Chrysler Bankruptcy: Central Wrap-Up
Chrysler was the second largest automaker between 1936 and 1949. It was acquired by Daimler-Benz in 1998, and suffered from poor management and lack of investment until being sold to Cerberus Capital Management. A combination of economic, political, marketing, and product issues short-circuited Cerberus' rapid work on correcting Daimler’s mis-handling of Chrysler; and, while the government was glad to lend trillions of dollars to financial institutions, politicians demanded that President Bush, and then President Obama, allow Chrysler and General Motors to go into an unassisted bankruptcy. Bush made interim loans over the objections of his party leaders, and Obama worked on forming deals to preserve Chrysler and GM. Bankruptcy would have been avoided, but three lenders refused to accept the Treasury's deal, which was admittedly draconian.
The three lenders were Oppenheimer Funds, Perrella Weinberg Partners, and Stairway Capital.
The bankruptcy may be brief, with the White House and Chrysler expecting a sale of core assets within 60 days. Legal expenses are likely to be $1,000 per hour per attorney, with a possibility of losing major assets or, if customers do not rely on government-backed warranties, liquidation if sales plummet and delays occur.
Court papers are available at Chrysler’s site, chryslerRestructuring.com.
Chrysler will sell its principal assets to a new company under Section 363 of the Bankruptcy Code. The new company will, if plans are maintained and no other company outbids them, be the result of the alliance with Fiat and will have the Chrysler, Dodge and Jeep brands, as well as most of Chrysler's current employees and production facilities. Chrysler's current employees will become employees of the new company.
The Treasury will provide up to $3.5 billion in debtor-in-possession financing, and $4.5 billion in exit financing; the Canadian government will provide around $800 million and get 2 percent of Chrysler's equity. $280 million has already been transferred to a program that guarantees Chrysler's warranties, so customers can be more confident in buying cars
from a company in bankruptcy.
The Fiat deal has been finalized and signed. A new board of directors will be created by Chrysler, the government, and Fiat, and Bob Nardelli will return to Cerberus as an advisor once the new company is created; Tom LaSorda will retire during the initial bankruptcy proceedings.
Arthur Gonzalez, one of the nation's most experienced bankruptcy judges, will oversee the bankruptcy proceedings for Chrysler. He handled both Enron and WorldCom's bankruptcies simultaneously; he has a favorable reputation and considerable experience in high-profile cases. The sale of key assets to the Treasury is expected to come very soon in the case, with other decisions possibly continuing for years.
Chrysler will pay $2 billion to its secured creditors. Its unsecured creditors, who are mainly parts suppliers and the BBDO Detroit advertising agency, may be paid more immediately in some cases, depending on what the judge allows.
The top unsecured debtor is Ohio Module Manufacturing, which presumably supplies Jeep components, and is owed $70 million. Ad agency BBDO Detroit was at #2, with $58 million owed. Many of the top ten debtors are instantly recognizeable to Chrysler fans - Johnson Controls (interior parts), Continental Automotive (electronics, ABS, brakes, and more), Cummins, Visteon, New Process, and Denso. Also included are Comau of Michigan and Germersheim Spare Parts of Germany.
GMAC will be the preferred lender for Chrysler’s consumer loans.
Production and plant closings
The newly renovated Sterling Heights Assembly Plant, which makes the Avenger and Sebring, will be closed in or before December 2010. Conner Avenue, Detroit Axle, St. Louis North, Kenosha Engine, and Twinsburg Stamping will also be closed and sold. Sterling Heights will not be included in the New Chrysler but will be leased to it.
Conner Avenue and St. Louis North are not surprising candidates to be left out of the "New Chrysler" since St. Louis has already been closed and Conner Avenue's sale was announced some time ago. Some have expected Twinsburg to be closed as well, and Kenosha production will be replaced by a new Pentastar V6 plant.
From Monday, May 4, through the sale of the “good Chrysler assets,” all Chrysler plants will be closed, though employees will keep their health benefits. If the process takes longer than the expected 60 days to create a new Chrysler holding company, some limited production may restart. During this period, Chrysler will cut its marketing budget by 50%, given that there will be no production.
Companies covered in the petition
sebring96hbg provided a link to Chrysler's actual bankruptcy petition.
Companies covered include Chrysler LLC, Chrysler Aviation, three Dutch divisions, the Chrysler Institute of Engineering, three international corporations, Chrysler Motors LLC, Chrysler Realty, the service contracts companies, Chrysler Technologies Middle East, Chrysler Transport, the vans business (Sprinter), Dealer Capital, GEM (electric cars), NEV, Peapod, TPF Asset and Note, and Utility Assets LLC.
Chrysler’s Mexican, Canadian and other international operations are not part of any bankruptcy filing.
Thanks to Allpar!
