Bloomberg reports that if Chrysler fails to secure a deal with Fiat and rapidly exit Chapter 11, some 38,500 jobs could be lost in a liquidation. According to one of Chrysler’s lawyers, anyway. But an Automotive News [sub] story says that, in addition to Chrysler’s plant idling during bankruptcy, no fewer than eight of its factories will be permanently closed by December 2010. The best part? According to Chrysler sources, the proposed Fiat deal would allow ChryCo “to retain substantially all our employees.” Huh? “Any employee displaced by the bankruptcy will be given an opportunity at other Chrysler facilities,” explains spokeswoman Dianna Gutierrez. Not only did Chrysler deny that shutting eight plants would cause the negative impacts (job loss) that government billions were supposed to prevent, it went as far to suggest that the Fiat alliance would add about 5,000 employees to the payroll. In fact, if you believe the Pentastar line, there are only two victims in in the Chrysler plan: Sebring and Avenger.

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No, really. The Detroit News reports that prior to its Chapter 11 filing, Chrysler sought to sell off parts of the company to everyone. “Chrysler sent letters to parties, primarily in China, whom we thought would be potentially interested in purchasing our assets,” writes ChryCo’s Tom LaSorda in a bankruptcy filing affidavit. “Over the next two months, several companies, including Beijing Automotive Industry Holding Co., Tempo International Group, Hawtai Automobiles, and Chery Automotive Co., expressed interest in purchasing specific vehicles, powertrains, intellectual property rights, distribution channels and automotive brands.” But guess what? Not even these ambitious firms were tempted to spend a dime on Chrysler’s alleged assets. And the major OEMs in the global auto game? Chrysler’s efforts to form alliances with Nissan, GM, Volkswagen, Tata Motors, Magna, GAZ, Hyundai, Honda and Toyota “have been determined and undertaken in good faith but have met uniformly without success,” admits LaSorda.

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Bankruptcylitigationblog.com provides its readers—and there’s bound to be a whole new audience these days—with a ChryCo C11 crib sheet. The facts are predictably startling (if that makes any sense). The top 50 unsecured creditors’ claims total $730 million, with total trade at about $1.5 billion. The senior lenders’ claims total $6.9 billion. As you know, Chrysler owes the you, the people, $4 billion for your extremely generous bridge loans to nowhere (secured by a third priority lien). Chrysler owes Cerberus and Damiler AG $2 billion (secured by a second priority lien). Chrysler owes the United Auto Workers VEBA health care fund approximately $8.5 billion. Also highlighted: German automaker Daimler paid $37 billion for Chrysler when it purchased it in 1998. And lost it all. The “smartest guys in the room” (a.k.a. Cerberus) paid $7.4 billion for an 80 percent stake in Chrysler in May 2007. And lost it all. Checking the balance sheet, Chrysler has $52.6 billion in real liabilities, broken into the following categories: Trade and Related Payables ($5.7B), Accrued Expenses and Other Liabilities ($33B) and Financial Liabilities ($13.9B). The bloggers’ summary of the new plan after the jump.

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TTAC commentator and bankruptcy lawyer Toxicroach’s hits keep happening. This time, the member of our Best & Brightest sends us a filing by the US government (download pdf here) in support of Fiatsler’s motion to extend its filing (download pdf here).

Check out the Treasury motion in support. I think you will have a laugh a minute with that one. Then you will cry. The lease rejection—quick Google of some of the addresses . . . apparently, $60K a month gets you a Dodge dealership. They are dumping multiple car rental places and dealerships. Must be some pretty lame properties to get rejected on day one.

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TTAC commentator and bankruptcy lawyer Toxicroach reports on another motion (filing extension) in the Chrysler C11 case (download pdf here):

Chrysler are asking for 60 days to file the complete petition. Basically, as far as I can tell, they are trying to get this deal done before they actually have to release any relevant information about the company to the public. They are filing an absolute flurry of motions to get court permission to operate the company . . . but they are trying to act like they can’t fill out the schedules in a timely manner. Stunning. I’m interpreting this as some kind of ruse to keep information private until its no longer relevant.

We have a new sub-series to our new series: the Toxicroach papers. Turns out our longtime member of the TTAC’s Best and Brightest is a bankruptcy lawyer with access to the Chrysler C11 filing. He’s going to present these documents for our edification with some “what’s it all about, Tony?” analysis. We begin with a motion from Chrysler (download pdf here) to do what they should have done a decade or more ago: consolidate.

Check this out—the last half is mostly about them consolidating the 25 cases into one for the sake of efficiency, but the first half lays out in pretty decent detail exactly what the plan is.

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Fiat’s explanation of its deal with Chrysler states, “Pending (the transactions) approval, the current Chrysler will continue its normal business operations and the US Treasury and the Canadian government will provide the company with financing in order to allow the performance of all its obligations towards the employees and to fund its on-going needs.” But according to The Detroit Bureau, this isn’t the case. “During the bankruptcy proceedings, which are expected to last from 30 to 60 days, most of its manufacturing facilities will be closed. It is only when the New Chrysler emerges from bankruptcy that production will gradually resume. Workers will be eligible for supplemental unemployment benefits, worth about 80% of pay. Some additional plant closings are anticipated.” Which means either The Detroit Bureau has its facts wrong, or Fiat does. And if Fiat is wrong and Chrysler will halt operations during bankruptcy, what does Auburn Hills need $3.5 billion in government DIP financing for?

“This transaction represents a constructive and important solution to the problems that have plagued not just Chrysler in recent years, but the global automotive industry as a whole. Bringing together Fiat’s world-class technology, platforms and power-trains for small and medium sized cars, and its extensive distribution network in Latin America and Europe with Chrysler’s rich heritage, strong North American presence and talented and dedicated workforce will create a powerful new automotive company, while helping preserve jobs and a manufacturing industry that is critically important to the U.S. and Canadian economies.”

