every US employee has a contract that says what they will be paid in return for what work, and outlines procedures for grievances by and against the employer. Or are you working for minimum wage with no set of workplace guidelines?

Quote from: DGuller on May 15, 2009, 04:52:15 PM
:unsure: I don't have it.  I have an employee handbook, but it states specifically that nothing in it can be construed as a contract.  It also says that my employment is at will, and either party can terminate it at any moment without a consequence.  Maybe some legal mumbo-jumbo talker can accurately state I have some kind of implied contract, or something to that nature, but for all intents and purposes I don't have one.  No one I know does either.

Quote from: DontSayBanana on May 15, 2009, 04:55:33 PM
You don't have a negotiated contract; you do have an implicit one- the protections provided by FLSA and FMLA are pretty spartan. That implied contract is what you rely on when you make appeals to the labor relations board, for example.

Wiki sucks for in-depth analysis, but it's pretty good for definition: http://en.wikipedia.org/wiki/Employment_contract

Quote from: DGuller on May 15, 2009, 04:59:05 PM
Like I said, "implicit contract" is not what is commonly meant by a worker having a contract.

Quote from: DontSayBanana on May 15, 2009, 05:04:29 PM
What you're arguing is that contracts don't need to be negotiated for each worker. True enough, but the reasoning also lies behind the collective bargaining agreement; the idea that each worker has the right to negotiate a contract, or at least have a representative negotiate their contract.

Either way, unless you're going to run an incredibly sparse business and have no intention of paying anyone more than minimum wage, you're going to need to formulate some kind of contract, if only to be used as a placeholder for future employees.

Quote from: DontSayBanana on May 15, 2009, 04:29:32 PM

Quote from: DGuller on May 15, 2009, 03:47:32 PM
I think you're being deliberately obtuse now.  Majority of people work without contracts.  I don't have one, and I'm not working for free.

Wrong. Almost every US employee has a contract that says what they will be paid in return for what work, and outlines procedures for grievances by and against the employer. Or are you working for minimum wage with no set of workplace guidelines?

The UAW is not the sole source of the problems; in fact, it has nothing to do with much of the excessive mismanagement at Chrysler. 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?

Quote from: DGuller on May 15, 2009, 03:47:32 PM
I think you're being deliberately obtuse now.  Majority of people work without contracts.  I don't have one, and I'm not working for free.

Quote from: DGuller on May 15, 2009, 05:13:43 PM
Maybe, but JR made it sound like Chrysler would have to hold tends of thousands of protracted negotiations if they moved away from unions.

Quote from: Berkut on May 15, 2009, 03:11:25 PM
No, that will take an actual bankruptcy.

Honestly, they should just be allowed to fail. The cure is worse than the problem.

Quote from: The Minsky Moment on May 15, 2009, 05:59:34 PM

Quote from: DGuller on May 15, 2009, 05:13:43 PM
Maybe, but JR made it sound like Chrysler would have to hold tends of thousands of protracted negotiations if they moved away from unions.

They would have to hire an entire workforce from scratch, and even non-union there are procedures that have to followed to do that.

Quote from: alfred russel on May 15, 2009, 05:30:14 PM
This has to be about the 5th thread that "employment contracts" come up. I was going to post my "employment contract" sans salary, which told me my salary and then listed a bunch of legalese that basically nothing I see anywhere should be construed as giving me any legal rights and I'm at will meaning I can leave or be fired at a moment's notice. There are offer letters out there that specify that the letter is not a contract (I dont remember if mine says that or not).

If you want to call that a contract, fine. But the only term is my salary plus I guess the right to quit.

Quote from: DontSayBanana on May 15, 2009, 04:29:32 PM
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?

Quote from: JacobL on May 15, 2009, 09:58:35 PM
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.

Quote from: Berkut on May 15, 2009, 09:27:35 PM

Quote from: DontSayBanana on May 15, 2009, 04:29:32 PM
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?

Quote from: Hansmeister on May 15, 2009, 09:29:41 PM
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.

Quote from: DontSayBanana on May 16, 2009, 08:31:58 AM

Quote from: Berkut on May 15, 2009, 09:27:35 PM

Quote from: DontSayBanana on May 15, 2009, 04:29:32 PM
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.

Quote from: Zanza2 on May 16, 2009, 08:57:50 AM

Quote from: Hansmeister on May 15, 2009, 09:29:41 PM
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?  :huh:

Quote from: JacobL on May 15, 2009, 09:00:47 PM
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.

Quote from: KRonn on May 16, 2009, 09:18:12 PM
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.

Quote from: DontSayBanana on May 16, 2009, 08:31:58 AM

Quote from: Berkut on May 15, 2009, 09:27:35 PM

Quote from: DontSayBanana on May 15, 2009, 04:29:32 PM
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.

Quote from: DontSayBanana on May 16, 2009, 08:31:58 AM

Quote from: Berkut on May 15, 2009, 09:27:35 PM

Quote from: DontSayBanana on May 15, 2009, 04:29:32 PM
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.

Quote from: Hansmeister on May 17, 2009, 10:11:07 AM
It won't increase crysler's sales, but it will cut down on distribution costs.

Quote from: dps on May 17, 2009, 08:47:00 PM
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.

Quote from: DontSayBanana on May 17, 2009, 10:41:09 PM

Quote from: dps on May 17, 2009, 08:47:00 PM
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.

QuoteThe Rise and Fall of Detroit
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Read More: American Automobile Industry, Auto Industry, Big Three Automakers, Cars, Celebrities Talk Politics, Chevrolet, Corvette, Detroit Bailout, Ford, Business News
     
I was growing up, some kids dreamed of owning cars like a Trans Am, Camaro, Firebird, Corvette, Chevelle or GTO. Stock or tricked out, owning one of the fastest street cars that American automakers turned out was a dream come true. Mustangs were for the West Coast. Chevy ruled the road on Long Island in the1960's and 70's.

Back then, in the middle class neighborhood where I grew up, foreign cars were for foreigners. As fuel economy began to become an issue, NOBODY in my neighborhood gave a thought to buying a Japanese car. Nobody. OPEC appeared and gas shortages came and went. You went Ford, Chevy, Chrysler. That was it. I have a feeling that it was like that in most American middle class neighborhoods back then.