Chrysler Bankruptcy
Chrysler was the second largest automaker between 1936 and 1949. It was acquired by Daimler-Benz in 1998, and suffered from poor management and lack of investment until being sold to Cerberus Capital Management. A combination of economic, political, marketing, and product issues short-circuited Cerberus' rapid work on correcting Daimler’s mis-handling of Chrysler; and, while the government was glad to lend trillions of dollars to financial institutions, politicians demanded that President Bush, and then President Obama, allow Chrysler and General Motors to go into an unassisted bankruptcy. Bush made interim loans over the objections of his party leaders, and Obama worked on forming deals to preserve Chrysler and GM. Bankruptcy would have been avoided, but three lenders refused to accept the Treasury's deal, which was admittedly draconian.
The three lenders were Oppenheimer Funds, Perrella Weinberg Partners, and Stairway Capital.
The bankruptcy may be brief, with the White House and Chrysler expecting a sale of core assets within 60 days. Legal expenses are likely to be $1,000 per hour per attorney, with a possibility of losing major assets or, if customers do not rely on government-backed warranties, liquidation if sales plummet and delays occur.
Court papers are available at Chrysler’s site, chryslerRestructuring.com.
Chrysler will sell its principal assets to a new company under Section 363 of the Bankruptcy Code. The new company will, if plans are maintained and no other company outbids them, be the result of the alliance with Fiat and will have the Chrysler, Dodge and Jeep brands, as well as most of Chrysler's current employees and production facilities. Chrysler's current employees will become employees of the new company.
The Treasury will provide up to $3.5 billion in debtor-in-possession financing, and $4.5 billion in exit financing; the Canadian government will provide around $800 million and get 2 percent of Chrysler's equity. $280 million has already been transferred to a program that guarantees Chrysler's warranties, so customers can be more confident in buying cars
from a company in bankruptcy.
The Fiat deal has been finalized and signed. A new board of directors will be created by Chrysler, the government, and Fiat, and Bob Nardelli will return to Cerberus as an advisor once the new company is created; Tom LaSorda will retire during the initial bankruptcy proceedings.
Arthur Gonzalez, one of the nation's most experienced bankruptcy judges, will oversee the bankruptcy proceedings for Chrysler. He handled both Enron and WorldCom's bankruptcies simultaneously; he has a favorable reputation and considerable experience in high-profile cases. The sale of key assets to the Treasury is expected to come very soon in the case, with other decisions possibly continuing for years.
Chrysler will pay $2 billion to its secured creditors. Its unsecured creditors, who are mainly parts suppliers and the BBDO Detroit advertising agency, may be paid more immediately in some cases, depending on what the judge allows.
The top unsecured debtor is Ohio Module Manufacturing, which presumably supplies Jeep components, and is owed $70 million. Ad agency BBDO Detroit was at #2, with $58 million owed. Many of the top ten debtors are instantly recognizeable to Chrysler fans - Johnson Controls (interior parts), Continental Automotive (electronics, ABS, brakes, and more), Cummins, Visteon, New Process, and Denso. Also included are Comau of Michigan and Germersheim Spare Parts of Germany.
GMAC will be the preferred lender for Chrysler’s consumer loans.
Production and plant closings
The newly renovated Sterling Heights Assembly Plant, which makes the Avenger and Sebring, will be closed in or before December 2010. Conner Avenue, Detroit Axle, St. Louis North, Kenosha Engine, and Twinsburg Stamping will also be closed and sold. Sterling Heights will not be included in the New Chrysler but will be leased to it.
Conner Avenue and St. Louis North are not surprising candidates to be left out of the "New Chrysler" since St. Louis has already been closed and Conner Avenue's sale was announced some time ago. Some have expected Twinsburg to be closed as well, and Kenosha production will be replaced by a new Pentastar V6 plant.
From Monday, May 4, through the sale of the “good Chrysler assets,” all Chrysler plants will be closed, though employees will keep their health benefits. If the process takes longer than the expected 60 days to create a new Chrysler holding company, some limited production may restart. During this period, Chrysler will cut its marketing budget by 50%, given that there will be no production.
Companies covered in the petition
sebring96hbg provided a link to Chrysler's actual bankruptcy petition.
Companies covered include Chrysler LLC, Chrysler Aviation, three Dutch divisions, the Chrysler Institute of Engineering, three international corporations, Chrysler Motors LLC, Chrysler Realty, the service contracts companies, Chrysler Technologies Middle East, Chrysler Transport, the vans business (Sprinter), Dealer Capital, GEM (electric cars), NEV, Peapod, TPF Asset and Note, and Utility Assets LLC.
Chrysler’s Mexican, Canadian and other international operations are not part of any bankruptcy filing.
Thanks to Allpar!
Chrysler Bankruptcy