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“Chrysler’s bankruptcy,” according to President Obama’s statement today, “is not a sign of weakness.” The goal is not to radically restructure the business of a firm that has been failing for decades and currently makes some of the least desirable vehicles on the market. No, for Obama and his task force, this is about going after evil speculators. After lauding the noble sacrifices of the UAW (which will own 55 percent of New New Chrysler), JP Morgan (recipient of $25 billion in TARP funds) and Daimler (who raped Chrysler in the first place), Obama glowers at the mean, nasty speculators who are “forcing” Chrysler into bankruptcy. “In particular,” explains Obama, “a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout. They were hoping that everybody else would make sacrifices and they would have to make none. Some demanded twice the return that other lenders were getting. I don’t stand with them.” So who are these shadowy money men who just won’t let Chrysler run free of their oppressive debts?

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In his cut-and-paste letter to ex-Chrysler-as-we-knew-it employees, ex-Chrysler CEO Bob Nardelli refers his ex-troops to a website set-up to explain just how bad their post C11 situation isn’t. The electronic hand-holding portal—www.chryslerrestructuring.com—offers nothing more than the press release and the letter (which refers to the site that refers to the letter). Slightly more reassurance is available at www.scoopchrysler.com. (I’ll refrain from making any canine scatology comments.) The second site provides workers with a simple C11 Q&A. Those looking for a little truth and reconciliation action are bound to be disappointed, as this answer to “why?” shows: “Companies file for Chapter 11 for a number of reasons, but generally they are seeking to protect their assets while trying to address financial problems – such as excessive debt, insufficient liquidity, unreasonable contractual obligations, and/or unmanageable liabilities. The process also is sometimes used by companies to sell assets free and clear of any obligations.” “Unreasonable contractual obligations.” How . . . reassuring.

In a surprise, almost off-hand announcement, President Obama told the nation that GMAC will finance Chrysler wholesale (dealer) and retail (customer) sales, as the ailing automaker enters Chapter 11. Obama promised “fresh financing” for GMAC to do the deal. Not Chrysler Finance. The remark adds substance to rumors that the Presidential Task Force on Automobiles (PTFOA) will arrange a shotgun wedding between Chrysler Financial and GMAC, despite objections from the FDIC and the Fed. For some reason, Obama forgot to mention either the merger or the amount of Uncle Sam’s contribution to GMAC that will be needed to back up the PTFOA’s decision not to throw Chrysler into liquidation. Yet. Meanwhile, Obama reiterated his promise to stand behind ChryCo customers with a federal warranty program, details of which are still notable by their absence.

GM’s major bondholders are asking for a 58 percent stake in a reconstituted General Motors, but there are a number of challenges facing any debt-swap to relieve GM’s crushing $28b debt load. First of all, the Freep reports that some $2.7 billion worth of GM debt is covered by credit-default swaps. Since this means that ten percent of GM’s bondholders stand to receive face value for their bonds, the odds that 90 percent of GM’s creditors will take up any haircut offer seem slim. Add a bunch of angry, populist small bondholders to the equation, and you have yet another obstacle to the restructuring goal.

Bloomberg reports that GM bondholders have made a counter-offer to the feds’ debt-for-equity swap proposal. Two days ago, The Presidential Task Force on Automobiles (PTFOA) offered the bondholders a 10 percent piece of a newly reconstituted “good” GM in exchange for $27 billion of paper. The bondholders reckon that should be . . . wait for it . . . 58 percent. To avoid C11, GM must convert 90 percent of its debt into equity. So, forget it. “Old” GM’s toast.

Those damn hedge funds and their secured debt! Despite enormous pressure from the US Treasury, “holdout creditors” rejected the federal government’s offer to increase the cash part of a proposed debt-for-equity swap to $2.25 billion (up from $2 billion). A high noon Wednesday deadline came—and went. Hey! What happened to Chrysler’s “owners” Cerberus? Anyway, according to Automotive News [AN, sub], the feds—under Presidential Task Force on Automobiles leader Steve “Chooch” Rattner—are stepping-up their campaign to blame the recalcitrant bondholders for ruining their non-C11 plans to recreate the ailing American automaker as a Fed-Fiat-UAW partnership. “While the Administration was willing to give the holdouts a final opportunity to do the right thing, the agreement of all other key stakeholders ensured that no hedge fund could have a veto over Chrysler’s future success,” an “official” told AN. “Their failure to act in either their own economic interest or the national interest does not diminish the accomplishments made by Chrysler, Fiat and its stakeholders nor will it impede the new opportunity Chrysler now has to restructure and emerge stronger going forward.”

Bloomberg reports that not-entirely-unexpected news that President Obama will announce Chrysler’s bankruptcy tomorrow. The president will outline the automaker’s restructuring, along not-entirely-unexpected lines (known in these parts as “good” Chrysler / “bad” Chrysler). In other words, Uncle Sam is reconstituting ChryCo as a partnership between the United Auto Workers (55 percent), Fiat (20 percent) and you, the people (25 percent). And guess who gets to put in the $6b plus to make this happen? That’s right: you! But then you’ve already put in over $4b, so what the heck. Anyway, Chrysler buyers (both of them) shouldn’t worry that C11 will stop Auburn Hills in its tracks; you’re very generous. Automotive News [sub] reports that Chrysler will extend current consumer incentives (a.k.a. employee pricing plus) until Monday. Meanwhile, The Wall Street Journal reports that President Obama is laying the blame for Chrysler’s collapse right where it doesn’t belong: Chrysler bondholders. Read More >