The fact that we have arrived where were are now is painful. Americans, who are being asked to invest billions upon billions of dollars in US automakers and their employees' futures, have already been investing in those companies, against their better interests, for decades. Now Chrysler is dead, GM is on critical life support and Ford has cancer but may beat it.

What do you care?

The heads of these corporations did not spend the last thirty years lying in bed each night, sleepless. They did not turn their spouses in the wee hours and say, "How do I serve the automotive needs of the American public and better protect their health and safety AND help them conserve energy?" They never said that.

Instead, they spent billions of dollars attempting to bribe the Congress to avoid putting in seat belts and air bags, installing catalytic converters and reaching more ambitious fuel efficiency standards. For the most part, they succeeded. Congress approached those issues with the same combination of sentiment, fealty and fear that Detroit's customers accepted. It was said to be "bad for Detroit." Little did we know that falling for that bull for so long was what was bad for Detroit. Now, the American automotive industry, once the industrial pride of this country and a source of so many great paying jobs that changed the economic fortunes of millions of Americans in assembly, parts, dealerships and service, is about to go away.

What do you care?

I feel horribly for every single man and woman who will suffer as the result of this heartbreaking turn of events. I was the voice of Chevy Tahoe TV spots for five years in the early 90's. I drove a Tahoe then and loved it. Now, I drive a Prius.

I've owned Mercs, Chevys, Fords and Jeeps. I'm in the market for a new car now. I'll probably get a hybrid from a Japanese company, manufactured at a transplant factory in the American South. (Read the excellent recent article in the New Yorker by Peter Boyer about the path the Big Three and the UAW took to get here.) I'd like to buy an American car, but I'd feel like a fool doing that now. The leadership of the biggest automakers made sure of that.

There can be only one legitimate response to this crisis. Let energy conservation and fuel efficiency rule the day. Let the carmakers go under. In the same way we have subsidized Big Oil by destabilizing the governments of petroleum rich countries, or outright invading them, we have subsidized Detroit long enough. Just as every barrel of oil is undervalued because we do not factor in that portion of the defense budget that helped bring that oil to market, so we have undervalued our government's, and therefore our, complicity in producing cars that not only were inferior, but drove Detroit itself right off a cliff.

From the ashes of such great innovation, hard work, beautiful design and extraordinary branding-as-myth-making, let's have better cars.

From the ashes of arrogance, greed and corporate cowardice, let's have better cars.

Until then, pull the plug.

Quote from: Savonarola on May 19, 2009, 09:14:54 AM
It's amusing that Alec doesn't show the slightest bit of shame for shilling for a corporation that, according to him, spent billions bribing congress.

Quote from: Neil on May 19, 2009, 09:53:51 AM
Also, destabilizing the governments of oil-rich countries?  Last time I checked, the governments of Saudi Arabia, the UAE and Qatar got a lot of help from the US, and Kuwait owes its existance to the US.

QuoteZetsche: 'Strong hope' for Chrysler-Fiat success
David Shepardson / Detroit News Washington Bureau
Washington -- Daimler AG board chairman Dieter Zetsche said Tuesday the deal to sell the German automaker's 19.9 percent stake in Chrysler LLC was "certainly not cheap for us."

On April 27, Daimler agreed to sell its remaining shares in Chrysler. As part of the deal, Daimler said it will forgive a $1.5 billion loan to Chrysler after ownership transferred to Cerberus Capital Management LP. Daimler also agreed to pay $600 million into Chrysler's pension plans in three installments, the last in 2011, to ensure pension payments for former DaimlerChrysler employees.

The deal came after complex talks with the U.S. Treasury, the UAW, the two automakers and Cerberus.

"It was certainly a fair package altogether for all parties involved," Zetsche told reporters at a briefing, saying he was "very satisfied" with the deal.

Daimler has been strapped for cash and agreed in March to sell a 9.1 percent stake in the company to Abu Dhabi's Aabar Investments PJSC to raise about $2.7 billion.

Zetsche, who ran Chrysler Group when it was part of DaimlerChrysler, said he hoped the Auburn Hills automaker's planned alliance with Italian automaker Fiat SpA would succeed.

"I certainly do hope that some of the strengths Fiat can bring to the party will help Chrysler and vice versa so that it can be stronger than a stand-alone form," said Zetsche, acknowledging that it is "very difficult to make that assessment from the outside."

Zetsche noted he still has many friends at Chrysler and has a "strong hope" that the automaker succeeds.

Quote from: Savonarola on May 19, 2009, 04:11:58 PM
...to sell a 9.1 percent stake in the company to Abu Dhabi's Aabar Investments PJSC to raise about $2.7 billion.

Quote from: Neil on May 19, 2009, 07:14:01 PM

Quote from: Savonarola on May 19, 2009, 04:11:58 PM
...to sell a 9.1 percent stake in the company to Abu Dhabi's Aabar Investments PJSC to raise about $2.7 billion.

Not a great investment on the part of the Arabs.

Quote from: DontSayBanana on May 19, 2009, 08:57:16 PM
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?

Quote from: Savonarola on May 19, 2009, 04:11:58 PMSome Daimler people were quoted anonymously in the Detroit News as saying "The Italians will steal milk out of coffee," so it's not really a surprise that they're eager to leave before a Fiat deal goes through.  Still that looks like a pretty awful deal for Daimler.

Quote from: Neil on May 19, 2009, 07:14:01 PMNot a great investment on the part of the Arabs.

Quote from: DGuller on May 20, 2009, 12:57:24 AM
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.

Quote from: citizen k on May 18, 2009, 12:47:52 AM
Too bad many of the closing dealerships were "healthy".  :cry:

Quote from: Zanza2 on May 20, 2009, 12:42:03 AM
Their stake at current market price is already worth about 25% more. They bought at exactly the right time.

Quote from: Admiral Yi on May 20, 2009, 01:05:55 AM
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.

Quote from: DGuller on May 20, 2009, 08:12:39 AM

Quote from: Admiral Yi on May 20, 2009, 01:05:55 AM
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.  :huh:

Quote from: DontSayBanana on May 19, 2009, 08:57:16 PM
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?

