'Surgical' Bankruptcy for Chrysler

According to an Obama official, the company will receive a $3.5 billion DIP from the U.S. government and up to $8 billion in total government financing, will file in NY bankruptcy court, and GMAC will take over financing duties.

The bankruptcy is expected to last 30-60 days (this is the biggest load of misguided garbage I have ever heard).

Other facts: Chrysler will name a new board of directors and the Chrysler-FIAT alliance is expected to go through.

According to BO, "Bankruptcy is not a sign of weakness." OK: are we talking about the same process where equity holders are wiped out and bondholders get pennies on the dollar?

Nothing like blaming Xerion Capital (a subsidiary of administration darling Perella Weinberg) once the UAW finds another 100,000 unemployed in its ranks in 3 months.

Anyone willing to take the Under on the 30-60 days?

Comments

[john1940:]

No surprise here. When government takes over, idiocy and incompetence thrive. I will take the over bet, but I will give one year to make it fairer. If this is not a pre packaged bankruptcy, it can last forever. I'm surprised by the reaction all over. We knew this was the end 10 and 20 years ago. Detroit was knee deep in concrete and blinders with respect to the auto companies' problems. Now we know, but if competence is restored at the management level and various constituencies (unions) are handled correctly there is a good chance the auto companies can recover. It's still a good business and very large. Every year, millions of cars wear out and there is a current need for a technology makeover to improve mileage and CO2 emissions. If the companies fail again, we will be buying from Asian companies. There is no room for another mistake.

Here's another offer: do you want the over or under on the Federal Govts total support of the car companies. I'll take the over and set the bar at $250,000,000.

Apr 30 05:45 PM

[Joseph Wagda:]

I'll take the over on $250 MM, too, LOL!

With so many zeros its easy to get disoriented momentarily while typing.

Apr 30 06:43 PM

[mikebrah:]

If Henry Ford had to deal with the EPA, government emissions standards, government mileage requirements, government safety standards, etc. etc. the original Model T would have been well over $1k and he would have paid his labor much less than 15%. He was also quite a stickler for productivity. If you didn't bust your ass, you got fired. So he paid well and expected good work in return. Today it's backwards and you can get in trouble with the union for working too hard.

Whether you agree with all the requirements car companies are burdened with these days as "good" for "society" is besides the point. They make the product much more expensive is my point.


MM


On Apr 30 04:48 PM Thadeus Thornton III wrote:

> *sigh* . . . . I continue to be amazed. Based on some peoples comments,
> they are never satisfied. Chrysler will now go through Bk, although
> I also agree not as fast as Uncle Sam would like it. As far as Pres.
> Obama and the UAW goes. . . gee whiz, Obama doesn't want this
> mess either. Let's not forget George W. made the first loans before
> he left office. And the UAW has had less clout, influence, and drag
> on either Chrysler or GM than the bashers like to blab. The labor
> costs ( even at the inflated cost plus legacy rates reported) were
> not a significant factor in this. Anywhere from 5 to 10% the cost
> of producing a vehicle. As a comparison: It cost Henry Ford 15%
> for the labor on his $695 Model T and he was happy with that. Remember,
> he built an entire manufacturing city, housed people, provided school
> for kids, and some medical care. If Henry Ford got rich on $695 Model
> T's at 15% labor cost, then new reduced costs for Chrysler and GM
> will certainly not be a factor in recovery. All of the Big 3 obtained
> year after year productivity gains for the last 15 years according
> the Ron Harbor reports. Many plants for Chrysler, GM, and Ford were/are
> more or just as efficient and cost effective as any at the transplant
> competition. GM still is outselling Toyota in vehicles in the US
> this year.
>
> It's the great and greedy financial gurus of Wall Street that precipitated
> this whole mess. It was and is a huge systemic financial problem
> and any anger ought to be addressed to those mongrels. And what did
> they get? FREE bailout money, not L O A N S of significantly less
> amounts that were provided for Chrysler and GM.

Apr 30 07:46 PM

[sodajerk:]

The last union I knew that had a majority ownership position in a company was the Soviet Union. Damn they made good cars!

Apr 30 08:12 PM

[Celcius:]

They could make money on the smaller cars, but at much lower margins. Management was just as greedy as the Unions. They all deserve to loose their jobs.


On Apr 30 01:40 PM north99man wrote:

> Yes, Chrysler forced the people to buy those pickup trucks. (seekingalpha.com/symbo...)
> Your statement shows the contempt which the left has for the actual
> people of the USA. They consider the people too stupid to act correctly
> so Government as run by the left has to force them to do the right
> thing.
>
> Actually pickups and SUVs were all they could make money on due to
> the costs associated with the UAW.

Apr 30 09:26 PM

[Auditor:]

It is now very simple. The Chrysler brand is no longer a vehicle that should be purchased by individuals that consider themselves free market enthusiast. Ultimately, the current administration is under girded by money and it is very unfortunate, but it is the only way to get their attention anymore. Heretofore, do not purchase Chrysler.

