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Or, as President Obama puts it, “a new lease on life.” Chrysler (“a company with a particular claim on our American identity”) will file for Chapter 11 bankruptcy in Manhattan court today, as Obama has promised $3.5 billion in federal aid over the next 30 days in hopes of hitching the troubled automaker to Fiat. The case will be handled by judge Arthur Gonzalez, a veteran of the Enron and WorldCom bankruptcies. When the deal is concluded and Chrysler emerges from bankruptcy, the federal government will inject another $4.7 billion. That more than doubles the current taxpayer investment in Chrysler, which had reached $4 billion (not counting ChryFi). See President Obama’s full statement at C-SPAN.
30 Comments on “Chrysler Gets $8 Billion For 60-Day Bankruptcy...”
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There goes a perfectly good $8b…
With dealers like these why isn’t this chrying shame going Chap 7?
I’m reposting here since it is highly appropriate.
I watched the high-noon-time TV event where Barry declared that Chrysler has declared bankruptcy. Unsaid: another $8 billion thrown into the toilet by the administration, to provide funds which nobody in their right mind would provide to Chrysler to try to get out of bankruptcy, so some portion of it can be GIVEN away to FIAT. It’s a mad mad mad world. Barry called “certain” bondholders of Chrysler “speculators”. Fact: bonds are SECURED LOANS not speculation. But let’s not let facts get in the way of declaring people who don’t go along enemies of the ruling diktats.
If these institutions holding Chrysler bonds had OK’d pennies on the dollar while being pressured by the administration, did they not open themselves to liability (lawsuits) because of lack of fiduciary duty? In other words, it is their job to not hand the baby over with the bath-water, but fight to keep the baby even with the government pointing an empty gun at their heads and verbally assaulting them.
So now we see…..
Do we live in a nation of LAW? Or a nation of DIKTAT? (root word for DICTATOR).
Oh yes, I almost forgot. The President has declared that we’ll have a clunker trade-in law. So it’s going to happen.
Federal aid for what??
Way to reward failure. You’re doing a heck of a job, Obama.
John R: yup, Fiat will enjoy these dealers a lot
Back of the envelop calculation.
In the recent best year of Chrysler, they sold 1.8 million cars. They’re now going to be $12 billion in the hole.
If they could sell 1.8 million cars in a year, and clear up the debt, it would cost more than $6,600 per car.
If they sold 1.8 million cars per year, for six years, it will still cost an extra $1000 per car to pay for the debt.
That’s assuming they don’t take on any more debt, or that they could start selling 1.8 million cars per year.
What’s wrong with my back-of-the-envelope calculation?
Obama’s “us vs. them” blaming the hedgies was disgraceful.
And the biggest damage from this?
What investor in his right mind would invest in industry in the USA? The industries went offshore and now the money is going to follow.
I don’t see the US economy recovering for many years.
What part exactly is the “particular claim on our American identity” that B.O. references? I can’t think of anything positive about America that Chrysler exemplifies. As for the negative aspects on the American identity to which Chrysler embodies, where to begin…
I’m just waiting for the Obama Brigade to come rolling in to this thread and tell us that this is simply a bridge loan to help the taxpayer ‘get their investment back’.
As Bill Griffeth on CNBC said, only the “mother of all incentive programs” will move those cars now.
How long will it take taxpayers to figure out they are going to foot the bill for $3200 / month UAW pensions and platinum benefits?
paris-dakar –
I’m sure the MoveOn and Huffington storm troopers have already been dispatched to turn this thread around in their favor.
RF –
The “us vs them” thing is the card you play when the “we’re all in this together” card gets trumped. But seriously, that is very unbecoming of a sitting president. The campaign is supposed to be over.
The “us vs them” thing is the card you play when the “we’re all in this together” card gets trumped. But seriously, that is very unbecoming of a sitting president. The campaign is supposed to be over.
Just another day in the life of a Cook County Machine hack.
@Farago
But typical. He’s tapping in to the seemingly endless populist outrage over the financial system for his own political gain. Why would anyone expect something different? The funny part will be how much the hedge funds are a part of the recovery process, and how much credit they get then.