Quote from: Admiral Yi on May 20, 2009, 01:05:55 AM

Quote from: DGuller on May 20, 2009, 12:57:24 AM
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.

Quote from: The Minsky Moment on May 20, 2009, 04:53:23 PM
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.

Quote from: Admiral Yi on May 20, 2009, 11:32:14 PM
Which prevented Americans from buying more fuel efficient cars how?

Quote from: Valmy on May 20, 2009, 11:34:11 PM

Quote from: Admiral Yi on May 20, 2009, 11:32:14 PM
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.

Quote from: Ed Anger on May 21, 2009, 07:15:00 AM
I'm going to go looking at a dealership that is going down today. I hear there is some bargains out there.

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

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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."

Quote from: FT

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.

QuoteObama 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.

QuoteChrysler 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.

QuoteObama 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.

QuoteHigh 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."

Quote from: Neil on June 08, 2009, 04:22:35 PM
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. 

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

Quote from: Habsburg on June 08, 2009, 04:40:51 PM

Quote from: Neil on June 08, 2009, 04:22:35 PM
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. 

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

I agree.

I am glad Ginsberg stopped this travesty.

Quote from: Neil on June 08, 2009, 04:43:43 PM
You removed the racist part of my post.  :(

Quote from: Habsburg on June 08, 2009, 04:49:12 PM

Quote from: Neil on June 08, 2009, 04:43:43 PM
You removed the racist part of my post.  :(

That is because I only recognize the late Sir Ian Smith's government in Salisbury.

Quote from: Neil on June 08, 2009, 07:40:47 PM

Quote from: Habsburg on June 08, 2009, 04:49:12 PM

Quote from: Neil on June 08, 2009, 04:43:43 PM
You removed the racist part of my post.  :(

That is because I only recognize the late Sir Ian Smith's government in Salisbury.

Sir Ian died.  :(

It's interesting to note that he was right about what would happen to RHODESIA.

Quote from: The Minsky Moment on June 08, 2009, 06:42:48 PM
The objectors have done a very good job of confusing the issue in their public rhetoric - with support from media outlets who either know nothing of the legal issues involved or don't care.  And the government has not done a good PR job of explaining its legal position as the sound bite from Kagan indicates.

In reality, the government's legal position is pretty sound and grounded in precendent, while it is the objector's position that is legally innovative in that it seeks to have the court's recognize new limitations on a bankruptcy court to hold a section 363 sale.

There is a reason why only one set of secured creditors representing $40-50 million of over $6 billion in secured debt are suing.  It is the same reason why the 2nd circuit unaminously affirmed for the government.  The reason is that the law favors the government.

Quote from: DontSayBanana on June 08, 2009, 08:38:47 PM
Interesting. The bit that caught my eye wasn't bolded, though. Is it common for manufacturing companies to be shielded from product liability claims for the duration of the process?

Quote[T]the leading case on this issue, In re Trans World Airlines, Inc., 322 F.3d 283 (3d Cir. 2003) ("TWA"), makes clear that such tort claims are interests in property such that they are extinguished by a free and clear sale under section 363(f)(5) and are therefore extinguished by the Sale Transaction.

Quote from: Scipio on June 08, 2009, 09:07:06 PM
Those Indiana pension plan guys are dicks, IMHO.  I hope that they get shit on like the sad little fucks they are.  And I hope they take down the Chrysler bankruptcy with them.  We should have bankrupted Chrysler six months ago.  And GM, too.  The fucks.

QuoteIn Supreme Court, Chrysler bankruptcy paves new legal road

It doesn't take a law degree to understand why the fate of Chrysler LLC and its ostensibly life-saving deal with Fiat SpA of Italy now rests with the U.S. Supreme Court.

We're making new law here, this Obama administration-driven attempt to speed insolvent automakers through bankruptcy court and, at the same time, to unilaterally rearrange the order of creditors, their status and what -- if anything -- they stand to recoup from the process.

The relevant facts: Chrysler's bankruptcy, barely five weeks old, hinges on delivering more value and more of the company to such unsecured creditors as the United Auto Workers at the expense of secured creditors like three Indiana pension funds and similar bondholders.

Whatever the wisdom of investing public pension money in the dodgy future of Chrysler, the Indiana funds' managers invested in bonds secured by the assets of the company -- meaning they would be at the front of the line for repayment should Chrysler go bankrupt. But they aren't in the Obama workout, which is why they're suing despite enormous political pressure to swallow their losses gladly and shut up.

"By refusing to make the relatively small sacrifices that would avert a calamity," Rep. John Dingell, D-Dearborn, said in a statement, "the pension funds will instead create a great catastrophe, which is the same kind of short-sighted thinking that got us into the Great Depression."

The implications of how the Supremes rule -- if they decide to review the case -- could be enormous for business in America. Here the promise and fact of an economy governed by the rule of law has been a cornerstone of commerce, distinguishing us from the arbitrary predations of political strongmen, demagogues and populist backlash.

This is a crossroads. Not just for Chrysler, likely to collapse into liquidation if its alliance with Fiat is not consummated by June 15 or so. But for the credibility -- legality, even -- of the Obama auto task force's effort to steer two of Detroit's three automakers through bankruptcy and onto a road to revival.

Team Obama should welcome a review by the Supreme Court. Otherwise, its heavy-handed auto bailouts risk being de-legitimized by the taint of potential illegality and "crony capitalism" that rewards friends (the UAW) at the expense of the political undesirables (the investor class, post-global financial meltdown).

But that's not all. The auto task force's pressure tactics with Chrysler's secured bondholders and the unsecured bondholders in bankrupt General Motors Corp. send a chilling message to the capital markets -- namely, the rules governing investments don't apply if they clash with political goals.

How, exactly, would these emerged-from-bankruptcy companies raise private capital in the months and years ahead? Who would invest in a "new GM" and Chrysler-Fiat, given the pounding suffered by the Indiana funds, creditor Perella Weinberg and others who resisted the government cram-down?

Successful automakers consume large amounts of capital every year to finance operations, develop product and do advanced research. If the likes of the Indiana pension funds or private equity players won't plump for GM and Chrysler, they'll once again become cash-starved and remain dependents of the federal government.