Apr 30 10:00 PM

[JPPennypacker:]

I wonder if the new/improved Chrysler will be making regular pit stops in the Bankruptcy Courts or maybe this will be a one time thing. Maybe the current CEO could pull some strings with his former employer Home Depot to sell some of the inventory out of the lawn and garden department or the parking lots.

I thought that there were established protocols for deciding who gets what in the bankruptcy proceedings. Perhaps this bankruptcy is extra special or double secret. Thank you Mr. Tyler Durden for the interesting report.

Apr 30 10:07 PM

[IOU:]

U.A W Stands For Uselss American Waste, I tell you all Dont Buy Anything Off The Union, I just Bought Toyado Stock , And Am Getting A new Kia, Listen Fellow Americans We can destroy That so call group of thugs, dont buy their products. damm Mad and not taking it no more.

Apr 30 10:57 PM

[expat in China:]

Its very simple, the UAW priced itself out of the market and the management of free enterprise companies had to develop alternate production chains starting first with Mexico and then with other LCC low cost countries.

The continued evolution to large high cost vehicles was a result of squeezed margins caused by the gravy train of excessive compensation for menial skill and the bubble burst as all other disparities do.

The UAW caused the demise of the viability of the North American manufacturing base and we will never recover.

May 01 12:39 AM

[Moon Kil Woong:]

Funny how everyone says doom if a company goes bankrupt to justfy raiding the treasury. I think raiding the treasury is the more dangerous act.

It makes you wonder what would have happened if they let Citibank, AIG, and others go bankrupt. The losers would howl but the reslient market would probably have either yawned, breathed a sigh of relief it's over, or bounced back. In the end I trust the market more than people jumping up and down saying the sky is falling give me your checkbook.

I suggest we give bankruptcy a try. It's not socialist. Preventing bankruptcy is.

May 01 05:35 AM

[TeresaE:]

What slays me is that all the "experts" in the world still cannot see reality.

When you off shored your suppliers, you off shored your BEST customers.

Think car sales are bad now? Just wait until all the former dealer, supplier and UAW employees no longer have jobs.

These are your BEST customers and you just fired them.

"Recovery" for our economy becomes more impossible with every passing day.

May 01 08:57 AM

[snap:]

It is amazing to see the comments of the left. They are always long and blame someone else. Even the left agreed that the retirement benefits of the UAW is why "They weren't cost competitive". This means for all you uneducated less cost to departments for R +D that is why the "Asians kicked our butts" (better cars for less). But for you environmentalists who blame SUV's and less fuel efficiency does the words "mass production" come to mind. Yes we have the technology and brains to make hydrogen and hybrid cars but the cost for "mass production" is still to high. Unless the majoriy of Americans felt the same way as the environmentalists if you have $50,000 to buy a car I bet the majoirty would choose a "luxury" car. Until the majority demands them (supply/demand) We cannot "mass produce" them at a cost competitive rate. Either way it is the legacy costs of the UAW that threw the brains of the industry under the bus. Cant wait to see the UAW in the laboratory doing metal stress tests and applying calc, physics, thermodynamics and critical thinking skills. Remember these are the guys who flunked high school.

May 01 11:06 AM

[Soldalma:]

I am amazed at the news that already specify the proportions of the "new" Chrysler that will got to different parties. It looks like that the bankruptcy judge does not have any say on the issue. If I were Judge Gonzalez I would issue an order to some parties to stop making statements on what will be the outcome. But I doubt he will have the guts, otherwise they would not have appointed him.

The rule of law is being seriously eroded in this country.

May 01 11:26 AM

[Thadeus Tho...:]

Some of the comments here reveal such a high degree of " intellectual ignorance". They are either very young and just accept the business school logic and media poppy cock about how a labor union such as the UAW and its members could have such a high degree of influence on a company's success and profitability. Their ignorance and malice is further revealed by name calling and deriding work ethics and education of people ( that they don't even know) doing the brunt of the work at an automaker. Most workers at an automotive plant merely took the job that was available to them where they happened to live. So that's reason to derided them? Many others have education well above the average including BA's and more. Some are also health care workers. law enforcers, farmers, business owners, that saw a better source of income and benefits than what their previous jobs would provide. Many still continue in a filed of endeavor after their work day is done at an auto plant. From what I've seem, most are and have been hard working, skillful, have education, talents, interests, and skills beyond what they do for an income. More than likely these complainers are envious of the wages and benefits because their corporate jobs and careers haven't panned out to be the personal gravy train that they thought.
To state it again. Check out productivity ( The Harbor report ) for all the Big 3 over the last 10 to 15 years. It rivals, meets, or bests the transplant competition. This is a measure, not just of number of vehicles produced, but hours per unit, labor and overhead costs, and overall throughput. You don't get productivity improvements with lazy workers. Job numbers decreased, line speeds and job tasks per unit have increased. The major reason for market decline in the Big 3 was some poor product choices and engineering, high compensation and bonuses for corporate management, wasteful and futile R&D efforts on questionable technologies, and not listening to it's customer base. Then along came the financial meltdown. These are the real mongrels. If you wish to be angry, direct it at the right causes. Not the people who followed production and design mandates by the automakers. Otherwise, point a finger at yourselves for the decline of your past or current employer while it's having difficulties in this bad economy.