Youuuuuu ooonnlllyyyy lliiiivvve thriiiiiiccce …
CNN Live: Former U.S. Vice President Dan Quayle announced today at the headquarter of Cerberus Capital Management that “part of the 8 billion dollar Chrysler received today will be used to convert the Dodge RAM factory in Warren, Mi to produce the Fiat 500″, a single-passenger revolutionary car developed in Italy exclusively for the US market”. “We are very exited about this car and the direction this is taking, it will revolutionize the way Americans commute. I can see millions of these single-passenger cars being driven everyday by environmentally-conscious people commuting to work”.
@Rod Panhard – “What’s wrong with my back-of-the-envelope calculation?”
I think it’s this line right here:
“That’s assuming they don’t take on any more debt, or that they could start selling 1.8 million cars per year.”
Only a complete moron would bet $8 billion on that.
… Oh wait.
Obama’s “us vs. them” blaming the hedgies was disgraceful.
It’s smart negotiation. The best way to get good terms is to fight for them.
What I don’t understand, though is why he doesn’t have Rattner lead the charge. This should really be the task force’s job, not the president’s. I do hope that this is not an indication of micromanagement; that would be a tactical error.
Our future generations are screwed.
“a bridge loan to help the taxpayer ‘get their investment back’.”
Standing at the dock watching the ship leave the harbor, waving, and crying, “I’ll never see my baby again.”
“We simply cannot keep this company – or any company – afloat on an endless supply of tax dollars.” – Barack Obama
“But damnit, we’re going to try.” – Unspoken but Implied
Now, in addition to all the people who quit buying Chrysler products for reasons well known to the B&B, add all the taxpayers who feel they’ve already contributed far too much money to this organization, and will in the future contribute all too much more to the new government/union hermaphrodite/zombie “enterprise”. Talk about driving buyers away with a stick…!
This is what we get when we elect as president someone who has absolutely no understanding of economics.
@PF,
That has to be the quote of the entire BK series
It’s funny recently with these threads where posters dump on the people trying to solve the problem and not make it worse than it already is.
It’s telling the political opposition doesn’t have a better idea to push other than a few feeble grunts about chap7 where everyone loses.
As I’ve said before, Obama is really quite the politician since apparently the “other side” has been reduced to petty bitching.
It’s funny recently with these threads where posters dump on the people trying to solve the problem and not make it worse than it already is.
I know. It’s so forward thinking of our President to propose a transfer of wealth to a politically connected Labor Union. Why, it’s the kind of thing Mayor Daley himself (either generation, doesn’t matter) would propose!
How progressive of him. Warms my heart to witness such LEADERSHIP.
Seriously though, you think the UAW is trying to solve this problem? Give me a break…
It’s so forward thinking of our President to propose a transfer of wealth to a politically connected Labor Union.
I have to say, I’ve never seen so much excitement over the creation of worthless stock.
On another note, I just received an email today from the Nigerian government that is going to transfer 55% ownership of the Brooklyn Bridge into my account. I’m so excited, what will I do with all of these newfound riches?
“where posters dump on the people trying to solve the problem and not make it worse”
I suspect this is because these posters see nothing positive in any of these developments, just an endless waste of taxpayer’s money. They weren’t competing for decades, now they’re taking on more debt and will be managed by the government and a union. Meanwhile, the same companies that were kicking their ass previously are going to be as strong as ever.
Personally, I view the auto industry cash dump as just one more indication of this administration’s contempt for capitalism and the free market.
Personally, I view the auto industry cash dump as just one more indication of this administration’s contempt for capitalism and the free market.
See, the problem is the variety of “capitalism and the free market”, ie. the profitable kind, is not going to exist for too long if the gov does absolutely nothing in the face of possibly massive deflation.
In any case, this is coming off as cheap compared to the banking situation where the numbers are more than one order of magnitude larger, along with the level of opacity.
I do hope fiat has to contribute some capital, though, otherwise I’m not sure why they would be chosen exclusive since surely there must be someone somewhere willing to pay something to get control.
Can a nation be considerded a superpower without its own auto industry. If you bow to the Italians then you indeed have no pride.
I feel sorry for the next generation that have to live in this declining envirnoment.
I think everyone knows this merger will be an absolute failure. Maybe it will be for the better.
Can a nation be considerded [sic] a superpower without its own auto industry.
Don’t forget Ford! For better or worse, we still have an awesome (in the size sense) military-industrial complex.