Would this be the business model the president deemed "viable?" Or would it be an unintended consequence of manipulating the process to ensure a politically acceptable solution to a Democratic president whose party controls Congress?

More than the fate of Chrysler, its employees, retirees and communities depend on what the Supreme Court decides. The course of GM's bankruptcy, larger and far more complex, could be dramatically altered and slowed, increasing the risk to a "new GM" that needs to emerge quickly from bankruptcy to stanch declining revenue.

For tens of thousands, this is not an arcane legal opinion, far away. It's the difference between a job and looking for one.

Quote from: Barrister on June 09, 2009, 01:08:01 PM
Where's the article from Sav?

It has a frothing-at-the-mouth quality that might be expected of the Weekly Standard.

Quote from: garbon on June 09, 2009, 01:11:59 PM
Detroit News

Quote from: DGuller on June 09, 2009, 01:34:29 PM
As a slight aside, what is there in Chrysler that could still be worth saving?  Their distribution network?  Their cars are pretty much uniformly junk on wheels.

Quote from: Valmy on June 09, 2009, 01:50:30 PM
Both Automakers are doomed and we are tossing money to keep alive a corpse before it goes into rigor mortis.

We should allow both GM and Chrysler to die and let their remaining competitors buy up whatever assets they had worth saving.

I mean that is going to happen in a few years anyway so why are we working so hard and spending so much money to make sure they are liquidated in 2011 instead of 2009?

Quote from: Berkut on June 09, 2009, 01:53:29 PM

Quote from: Valmy on June 09, 2009, 01:50:30 PM
Both Automakers are doomed and we are tossing money to keep alive a corpse before it goes into rigor mortis.

We should allow both GM and Chrysler to die and let their remaining competitors buy up whatever assets they had worth saving.

I mean that is going to happen in a few years anyway so why are we working so hard and spending so much money to make sure they are liquidated in 2011 instead of 2009?

Nah, we should pump more billions than the companies are actually worth into them. We can give the UAW employees jobs waving the rotting, pestulant arms around so people might think they are still alive.

Quote from: Valmy on June 09, 2009, 01:50:30 PM
Both Automakers are doomed and we are tossing money to keep alive a corpse before it goes into rigor mortis.

We should allow both GM and Chrysler to die and let their remaining competitors buy up whatever assets they had worth saving.

I mean that is going to happen in a few years anyway so why are we working so hard and spending so much money to make sure they are liquidated in 2011 instead of 2009?

Quote from: Iormlund on June 09, 2009, 02:19:03 PM
GM may have some useful stuff, but I can't help but wonder if it's worth much in the current situation. Every manufacturer is cutting production. It doesn't make sense for Honda or Toyota to buy another plant in these circumstances.

Quote from: Berkut on June 09, 2009, 02:22:57 PM
Nor would they want one of those plants anyway. Probably MUCH better off building their own somewhere that they can get a good local deal on taxes and labor. Just like they do now.

Quote from: Barrister on June 09, 2009, 02:42:30 PM

Quote from: Berkut on June 09, 2009, 02:22:57 PM
Nor would they want one of those plants anyway. Probably MUCH better off building their own somewhere that they can get a good local deal on taxes and labor. Just like they do now.

And then have Michigan wind up with another dozen packard plants, sitting empty and vacant for 50 years and falling into disrepair so great the fire department fears to enter?

Quote from: Barrister on June 09, 2009, 02:42:30 PM

Quote from: Berkut on June 09, 2009, 02:22:57 PM
Nor would they want one of those plants anyway. Probably MUCH better off building their own somewhere that they can get a good local deal on taxes and labor. Just like they do now.

And then have Michigan wind up with another dozen packard plants, sitting empty and vacant for 50 years and falling into disrepair so great the fire department fears to enter?

QuoteThe Deferred Prosecution Deal the White House Doesn't Want You To Know About
Morgen on June 9, 2009

Late in the day yesterday, the Supreme Court stepped in and at least temporarily halted the sale of Chrysler to Fiat. A handful of creditors, including the pension fund for the State of Indiana, have challenged the legality of the transaction on the basis that unsecured creditors (namely, the UAW) were given preferential treatment over secured creditors. Ironically, it was Justice Ginsberg who at the 11th hour ordered the sale to be put on hold. But it remains unclear her exact reason for doing so and whether the Supreme Court will actually take up this case for review.

Obama's auto bailout "task force" has been aggressively pushing the Chrysler-Fiat deal through the bankruptcy process, claiming that any delay in finalizing the transaction could cause the deal to fall apart since Fiat has the right to back out if the deal is not closed by June 15. However, according to news reports today, a spokesman for Fiat has said that they "will never walk away" from the deal even if the June 15 deadline passes.

This struck me as a little odd given the definitive nature of this statement, which seems to clearly contradict the sense of urgency that has been fostered by Chrysler and it's benefactors in the Administration. Perhaps it can be explained by the fact that Fiat is receiving a 20% equity stake in a restructured Chrysler while contributing nothing (that's right - $0). But I wondered whether there still might be more to this. Especially in light of a report in the Wall Street Journal over the weekend that claimed that the Obama Administration had forced the Fiat deal on Chrysler. Despite reservations on the part of Chrysler management regarding Fiat's financial condition, and Fiat's failure to disclose information that had been requested. According to the WSJ report, an unnamed Chrysler advisor even went so far as to express concern that the perception might ultimately be that they "were in bed with a shady partner", meaning Fiat.

There is more truth to this statement than perhaps he knew, and it apparently applies not only to Fiat but to those in the Administration behind this deal as well. It turns out that back on December 22, right before Christmas, the U.S. Justice Department reached a settlement of sorts with Fiat and a group of affiliated companies. Fiat apparently had been under DOJ investigation for their participation in the UN "Oil for Food" scandal dating back to the early to mid 90's (updated: and continuing through 2003). I called this a "settlement of sorts" because in actuality it is a deferred prosecution agreement, where the DOJ filed but deferred prosecution against Fiat on charges including wire fraud, falsification of books and records, and conspiracy.

