More to Love About the Chrysler Asset Sale

by Edward Niedermeyer

Published: June 3rd, 2009

more to love about the chrysler asset sale

The NYT Wheels blog reports that Judge Arthur Gonzalez has overruled pleas by consumer advocates and law professors by granting Chrysler’s request to exempt “New Chrysler” from any liability arising from “Old Chrysler.” Public Citizen, the Center for Auto Safety and Consumers for Auto Reliability and Safety have formally objected to the move on the grounds that current owners of Chrysler vehicles will have no legal recourse if they are injured because of a product defect. A lawyer representing these groups has said they will seek an appeal, the second objection to date to the Chrysler asset sale. According to testimony by Robert Nardelli, the idea of not allowing current owners to sue came up during the discussions between the Treasury and Fiat. Unlike the State of Indiana’s appeal of the Chrysler asset sale, this appeal has the potential to completely change the incentives for Fiat to take over Chrysler. If an appeals judge hears and approves this objection, Fiat could simply walk away.

Edward Niedermeyer

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U mad scientist on Jun 04, 2009
that some lawyers aren't going to make every argument possible for the alternative view. Including using law from unrelated jurisdictions if they're desperate enough. Hell the judge might forgive that if the arguments didn't contradict the facts in the case. What's really happening is that the desperate idiot side is trying to conflate the bankruptcy sale with whatever the hell the DIP lender chooses to do with the assets/equity after it buys them. Legally speaking they can use the factories to throw stripper parties for every UAW worker's birthday if they so fancy, or hold a cage fight where the last granny standing gets all the newco stock. On second thought, that may not be legal.

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U mad scientist on Jun 04, 2009

What John The Hacker should've been looking if he had a clue was something more along these lines: http://www.bingham.com/Media.aspx?MediaID=5085 Unfortunately, that's not exactly what he's looking for, and thus he will likely fail in his venture without another big helping hand. I was hoping to do a sally struthers parody here for a foundation that aids those deprived of basic legal knowledge, but couldn't find a suitable save the children transcript, so screw it.

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Anonymous on Jun 04, 2009

Everybody... I must confess I am not a lawyer. This is in my opinion, not a bad thing. At least I have a slightly better chance of getting into heaven than the camel stuck with his ass in a needle eye. But it always helps to listen to a good one speak. Please take the time to read through this interview with the link below. If initially a window pops up, x out to the interview. It makes me a little more clear on the government moves with these bankruptcies. But even IF the deals are all legal, although odd, it all comes down to what RF tried to explain in his TV discussion: Nothing matters IF you are NOT building cars that the public wants. There is NOTHING in the big plan that gives me confidance the NEW GM or the NEW C will present to a buying public anything worth purchasing. Everything invested will be lost without a good desireable car to sell. PLEASE read through... http://www.salon.com/tech/htww/feature/2009/05/23/fun_with_bankruptcy_law/

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Pch101 on Jun 04, 2009
Another factor that makes a sham sale likely is when only one party is allowed to bid on the assets, like in the politically structured deal we had. That's factually inaccurate. The judge ordered an auction. The lack of bidders at that auction is indicative of the absence of a sham sale. A sham sale suggests an effort to underpay for the assets in order to harm the creditors. But without anyone else expressing interest in the purchase, it's rather tough to argue that the value was too low. Apparently, nobody else was interested in paying $2 billion for Chrysler's assets. That's not surprising. Net net, Cerberus didn't pay much for the company, and that was at a point when Chrysler was selling more units. Daimler happily dumped it at a loss, given the weakness of the operations. This deal makes sense for Fiat, but it doesn't make much sense for many other parties, and apparently doesn't make sense for anyone at that price point. The bondholders had a rotten case, and they knew it. Accept it for what it is; they made loans to a bad business, and got paid less than par because they made those choices. That's how the real world works.

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