Chrysler Travesty Hearings Continue

Nothing too exciting yesterday at One Bowling Green, just 10 hours of cross examinations of Tom Lasorda, former president and Vice Chairman of Chrysler, Alfredo Altavilla, chief executive of Fiat's (FIATY.PK) Powertrain business and, most notably, Robert Manzo of Capstone's Advisory Group, the de facto financial advisors for Chrysler (yes, Greenhill, we know you are submitting monthly invoices too, a question arises what exactly for, but taxpayers will let that slide for now). I say de facto, because Chrysler's Liquidation valuation analysis was prepared and submitted as an expert report by Capstone, so one would imagine they would have to be unbiased, objective, and fair. I will get back to this in a second.

I mentioned Robert Manzo, who had a very critical role in today's hearing. First, I present Robert's Curriculum Vitae, which is Exhibit A in the above filing (click to enlarge).



Based on this, one would imagine that Mr. Manzo may, in principle, pass as an auto expert, even though looking at his debtor representations, which include Cumberland Farms/Gulf Oil, Camelot Music and Virgin Entertainment, one would presume Mr. Manzo is better suited to prepare "expert reports" for the likes of CBS, Omnicom (OMC), and other entertainment-related companies.

Now as part of his obligation to find the best and final bid for Chrysler, Mr. Manzo was busy. He was so busy he contacted a whopping 9 entities (presented below, Exhibit B from the above filing), of which he executed a confidentiality agreement with one single party. Presumably Mr. Manzo was busy thinking of what is the best way to invoice 23.5 hours a day for his hard "bankruptcy" work instead of actually trying to see if there are any interested overbidders to the Fiat stalking horse bid.

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However, what demonstrates beyond a reasonable doubt how Mr. Manzo
(and Capstone) transformed their financial advisory obligation into a complete procedural travesty is the following: Glenn Kurtz, a White & Case attorney who represents the Indiana pension funds, procured an email during discovery. It captures Mr. Manzo's reaction to a proposal of eliminating the banks' secured debt after they rejected a pittance equity stake in Chrysler, and I quote:

"Oh baby!!!!!!!! They get what they deserve."

Now that email from anyone else would be explainable - after all in the Chrysler
case there is a plethora of obviously conflicted entities (the U.S. government aka the UAW being #1) who had everything to gain and nothing to lose by screwing over the secured lenders. However, that particular phrase, coming from the man who singlehandedly put together Chrysler's liquidation analysis - the cornerstone for the entire case, upon which rests the premise that there is really no value here to creditors unless the sale is completed in the fastest fashion imaginable - is simply borderline criminal (or criminally stupid - not sure which).

The following is a statement from Manzo which explains why his "expert" opinion in this case should be unbiased and impartial:

Under the May 20 Liquidation Analysis, the First Lien holders are expected to recover less than 18% of their secured claims at the time of filing. In fact, on the low end of the range, if Chrysler’s assets must be liquidated, the First Lien holders may not recover anything at all for their claims.

If Judge Gonzalez is so stupid to be unable to put two and two together, and to notice this clearly inexcusable and impermissible bias from a "valuation expert" then he should simply be disbarred from his judicial role. The entire liquidation analysis prepared by Manzo and Capstone is presented below . When read in the context of the email discovery presented above, this report has zero credibility, and it also destroys the credibility of Mr. Manzo as an expert witness in any future testimony (if nothing else, then simply for lacking any foresight that all his emails would be subject to discovery and a phrase like the one above, under circumstances where he did not have Barack Obama on his side, would have been a dealbreaker).

Later today, the complete travesty that is the Chrysler bankruptcy case continues. As the final outcome of this rigged from the beginning bankruptcy at this point is more than obvious, Zero Hedge has decided against sending representatives to the hearing, as it would be a complete waste of time.

Comments

[TeresaE:]

The globalists have so convinced the politicians that off shoring is good for America that no amount of reason would prevail here anyway.

Yes the creditors are being screwed, but not near as bad as the suppliers, dealers and the communities they supported.

Carry on. Prosperity MUST be right around the corner, especially when it becomes so obvious that this whole mess isn't corruption at its finest.

May 28 08:30 AM

[Steve in Gr...:]

In the Chrysler situation, the U.S. government helped perpetrate a fraud on the bondholders to payoff their political allies, the thugs in the UAW.

Why would anybody buy U.S. corporate bonds under these circumstances? Why would anybody buy U.S. equities under these circumstances?

