By on May 23, 2009

You’d be forgiven for thinking that the sale of “old” Chrysler to “new” Chrysler by June 15 was a done deal. Otherwise, why would Fiat feel free to tell the American taxpayer which three amigos will control “new” Chrysler’s Board of Directors (Fiat Chief Executive and future ChryCo CEO, Sergio Marchionne; Alfredo Altavilla, head of Fiat Powertrain Technologies; and former ExxonMobil executive, Lucio Noto)? Lest we forget, federal bankruptcy judge Arthur Gonzalez swept aside the non-TARP bondholders. But there’s growing, well-organized, politically-connected resistance from the terminated Chrysler dealers. In fact, their Congress critters are calling ChryCo’s (and GM’s) CEO onto the carpet next month, compelling them to testify why they done did it, reports Automotive News [sub]. As part of a rearguard action, Fiat has submitted papers to Arty that say “You don’t let us do this thing we must do and your people will suffer.” Minus the paraphrasing . . .

“Any material delay in the implementation of the bidding and sales process that the Bankruptcy Court has carefully but expeditiously set in motion will destroy Chrysler, put hundreds of thousands of people out of work, and devastate communities in both the United States and Canada,” Chrysler said in court documents.

Automotive News [sub] reports that the assertion comes after Indiana’s pensions funds requested a delay in the government-sponsored left hand to the right hand fire sale. File that one under not bloody likely. But the dealer showdown post GM’s C11? That should be interesting.

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22 Comments on “Chrysler Threatens Bankruptcy Court...”


  • avatar
    Happy_Endings

    I hope the BK judge doesn’t own any horses…

  • avatar
    Lokki

    I lived in Central America for a while, working with the U.S. government. The local national employees LOVED the fact that they could write to the government and complain…

    Cynic that I am, one night in my cups, I said, “I don’t know why you think that’s so great… .they’re still going to do what they want.”

    And the answer came… “maybe, but at least they have to answer you and explain…. AND you can keep complaining until you get tired…. AND sometimes, somebody listens and they don’t get away with it.”

    From their perspective that’s what makes America great. Yeah the government can do what they want, but they don’t ALWAYS get away with it.

  • avatar
    eyeonthetarget

    I have to applaud the spurned dealers for raising the consciousness of their plight to the Congressional level. The arbitrary & inequitable manner in which their financial ruin has been orchestrated leaves them no alternative.

    It’s hard to read the accounts of long-standing dealers who have been pillars of their communities, both from a philanthropic sense and by virtue of the economic contribution they’ve made to their regions, and not feel sympathetic to their pleas for justice.

    While most of us are insulated from the impact that their impending insolvency and financial ruination will cause, what rankles most is that their treatment simply appears to be unjust, unfair, unfeeling, and perhaps, even un-American.

    One can go on about the minority of dealers who are shysters, poor businessmen, and even crooks, and one can subscribe to the comfortable notion that in bankruptcy there are always winners and losers.

    However, in this case, the apparent steam-rolling of dealers from 3-dimensional human beings and engines of the economy, into 1-dimensional cardboard cut-outs devoid of humanity, sensitivity, and consideration for their economic welfare is reflective of the arbitrary nature of things we decry in more brutal, dictatorial areas of the world.

    Although I’d like to see them successfully seek some form of redress, I would argue that it is at least just as important that they get their well-earned “due process.”

  • avatar
    Robert Schwartz

    “I hope the BK judge doesn’t own any horses…”

    Arthur “Peg-boy” Gonzalez is not a horse owner. He is a horse’s hind end.

  • avatar
    lw

    I have to admit that I didn’t see this coming.

    The lenders were very well connected, but DC already owns Wall Street so they could be crammed down privately, although that almost didn’t work.

    The Chrysler dealers are very public (everyone knows when a local dealer goes away) and politically very well connected at the local and in many cases up to the state level.

    If the volume on this amps up and anyone from the new Chrysler / Fiat is called in for a public flogging, Fiat could just walk away.

    I bet the new Chrysler would even have to pay a walk-away fee if Fiat takes a pass. This “deal” is far from done.

  • avatar
    jpcavanaugh

    The delay requested by the Indiana pension funds and the political heat from the dealers are two separate but interesting issues.