May 01 01:12 PM

[Wisdom vs. ...:]

snaps comment is 100% true and undeniable. consumption is consumption, period, and consumption is the worst factor for the environment, not pollution. if politically correct cars cost more (ie consume more) then they are not only worse for the ecenomy, they are worse for the environment as well. if you do not understand economics you are part of the problem

May 01 03:54 PM

[snap:]

Thadeus, no one said UAW is not working hard, the point (you lefters tend not to stay on point well) is everyone is working much harder since 2001, when NAFTA's effects were in full force (thank you Bill Clinton) . But the UAW is working for themselves( not the corporation who butters their bread) they could care less that they need to scale back just like everyone else. Sooner or later when the economy turns and we are leaner and adjusted to the transplants everyone will adjust and things will improve. No I am not bitter I am a team player and do not suffer from "Class Envy". I love rich people the richer the better because they actully make me richer. Ever get a job from a poor person? I applaude the next Bill Gates, Henry Ford and Thomas Edison they all made my life better. How dare the UAW feel entilted to the inventions and "Brain Power" that allowed these people to have jobs and improve their quality of life and it takes more than physical labor to make a company run.

May 01 04:59 PM

[snap:]

Additionally, ANYONE can do your job but you DO NOT have a degree in engineering, physics, or accounting to do the "white-collar" jobs. My carrer is great I just hate when people get a case of "class envy" and think jobs that ANYONE can do override the jobs than NOT ANYONE can do. Bolting a car together is the icing on the cake it takes years to design, engineer, and crunch numbers to develop a car you bolt together.

May 01 05:17 PM

[Thadeus Tho...:]

Talk about not staying on point. You seem to talk arounf the points and still manage to do the same thing. . . bash honest hard working people by putting them in a box and labeling them as greedy workers preying off a company. Guess what, their are lazy, opportunistic, self servers in every walk of life , I would venture to say yours included. You right wing "Toyota Republicans" also seem to see things though fogged spectacles of the class prejudice you say you don't possess. If the economy continues to fail and this country continues to decline, it will be due your lack of any attempt at understanding.

------>no one said UAW is not working hard, the point (you lefters tend not to stay on point well) is everyone is working much harder since 2001, when NAFTA's effects were in full force (thank you Bill Clinton) . But the UAW is working for themselves( not the corporation who butters their bread) they could care less that they need to scale back just like everyone else. Sooner or later when the economy turns and we are leaner and adjusted to the transplants everyone will adjust and things will improve. No I am not bitter I am a team player and do not suffer from "Class Envy". I love rich people the richer the better because they actully make me richer. Ever get a job from a poor person? I applaude the next Bill Gates, Henry Ford and Thomas Edison they all made my life better. How dare the UAW feel entilted to the inventions and "Brain Power" that allowed these people to have jobs and improve their quality of life and it takes more than physical labor to make a company run

May 02 11:47 AM

[mikebrah:]

snap and Thadeus,

I enjoyed the back-and-forth. Personally, I think the reality is in between your two "sides." I guess this makes me a Toyota Republican? Interesting terminology.

My point is Toyota outdid The Big 3 executives AND the UAW. It was not one or the other. Back in the glory years, Big 3 Management (B3M) made a lot of spineless decisions because they assumed the gravy train would run in perpetuity. But the UAW thought the same way and made a lot of parasitic demands against their host.

Meanwhile, Toyota has no union but keeps their employees well-paid because management actually MANAGED. For this they are paid well but not egregiously. They kept the balance between productivity and profit. From what I understand, Toyota employees are just as well paid as any of the Big 3 yet they have no union. The job banks and patriarchal health care type stuff is nowhere to be amongst Toyota workers.

From where I stand, the B3M and the UAW are like an old bitter couple. They should have gotten divorced long ago and each let the other have a chance at happiness. Instead they just stayed together and increasingly resent the other.

MM

May 02 03:35 PM

[snap:]

That is not "class prejudice" please apply for some white collar jobs in the automotive industry with a non-science (math, physics, and accounting) degree and see how successful you are in the attempt. It is not prejudice you are not qualified. Your agrument is the same if I played basketball from age 3 through college and demanded an NBA contract even though I was not drafted. Just because I spent so much time with the sport doesn't mean I am good enough. We all have strenghts and weaknesses but the "I am entitled and if I am not granted it is prejudice" BS is why our country is in the shape it is in." I hold a Phd in physics and an MBA from a top 25 University. I guess that means I am entitled to a CEO's job and if I don't get one I sould sue and say that is prejudice because I am Asian?

May 04 10:52 AM