Chrysler files for Bankruptcy

chrysler_logo None other than The Great Obama himself announced it, to top it all off.  Chrysler, LLC is officially under Chapter 11 bankruptcy protection.  Just to clarify, this is a “restructuring” type of bankruptcy, not the liquidation that occurs in Chapter 7. 

This bankruptcy is, of course, with the blessing of the United States government.  They have been providing the cash needed for Chrysler to stay alive.  They will also be pouring an additional $8 billion into the company to help move it through a “quick” bankruptcy.  The US Government isn’t the only sucker good Samaritan to be found in this deal, however.  GMAC has agreed to provide loans for Chrysler vehicles during this transition phase.  And Fiat has agreed to a partnership / alliance deal with Chrysler. 

Though bankruptcy law and proceedings are a little out of my league, from what I can gather, this is the rough idea:

  • A new company will be formed out of Chrysler’s “good” assets ( not sure what goes here )
  • Many liabilities / much debt will be left behind
  • Hundreds ( thousands? ) of dealerships will be closed, without Chrysler buying out the franchise.
  • CEO Bob Nardelli is toast
  • Chrysler Financial is toast
  • Cerberus will own 0% of Chrysler
  • UAW will own 55% of the New Chrysler, Fiat will own 20%, the US government 8%, and Canada 2%

I don’t pretend to understand the intricacies of bankruptcy.  But if the UAW is going to own most of Chrysler, I can’t see a positive outcome here.  The UAW has done a marvelous job of running the domestics into the ground before – can you imagine how well they will do now?  On the other hand, Chrysler management has been the worst of the worst… so maybe some new guys in charge could turn it around.  Anyway you look at it, no one is surprised at the bankruptcy.  I do feel bad for Chrysler / Jeep / Dodge dealers though.  Government warranty guarantees notwithstanding, who in the world would by a car from a bankrupt automaker?

Published on April 30, 2009 in Chrysler

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