California Autos Examiner

Wednesday, April 29, 2009

Open Your Books to Chapter 11

In what I can only describe as a game of "Extreme Chicken," President Obama is writing two speeches for Thursday: one in which he declares that Chrysler will fall into Chapter 11 bankruptcy and one in which he announces that Chrysler has avoided bankruptcy.

From what I know of the situation, it would appear that a few lenders are holding out on a plan to cancel a large portion of Chrysler's debt. The White House, Fiat and labor unions may be intentionally leaking information to the media that they are "comfortable" with Chrysler declaring Chapter 11 in order to force these debt holders to play ball.

Obviously if Chrysler goes Ch 11, then Fiat could avoid the management hassles of taking over an entire car company, but on the flip side it would have to plunk down some serious cash upfront to get the assets it wants, something that it wouldn't necessarily have to do otherwise. Jeep alone would bring a tidy sum.

Frankly, I'm going to go ahead and call it: Chrysler will not declare bankruptcy. I think that enough of the conditions have been met and all that is left is posturing on both sides to get the best deal possible. At the heart of the negotiations, we are down to haggling over only a billion or two at this point and given that the economy looks to be stabilizing, I don't think the Obama administration is going to risk upsetting the apple cart with a bankruptcy.

We have only a few hours to wait before we know the answer.


Trooper Thorn said...

Chrysler will stay afloat. Today's announcements that the recession will end sooner than expected will stave off the collapse.

AMIT said...

I hope the Chrysler will not declare Bankruptsy.