In exchange for Fiat signing a "Statement of Facts" admitting to and accepting responsibility for these crimes, and remitting a penalty of $7 million to the U.S. Treasury, the DOJ agreed to defer any further prosecution for a period of 3 years. Importantly, during this 3 year period Fiat is required to "cooperate fully with the Department and any other authority or agency, domestic or foreign, designated by the Department" in allowing the U.S government full access to their books and other financial records to verify that no further corrupt or fraudulent activity has taken place. If, and only if, they are deemed to have been in full cooperation with no additional violations has the DOJ agreed to move to actually dismiss the underlying charges.

Gee, do you think this arrangement just might give the U.S Government a little bit of leverage in dealing with Fiat related to the Chrysler transaction? Could it be any more obvious that the DOJ was pressured to reach a settlement agreement with Fiat in order to clear the decks for the Fiat-Chrysler deal? A deal which was first announced in mid-January, just weeks after the Deferred Prosecution Agreement was finalized. Could it be any more obvious that the timing of this settlement, right before Christmas, was intended to draw as little attention as possible? (It was very lightly reported, primarily by the international press. This London Times article was one of the only examples I found in the mainstream news media).

Now I realize that December 2008 was in the waning few weeks of the Bush Administration. So if the inferences I've made are correct, this would mean that officials in the Bush Administration were complicit in working out the terms of this deal in order to clear the way for the Chrysler deal. However, given the extent to which the Bush White House was in coordination with the Obama transition team, I very much doubt that this was done without the knowledge of Obama's economic advisers and likely Obama himself.

And it's beside the point. The bottom line seems to be that the U.S Justice Department acceded to political pressure to reach an agreement with Fiat, which is an inappropriate administration of justice no matter who was complicit in the arrangement. And as far as I'm concerned, it calls into serious question the legitimacy of the entire Fiat-Chrysler deal itself. We have a U.S. Administration actively pushing for AND FINANCING a transaction between a U.S. auto maker and a foreign auto maker who is under a deferred prosecution arrangement for corruption and fraud. I am tempted to make a joke about the fact that the resulting company would be controlled by a 75% ownership stake between Fiat and the UAW (talk about "shady partners")...but there is really nothing funny about this given the amount of tax payer dollars that have been spent bailing out Chrysler. Someone has some explaining to do.

Quote from: Valmy on June 09, 2009, 01:50:30 PM
Both Automakers are doomed and we are tossing money to keep alive a corpse before it goes into rigor mortis.

We should allow both GM and Chrysler to die and let their remaining competitors buy up whatever assets they had worth saving.

Quote from: Hansmeister on June 09, 2009, 05:10:51 PM
A blogger named Verum Serum rases some interesting questions:

Quote from: Savonarola on June 09, 2009, 04:30:12 PM
Detroit's major advantages as a hub of both rail and water traffic were eliminated with the creation of the highway system,

Quote from: The Minsky Moment on June 09, 2009, 05:31:30 PM

As for GM - there is no competitor out there that can swallow it whole or come close, and not all the lines and brands can be shed off easily.  There are selling off those lines that can be sold to stand-alone buyers, and stripping down the rest of the business.  If it is properly run going forward, I see no reason why it cannot survive.

Quote from: Berkut on June 09, 2009, 06:57:03 PM

Quote from: The Minsky Moment on June 09, 2009, 05:31:30 PM

As for GM - there is no competitor out there that can swallow it whole or come close, and not all the lines and brands can be shed off easily.  There are selling off those lines that can be sold to stand-alone buyers, and stripping down the rest of the business.  If it is properly run going forward, I see no reason why it cannot survive.

Do you see any reason to believe a corporation owned and run by the UAWand the US government would be run "properly" going forward?

Quote from: jimmy olsen on June 09, 2009, 07:42:53 PM
The Court's gonna let the deal go through.

http://www.msnbc.msn.com/id/31185911/

Quote from: jimmy olsen on June 09, 2009, 07:42:53 PM
The Court's gonna let the deal go through.

http://www.msnbc.msn.com/id/31185911/

Quote from: Berkut on June 09, 2009, 06:57:03 PM
Do you see any reason to believe a corporation owned and run by the UAWand the US government would be run "properly" going forward?

Quote from: Berkut on June 10, 2009, 12:42:42 PM
No, I could not imagine they would use their equity stake to muck around with management decisions like pay and benefits.

I am sure if the new CEO comes along and tells them he is going to cut their salaries they will be all "OK, yous the boss Mr. CEO!"

Quote from: I Killed Kenny on June 10, 2009, 12:57:41 PM
YUROPE OWNS THE USA! :yeah:

Quote from: Barrister on June 10, 2009, 01:01:12 PMAnd how exactly are they going to "muck around with management decisions" with a minority stake?  They'll get to nominate a minority of the board of directors, but otherwise they'll have no say over the operation of the company.

Quote from: Barrister on June 10, 2009, 01:01:12 PM

Quote from: Berkut on June 10, 2009, 12:42:42 PM
No, I could not imagine they would use their equity stake to muck around with management decisions like pay and benefits.

I am sure if the new CEO comes along and tells them he is going to cut their salaries they will be all "OK, yous the boss Mr. CEO!"

And how exactly are they going to "muck around with management decisions" with a minority stake?  They'll get to nominate a minority of the board of directors, but otherwise they'll have no say over the operation of the company.

Quote from: Savonarola on June 10, 2009, 01:03:23 PM
Not the first time, but I can understand your excitement since it worked so well the last time a European company owned Chrysler.

Quote from: Savonarola on June 10, 2009, 01:03:23 PMNot the first time, but I can understand your excitement since it worked so well the last time a European company owned Chrysler.

Quote from: Berkut on June 10, 2009, 01:07:57 PM

Quote from: Barrister on June 10, 2009, 01:01:12 PM

Quote from: Berkut on June 10, 2009, 12:42:42 PM
No, I could not imagine they would use their equity stake to muck around with management decisions like pay and benefits.

I am sure if the new CEO comes along and tells them he is going to cut their salaries they will be all "OK, yous the boss Mr. CEO!"

And how exactly are they going to "muck around with management decisions" with a minority stake?  They'll get to nominate a minority of the board of directors, but otherwise they'll have no say over the operation of the company.