Monetarily, politically and judicially, we are turning into Argentina.

May 28 08:50 AM

[casey00001:]

Now hearing chatter the camp Obama is hoping that Judge Gonzalez can wrap up the Chrysler bankruptcy so they can give him the GM bankruptcy, claiming this makes perfect sense since its the same industry and he is now an expert. (bypass whatever normal rotation of Judges that applies) If that happens expect GM bondholders to get royally screwed also.

May 28 10:29 AM

[henarl:]

It's pretty obvious that the law firms are the only ones coming out on top of this farce. But then, no matter who else wins or loses in our litigious adversarial justice system, the courts will always make sure the attorneys come out on top.

May 28 10:30 AM

[LKofScotland:]

pretty good for profitibility for Chrysler which actually might emerge from the government sponsored bankruptcy and be able to sell itself. Don't think the Unions are all shits and giggles over this process by the wa. Probably thought they were but clearly there will be only one car company once this process is done and those who actually know how to make cars are praying they'll be able to work for them because unlike the government they actually pay for quality instead of BS. (It isn't going to be the big C by the way. Appears more likely the big "F." Leave it to your imagination what the "F" really stands for.) In the meantime Uncle Sam will pour another 100 billion into GM all for nothing as the American people flee the brand en masse. As was said in the movie "Highlander," "there can be only one."

May 28 12:06 PM

[henarl:]

LK: The big "F" will probably be the sole remaining traditionally American car company as you say, but look for most of GMs and Cs market share to go to "T" and "H".

May 28 03:00 PM

[JPPennypacker:]

Maybe Mr. Robert Manzo, Judge Gonzalez and the Bankruptcy Legal Staff can combine their expertise and design an automobile that will put Lee Iacocca to shame. I would predict they would design some form of rickshaw that maximizes billable hours to the customer and personal profits for the developers.

May 28 04:36 PM

[qw:]

Ford has been gaining market share for the last 7 months and with GM bankruptcy it is not a given that C and GM share will go to T and H.
Ford will be the big winner as the only american auto company still standing without government bailout and with superior products, now and in the pipeline.

May 28 05:47 PM

[Deweyp:]

This day was written in the wind over 20 years ago and as many predicted it has happened. As to F having superior products in the pipeline while GM and C have not, I question who would have that true knowledge, as these are very closely guarded secrets, unless already announced. What may be the probable outcome of all of this is C and GM, unencumbered of the debt that drags any development of future products down, brings forth the great products they have had in the pipeline, while F stumbles trying to finance their pipeline products while laden with draconian debt that has not been forgiven. Those who truly understand the auto industry know that product plans are made several years (3-5) in advance and this economy downturn is only 9 months old, although it really began 20 months ago. It is purely supposition to say one company has better products "in the pipeline" than another, especially when one looks at the superior products that have been produced by C and GM (Dodge Mini Van, Cadillac CTS,
Chevy Malibu, Chevy Volt, Jeep, Dodge Challenger and above all the 2010 Camaro). These are acknowledged product winners. The morass C & GM currently find themselves in is purely financial and is in no way a result of the product they have brought to market. To be sure F has shown many successful products and I am sure they have more in the pipeline, but let's not confuse economic problems with product issues and, we should not assume that F has solved all their economic problems as well. There is a reason Ford's major supplier (Visteon) filed chapter 11 today and it is an economic issue just as it was for GM's major supplier Delphi. The American auto industry is truly the best in the world and once these issues are resolved and the economy improves, they will be back on top, no matter what the Asian guys tell you.

May 28 08:10 PM

[User 123117:]

I would be very surprised if liquidation paid off any bills at any automaker or supplier. Most of their assets are useless for anything but making cars or parts.

May 28 08:53 PM

[Jasper M:]

1) Tyler, if life here teaches us anything, it is that there is no such thing as "criminally stupid". A certain kind of stupidity is rewarded in that man's field.
2) Absolutely agree re Manzo's credibility, And Judge Gonzalez if he let's Manzo's work stand.

May 28 09:35 PM

[Homer II:]

The better Judge Gonzalez and cronies screw the debtholders in the Chrysler case ( and presumably, in the GM case as well ), the more surely that the case(s) will end up in Appeal and the more surely the bondholders will be reverted to first in line to collect. It will be a long, convoluted, acrimonious process before litigants receive any distribution.

May 31 03:52 PM