    The Indiana pension funds are arguing to the BK court (as I understand it) what I have wondered all along: There are 2 kinds of BK filings – Chapter 7 liquidation and Ch 13 reorganization. The transaction here looks like the asset sale provisions of Ch 13 are being misused to essentially conduct a liquidation and asset sale through the mechanism of a reorganization. Make no mistake here, the current Chrysler LLC is NOT being reorganized. It is being stripped of its good parts by a government backed “New Chrysler” which is a separate entity. The old Chrysler will sell off what has value, and will certainly liquidate, as there will be nothing left to reorganize.

    The dealers are playing the political card, as they have no argument in the BK court. Their only hope is to get the task force’s/Treasury’s attention and maybe a re-think. From where I sit, the dealer culling was absolutely unnecessary. Old Chrysler (that cut the dealers) is not in this for the long haul anyway. It isn’t going to have ANY dealers. So why is it cutting some now. Answer is that it is doing the dirty work for NewChrysler. All New Chrysler had to do is go out and re-sign the dealers it wants. Those it did not want have no recourse. Except politics, which must be a very, very important thing for New Chrysler, being controlled by the government and its best friends. So, get lame duck Old Chrysler to cut the unwanted dealers so New Chrysler can say “hey, it was them, and there was nothing we could do about it.”

  • avatar
    Pch101

    There are 2 kinds of BK filings – Chapter 7 liquidation and Ch 13 reorganization.

    To clarify, it’s 11, not 13. 13 is for individuals only, and does not apply to this situation.

    The dealers are playing the political card, as they have no argument in the BK court.

    Their argument is weak, and will get blown out of court soon enough. Case law is very clear that contracts can be blown out in an 11, and the judge seems fair content with the idea with this being an 11.

    I don’t know all of the arguments being made by the debtor for this being an 11, but it obviously could be argued that the NewCo is necessary because Fiat wouldn’t do the deal without it. An incoming new operator is going to demand a clean balance sheet, and giving them a new entity without the old liabilities is the way to get them over the hump.

  • avatar
    quasimondo

    And here I was thinking that a Chapter 11 filing would be so easy.

  • avatar
    afabbro

    It’s hard to read the accounts of long-standing dealers who have been pillars of their communities, both from a philanthropic sense and by virtue of the economic contribution they’ve made to their regions, and not feel sympathetic to their pleas for justice.
    I feel sympathy for people who lose their livelihood through no fault of their own. But…if Chrysler or GM went out of business (liquidation), they’d be in the same boat surely.

  • avatar

    “As fiduciaries, we can’t allow our retired police officers and teachers to be ripped off by the federal government,” Richard Mourdock, Indiana’s treasurer, said in a statement. “The Indiana state funds suffered losses when the Obama administration overturned more than 100 years of established law by redefining ‘secured creditors’ to mean something less.”

    Another right wing hack, no doubt.

  • avatar
    jpcavanaugh

    pch101
    To clarify, it’s 11, not 13. 13 is for individuals only

    You are correct. Saturday morning brain fade. I also agree with your guess as to why they are doing this thru the 11. The only realistic alternative for Chrysler was going to be a liquidation. Fiat does not have the cash to bid anything, and the federal dollars and all the UAW jobs go poof, with no further pension contributions.

    The interesting question, though, is why this template for GM? IMHO, a GM BK on this template is more of a transparent circumventing of debt priorities for the benefit of the Treasury and the Union. Everyone (at least outside of this site) has always said that GM is salvagable. so why not a regular 11 reorg. Dump divisions, dealers, plants and lines that they don’t need, and move forward with a leaner and more focused company that is still the same company owned by the same shareholders. (Personally not sure this is possible without new management, but this is another topic.)

    I recognize that statutory asset-sale provisions under Ch 11 are being used in the Chrysler deal (and probably with GM too) but any good lawyer can take a statute and stretch it to fit a current situation that was never even considered when the law was written. Some of these get reported in the casebooks or upheld on appeal, making it precedent for the next case. It is an old saying that hard cases make bad law. I think we are seeing a perfect example in these bankruptcies.

  • avatar
    Pch101

    The interesting question, though, is why this template for GM?

    If there is a new buyer in the wings, that would clinch it. My guess is that we’ll be hearing about a buyer soon enough. (Well, that’s my hope, anyway.)

    Otherwise, it could get interesting. If there is no new buyer or firm plans for bringing one in, then I think that it may become a fair question as to why a Good GM is necessary, when you could just reorganize the current GM.