LOL, and who owns the bulk of the majority stake to oppose them?

Oh right, the US government. The ones who ahnded them that "minority stake" to begin with. The ones who ahve also sworn they won't involve themselves in the management of the company.

My disdain for the UAW is well know, but I would think even a fan of unions could see how screwed up this entire plan is.

Quote from: Savonarola on June 10, 2009, 01:03:23 PM

Quote from: I Killed Kenny on June 10, 2009, 12:57:41 PM
YUROPE OWNS THE USA! :yeah:

Not the first time, but I can understand your excitement since it worked so well the last time a European company owned Chrysler.

Quote from: Barrister on June 10, 2009, 01:29:20 PM
UAW may attempt to keep benefits and wages high but is still a rational actor and is not ging to drive the company into bankruptcy. 

Quote from: Berkut on June 10, 2009, 01:34:27 PM
Making good cars and returning a profit to the shareholders? Could not care less.

Quote from: Iormlund on June 10, 2009, 01:43:02 PM

Quote from: Berkut on June 10, 2009, 01:34:27 PM
Making good cars and returning a profit to the shareholders? Could not care less.

To be fair I wouldn't care either about that if I were a blue collar worker at an auto assembly line. As an engineer, I can look at my finished work and take pride in it: "I've made this happen!". As someone who puts some bolts in the same place for years on end, I'd probably think much differently.

Quote from: Berkut on June 10, 2009, 01:34:27 PM
But they've already done that. Why would I assume they would not do so again? They buy into the canard that if the company fails, it *certainly* can have nothing to do with their own salaries and bennies, or their lack of productivity - indeed, they *always* deserve more and more for less and less, by definition, so any failure is in spite of them, not because of them.

The UAW is going to look at this perfectly rationally - their goal will be to get as much money from the Fed as possible, for as long as possible. Which is their goal right now, and they are succeeding at it admirably.

Making good cars and returning a profit to the shareholders? Could not care less.

Quote from: Berkut on June 10, 2009, 01:47:51 PM
Which is my point - a system where the people who repersent labor are in a position to dictate the operations of the company is bound to fail. Even if you love unions, you should be able to see that is the case.

It is like saying that we should let the defense attorney have a vote on the jury, or the DA for that matter.

Quote from: Berkut on June 10, 2009, 01:47:51 PMWhich is my point - a system where the people who repersent labor are in a position to dictate the operations of the company is bound to fail. Even if you love unions, you should be able to see that is the case.

Quote from: Zanza2 on June 10, 2009, 02:39:55 PM
The German corporate governance code for stock corporations (e.g. Volkswagen, Daimler, BMW, Porsche) necessitates that 50% of the supervisory board members are worker's representatives. The other half represents the stock owners. However, the stock owners always have the president of that board who acts as a tie breaker, i.e. 50%+1 vote. While the supervisory board does not interfere with daily operations it still chooses the CEO and other management board members and must agree with strategic decisions (such as opening a new plant, big aquisitions). So having workers representatives (usually mostly union bosses) on the supervisory board does not necessarily make an economic enterprise unviable.

Quote from: Barrister on June 10, 2009, 01:55:33 PMExcept that there are examples of successful woreker-owned companies.  There are reasons why lots of companies encourage employee stock ownership.  Volkswagen seems to be doing pretty well.

Quote from: DGuller on June 10, 2009, 02:43:02 PM

Quote from: Zanza2 on June 10, 2009, 02:39:55 PM
The German corporate governance code for stock corporations (e.g. Volkswagen, Daimler, BMW, Porsche) necessitates that 50% of the supervisory board members are worker's representatives. The other half represents the stock owners. However, the stock owners always have the president of that board who acts as a tie breaker, i.e. 50%+1 vote. While the supervisory board does not interfere with daily operations it still chooses the CEO and other management board members and must agree with strategic decisions (such as opening a new plant, big aquisitions). So having workers representatives (usually mostly union bosses) on the supervisory board does not necessarily make an economic enterprise unviable.

I've heard of this before.  I'm curious, how does it work out in practice?  Does it lead to some unique German problems in corporate governance?

Quote from: MadImmortalMan on June 10, 2009, 02:47:10 PM

Quote from: DGuller on June 10, 2009, 02:43:02 PM

Quote from: Zanza2 on June 10, 2009, 02:39:55 PM
The German corporate governance code for stock corporations (e.g. Volkswagen, Daimler, BMW, Porsche) necessitates that 50% of the supervisory board members are worker's representatives. The other half represents the stock owners. However, the stock owners always have the president of that board who acts as a tie breaker, i.e. 50%+1 vote. While the supervisory board does not interfere with daily operations it still chooses the CEO and other management board members and must agree with strategic decisions (such as opening a new plant, big aquisitions). So having workers representatives (usually mostly union bosses) on the supervisory board does not necessarily make an economic enterprise unviable.

I've heard of this before.  I'm curious, how does it work out in practice?  Does it lead to some unique German problems in corporate governance?

It sounds pretty good to me, but the difference is that in Germany the "workers' representatives" represent the workers and not some backroom gangsters and labor cartels. Plus, the rules under which unions operate there are different than they are in the US and, IMO, lead to a much better union service to the employees.

Quote from: DGuller on June 10, 2009, 02:43:02 PMI've heard of this before.  I'm curious, how does it work out in practice?  Does it lead to some unique German problems in corporate governance?

Quote from: Berkut on June 10, 2009, 02:52:04 PMI cannot say I know a lot about how it works in Germany, but I would venture to guess that the German economic and labor model is sufficiently different from the US as to render the comparisons somewhat moot.

QuoteI could be wrong, but I think I will need more than "Yeah, but VW has employee owners and they do fine!" to be convinced that having the UAW run Chrysler or GM is a good idea.

Quote from: Admiral Yi on June 10, 2009, 03:12:33 PM
Doesn't Germany have a national labor board that negotiates pay increases nationwide, like Scandilonia?

QuoteIf so that would seem to be a major difference right there.

Quote from: The Minsky Moment on June 10, 2009, 11:50:52 AM

Quote from: Berkut on June 09, 2009, 06:57:03 PM
Do you see any reason to believe a corporation owned and run by the UAWand the US government would be run "properly" going forward?