    Putting that in context, though, posters here should understand what a “quick bankruptcy” really means. What that would entail is that the court approves some sort of plan to get the major assets under the control of the debtor or new company, while the other stuff is sorted out.

    Under this scenario, the case itself could take years to resolve. But the ability to put the basics of the reorg plan into motion would occur fairly quickly. The quick rinse isn’t that quick in every respect, just in the ways that matter the most to the debtor.

  • avatar
    Luther

    Obama would love to nominate a Supreme Court Maggot-in-black-robe with a South-o-Texas-American last name…Arthur Gonzalez will do whatever Obama wants him to do.

  • avatar
    lutonmoore

    Maybe they really want ChryCo to go out, and keep GM and Ford viable. Make it look like they gave it the old college try. PBGC takes over Chrysler’s pensions at the reduced rate. GM could buy Jeep. But after all the smoke clears out, Fiat walks away and it’s like, (shrug) “Oh well.” Just a (conspiracy) thought.

  • avatar
    97escort

    I find it hard to have much sympathy for the dealers who have been axed. How are they so different from employees who have invested years of their working lives in a company who then become redundant and let go? Life’s a bitch and that is why one should always have a back up plan.

    These guys are supposedly smart business men. If TTAC and its readers knew this was coming years ago, they should have too. After all they were the poorest performers of the lot. The local Dodge Truck dealer who got the ax also has a Toyota franchise. He moves Toyotas like crazy as near as I can tell. I don’t feel a bit sorry for him.

  • avatar
    NBK-Boston

    Ronnie Schreiber writes, concerning Richard Mourdock (the IN state treasurer who blamed Obama’s “overturning” of 100 years of bankruptcy law for causing the losses his state’s pension fund took on its Chrysler investments):

    Another right wing hack, no doubt.

    In a word: Yes.

    Look up his bio.

    He was a long-serving executive in the coal industry, until getting involved in municipal politics in the 1990s. His current job is his first state-wide office — he never sat in the legislature or in a state administrative agency before this. As far as “right wing” goes, well, he is a Republican.

    My advice to Ronnie: Look both ways before sniping.

  • avatar
    motron

    @NBK-Boston: “he is a Republican”

    Not only that, he is apparently an early favorite to be the 2012 Republican candidate for Governor. I imagine this bit of posturing is not hurting his chances of capturing the nomination.

  • avatar

    He was a long-serving executive in the coal industry,

    Minus 10 demerits on the left wing scale of morality for working in the fossil fuel industry.

    until getting involved in municipal politics in the 1990s.

    Too bad he wasn’t a community organizer.

    His current job is his first state-wide office — he never sat in the legislature or in a state administrative agency before this.

    For the left, the ultimate authenticity is being a politician or bureaucrat.

  • avatar
    Dr. No

    To those who say “the dealers have it coming…” are wrong in the context they’re to blame for Chrysler and GM’s problems.

    The fact is, Chrysler and GM are making both business and political decisions in the selection process. The political reasons should not be mixing with the business decisions. I can assure you that Chrysler has axed some EXCELLENT (and profitable) dealers. Why? You’ll have to ask Chrysler, but it’s probably because the “dealer didn’t play ball” or had “attitude” with the factory reps. The factory didn’t win many friends when it tried to stuff an extra 60 days supply down the throat of the dealers…

    Long term, reducing the # of dealers is necessary, but the excess # today is NOT the big problem of the Big Two. The dealer is a customer of the factory, and the factory giving the finger to the dealer (i.e. customer) isn’t a very good business decision here.

  • avatar
    NBK-Boston

    Ronnie Schreiber writes:

    Minus 10 demerits on the left wing scale of morality for working in the fossil fuel industry.

    So if you are taking away 10 demerits, you’re moving him up 10 units on the left-wing scale, so it’s a clever way of saying that left-wingers give due recognition to the skills evidenced by holding down a job in the real world, even if it is in an industry they don’t like?

  • avatar
    RogerB34

    Nancy says the CIA issue is over and done.
    Obama says Chrysler bankruptcy is over and done.
    What is it that you don’t understand?

  • avatar
    WildBill

    97escort, our local Chrysler/Jeep dealer that has been axed also has Toyota on the lot. He sells them 4 to 1 over the Chrysler product. He claims no layoffs as a result of this.

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