The new CEO the feds put in place seems to have his head screwed on straight.  the real question going forward will be when the UAW uses their equity stake to muck around with management decisions.  When that happens I agree it doesn't look good.

Quote from: Syt on June 10, 2009, 11:39:44 PM
Zanza, do you guys still have the Steinkühler-break? :P

QuoteWhat I found galling was when a couple years ago when there was talk of re-introducing the 40 hour week for automobile workers one of employees' representatives said something along the lines, "Please remember we have many older employees over 45 - certainly not all of them are still capable of working 40 hours a week!"

At the same time, our company had 50 year old construction workers do 60+ hours in seven day weeks during crunch time.

Quote from: Zanza2 on June 10, 2009, 02:39:55 PM
The German corporate governance code for stock corporations (e.g. Volkswagen, Daimler, BMW, Porsche) necessitates that 50% of the supervisory board members are worker's representatives.

Quote from: I Killed Kenny on June 10, 2009, 01:31:14 PM

Quote from: Savonarola on June 10, 2009, 01:03:23 PM

Quote from: I Killed Kenny on June 10, 2009, 12:57:41 PM
YUROPE OWNS THE USA! :yeah:

Not the first time, but I can understand your excitement since it worked so well the last time a European company owned Chrysler.

I have no idea what you are talking about :p

Quote from: grumbler on June 11, 2009, 11:11:49 AM
I think a lot of people are confusing "employee ownership of stock" with "union ownership of stock" when they are two entirely different things.

QuoteGM, Chrysler spar with House on dealer closings
By Justin Hyde • Free Press Washington Staff • June 12, 2009

WASHINGTON – U.S. House members vented their frustration at General Motors Corp. and Chrysler Group LLC's dealer closings today, demanding a fuller explanation of how the automakers made their choices and whether they would save any money.

As they did in a previous Senate hearing, executives from both automakers defended their decisions and the methods they were using to aid dealerships targeted to close, saying only a handful of dealers had refused help.

But lawmakers aggressively questioned the rationale and motivations behind the cuts, criticizing them as uncertain and unfair. Rep. Greg Walden, R-Ore., played a computer animation showing the 136-mile drive that GM customers in Burns, Ore., will now have to make to reach the nearest GM dealer for service.


"We have yet to get a clear answer on how this so-called rationalization will save the automakers and taxpayers money," Walden said


And a passel of dealers refutes the companies' claims, contending the criteria used by the automakers were unclear and made little business sense on either end. Frank Blankenbeckler, a dealer from Waxahachie, Texas, said he received letters from GM and Chrysler saying his Chevrolet and Chrysler franchises were being cut within a day of each other.


"In 24 hours, I was told that everything my family and I had worked for for 84 years would be taken away without any compensation," Blankenbeckler said.


The hearing, the second in two weeks on the plight of GM and Chrysler dealers, highlight the political sway that auto dealers command. Most auto dealerships are family-owned companies that typically rank among the largest local businesses in their areas – giving them a strong calling card with elected officials.


Auto dealers also contributed $9.2 million to federal political campaigns in 2008.


GM Chief Executive Fritz Henderson said GM's cuts of 2,200 to 2,500 dealerships would save the automaker $2.5 billion a year, adding that a majority of GM dealers were not profitable today. He emphasized the cuts made among GM's workers, investors and retirees, and said the Obama auto task force and many industry experts had long said GM needed fewer dealers.

GM said that from the 1,300 dealers it sent closure notices to as part of its bankruptcy, it had received 856 appeals and reversed 45 decisions. Henderson also said dealers who had signed "wind-down" agreements could not order 2010 model year vehicles. Those agreements were due back to GM today.


"GM's remaining dealerships will be better positioned to keep their current GM customers, while aggressively marketing to take sales from competitors," Henderson said.

The House Oversight committee released documents from GM showing that the company graded its dealers to decide which ones would be targeted to close, with sales accounting for half the score and customer service responsible for 30%. A state-by-state breakdown shows GM plans to close 58 dealers in Michigan.

Chrysler Group Deputy CEO Jim Press said the 789 dealer cuts Chrysler made earlier this week were necessary for Chrysler's survival, and were driven by its bankruptcy. He said Chrysler had not drawn up any plans for such cuts before it filed for bankruptcy last month, but had to move quickly given the speed of the sale to the partnership with Fiat SpA.

Press once again estimated the cost of the closed dealerships at $3.1 billion, including $1.5 billion in "lost" sales due to poor sales performance. He said Chrysler was trying to help closed dealers, and that of the 42,006 vehicles held by those stores, all but 220 had been transferred with the company's help.

"Going through bankruptcy was not our choice," Press said, adding "we've got 2,391 dealers in small towns, with Little Leagues, with employees, whose jobs were saved."

Press also defended comments he made during a conference call with dealers reported by Automotive News in February, where he pressed Chrysler dealers to order more vehicles and said the company "had a good memory" of which dealers would help the company.

Press said the statement was not meant as a threat.

"I would never threaten a dealer," he said. "I would say that under any oath."

GM and Chrysler have long maintained they would need fewer dealerships, but have been hamstrung from making such broad cuts under a bevy of state franchise laws that force automakers to buy out dealers they want to close. Press said Honda Motor Co. and Toyota Motor Co. sold three times more vehicles per dealer than Chrysler had.

But Henderson said GM would continue to hear appeals from dealers.

"The process is intended to be data driven, but the data isn't always right," he said. "There are cases where we are wrong."

Contact JUSTIN HYDE: 202-906-8204 or [email protected].

Quote from: grumbler on June 11, 2009, 11:11:49 AMWho chooses the workers' representatives?  Just curious.

Quote from: Savonarola on June 12, 2009, 02:56:14 PM

Quote

But lawmakers aggressively questioned the rationale and motivations behind the cuts, criticizing them as uncertain and unfair. Rep. Greg Walden, R-Ore., played a computer animation showing the 136-mile drive that GM customers in Burns, Ore., will now have to make to reach the nearest GM dealer for service.

I'm curious to see if anything comes of this.  Obama has said he has no interest in running a car company, but the political pressure car dealerships can exert on congressmen might change that.

Quote from: Berkut on June 12, 2009, 03:22:10 PM
Christ, this would be funny if it was an Ann Rand novel.

QuoteSenate passes 'cash for clunkers' program

Senate passes $1 billion 'cash for clunkers' program over strong Republican opposition

WASHINGTON (AP) -- Congress approved a "cash for clunkers" program Thursday to provide government incentives of $3,500 to $4,500 to motorists who trade in their gas guzzlers for more fuel efficient vehicles after Senate Democrats narrowly defeated a Republican effort to kill the plan.

Auto state senators said the program would help hard-pressed car dealers and automakers by bringing buyers into showrooms, and they got help from President Barack Obama and Vice President Joe Biden, who made calls to wavering Democrats urging them to keep the plan alive.

"This is an emergency for families and small businesses -- for an industry that has been the backbone of our economy for a generation," said Sen. Debbie Stabenow, D-Mich., who sponsored the proposal.

Opponents said it would increase the federal debt without doing much to get expensive-to-operate vehicles off the roads.

Senate supporters of the program overcame a procedural hurdle by the plan's leading opponent, Sen. Judd Gregg, R-N.H., on a 60-36 vote, winning the minimum number of votes needed to keep the program in a $106 billion war-spending plan that the Senate passed later Thursday.

The House approved the cash for clunkers bill last week on a vote of 298-119 and Senate Democrats attached it to the war-spending bill. The overall bill now goes to the White House for Obama's signature.

Four Republicans -- Kit Bond of Missouri, Thad Cochran of Mississippi, Susan Collins of Maine and George Voinovich of Ohio -- voted with two independents and 54 Democrats in favor of the clunker measure, while Democrat Ben Nelson of Nebraska was opposed along with 35 Republicans.

Sen. Maria Cantwell, D-Wash., changed her vote to support the vehicle incentive plan and spoke by phone with Obama during the vote.

Cantwell spokeswoman Ciaran Clayton said Obama "acknowledged Senator Cantwell's concerns that the cash-for-clunkers program ... did not do enough to meet our nation's urgent need to reduce foreign oil dependence" and vowed to work with Cantwell and others to "maximize the number of efficient cars on America's roads."

In addition to Cantwell, Obama and Biden reached out to Democrats Patrick Leahy of Vermont, Claire McCaskill of Missouri and Michael Bennet of Colorado, according to two people familiar with the outreach. They spoke on condition of anonymity because they were not authorized to speak publicly.

Obama has encouraged Congress to approve the consumer incentives for new car purchases as part of the government's efforts to restructure General Motors Corp. and Chrysler Group LLC. The bill provides $1 billion for the program from July through November.

Sen. Dianne Feinstein, D-Calif., who supported a plan with more stringent requirements to receive the vouchers, said she received "absolute assurance" from Senate leaders that if the program was continued beyond November it would be modeled after the bill she pushed.

Supporters said the program, which would be implemented by the Transportation Department, was expected to be implemented by early August.

The auto industry and its union lobbied heavily for passage of the cash for clunkers plan as GM and Chrysler have received billions of dollars in government-led bankruptcies and the entire auto industry has dealt with plummeting car sales. In May, overall sales were 34 percent lower than a year ago.

Under the proposal, car owners could get a voucher worth $3,500 if they traded in a vehicle getting 18 miles per gallon or less for one getting at least 22 mpg. The value of the voucher would grow to $4,500 if the mileage of the new car was 10 mpg higher than the old vehicle. The miles per gallon figures are listed on the car window's sticker.

Owners of sport utility vehicles, pickup trucks or minivans that get 18 mpg or less could receive a voucher for $3,500 if their new truck or SUV got at least 2 mpg higher than their old vehicle. The voucher would increase to $4,500 if the mileage of the new truck or SUV was at least 5 mpg higher than the older vehicle.

Dealers participating in the program would receive an electronic voucher from the government for the trade-in to apply to the purchase or lease of a qualifying vehicle. The bill directs dealers to ensure that the older vehicles are crushed or shredded to get the clunkers off the road.

The program was intended to help replace older vehicles -- built in model year 1984 or later -- and would not make financial sense for consumers owning an older car with a trade-in value greater than $3,500 or $4,500.

The U.S. industry is expected to generate about 9.5 million vehicles sales in 2009, compared with more than 13 million in 2008 and more than 16 million in 2007.

Associated Press writer Matthew Daly contributed to this report.

The bill is H.R. 2346.

Congress: http://thomas.loc.gov

Quote from: Ed Anger on June 18, 2009, 06:13:58 PM
Give me a Hummer, or give me death.

Quote from: garbon on June 18, 2009, 06:18:25 PM

Quote from: Ed Anger on June 18, 2009, 06:13:58 PM
Give me a Hummer, or give me death.

That individual who calls you coach might take you up on that offer.

Quote from: DGuller on June 18, 2009, 05:16:45 PM
This news is about clunkers and gas guzzlers, so I figured the Chrysler thread is the natural choice.  Will someone please pass me the barf bag?

Quote from: Savonarola on June 19, 2009, 09:16:54 PM

Quote from: DGuller on June 18, 2009, 05:16:45 PM
This news is about clunkers and gas guzzlers, so I figured the Chrysler thread is the natural choice.  Will someone please pass me the barf bag?

I have some grave doubts about this; but NPR reported that there is a similar program in Germany that has had some spectacular results.  Zanza can you confirm or deny?

Quote from: jimmy olsen on June 20, 2009, 10:03:40 PM
What exactly do you mean by spectacular results?

QuoteI'd imagine with a subsidy that big a ton of people will take the government up on that offer and trade in their vehicles, but does that necessarily mean that the government should have offered that program?

Quote from: Zanza on June 21, 2009, 10:13:15 AM
However there was lots of criticism too. Cars that were still perfectly workable were scrapped (which is against the stated intention of this - to protect the environment). Another thing that will hurt the beneficiaries of this scheme is that it is just realising the demand a bit earlier. I predict that the car market will crumble in the next two or three years. After all, a lot of people now have a new car and those people are unlikely to buy another car anytime soon.