Chrysler to Emerge From C11 on Monday

by Robert Farago

Published: June 5th, 2009

Provided, that is, the Supreme Court of the United States (SCOTUS) turns down Indiana’s request to overrule the sale of assets from Old, Crap Chrysler to New, Italian-controlled Chrysler. This after the U.S. Appeals Court told the gearbox-factory-jilted state’s lawyers to piss off. Or, more specifically, “You can’t wait for a better deal to come in from Studebaker.” Wait schmait; the three judges returned their decision about 10 minutes after Indiana’s lawyers finished their arguments. “There’s one more stop on the train,” Tom Lauria, a lawyer for the Indiana pension funds said, after the court’s ruling. Yes, well, New Chrysler left the station a while ago. One of our Best and Brightest has an interesting take on this (after the jump), but again, I reckon this is a done deal.

A TTAC commentator e-mails:

Well, a very interesting conference there will be at SCOTUS on Monday!

Assuming that there are no self-recusals for stock ownership (but shouldn’t they all recuse because they are taxpayers?), I can envision a scenario where Alito, Roberts, Thomas, and Scalia find likelihood of success and therefore would preliminarily enjoin the sale pending expedited briefing and argument.

However, then one of the others says, “Look guys, you can get this case heard, but you are going to lose 5/4, and in the interim FIAT walks away, and then it’s all OUR fault. So, suck it up, and take one for the team.”

Except, seeing as Congress declined to give TARP funds to the automakers… do the institutional aims of SCOTUS usually include allowing the Executive branch to rule by fiat? (Sorry, could not resist. RF, feel free to use, but don’t attribute.) But I think the only way that the four named above can get another vote is to appeal to the others’ amour-propre and not to the rule of law!

It is actually a very “nice” legal issue: “As long as there is some non-trivial amount of competent evidence that the Ch. 11 plan gives the objecting creditor more than a Ch. 7 liquidation would, does that fact that a non-objecting creditor get treated even better invalidate the Plan?” (We can call it the ‘The Parable of the Vineyard Workers’ test. You know—”What business of yours is my generosity with others; you got the wages you bargained for.”)

In other words, does passing the “more favorable than Ch. 7” test confer immunity on favoritism? As a precedent, I think that is very dangerous. But SCOTUS can’t put in a footnote that says, “This decision shall be non-precedental, except for any other bankruptcy BH Obama really cares a lot about.”

Well, by 4:00 PM Monday, we should know how much is left of the Republic.

Robert Farago

More by Robert Farago

Comments

Join the conversation

2 of 43 comments

Long126mike on Jun 09, 2009
Do you favor the government’s intervention in GM and Chrysler? I am certainly open to read your thoughts on the topic. That's tough. Macroeconomically, I think it's prudent to keep them both from liquidating simultaneously. Any rational cost-benefit analysis will tell you that it's a prudent choice, because the probability of a downside and the costs of a downside are pretty severe. Do I like guys like Maximum Bob taking his and her private jets to Bali to drink smoothies on the beach, while I pick up the tab for his awful mess? Hell no. I don't like it one bit. If I ran the world, he'd be lucky that the least I did was seize everything he owns and put him in a work camp shoveling cow dung for the next 5 years. Do I love unions, particularly the UAW? Hell no as well. People on the right love to lump unions into the "lefty" side of things, but the reality is that unions are like any interest group of any size and power - they have their own unique agenda. For example, you can find unions in favor of drilling in Alaska, or in favor of publicly-funded sports stadiums. You also find them fighting certain transit innovations or changes in educational policy. But I support the president's decision on this matter at this point because I know for a fact that they're looking at this thing from the big picture perspective, and since it's his job to look out for the country and the economy as a whole, I agree that the choices he's making at the moment are the best choices available from a set of bad options. What can he do? He inherited a lot of big messes at once. I think that people who focus on "getting their money back" or using GM or Chrysler's eventual business success or failure as a metric are missing a large part of the picture. Government accounts for about 20% of the economy in an average year, and its job is to be a stabilizing actor whenever things get out of whack. So if there's a steep drop-off in one aspect of GDP (like consumer spending), then government needs to step up and fill that gap, otherwise the economy is really going to crater. People need to not look at the gross dollar amounts but when they're being spent and for what broad purpose. Take the stimulus bill as another example. There's a big focus on "shovel-ready" projects, which applies to the transportation sector. In an ideal world, I would like that the government shift its funding priorities away from the overwhelming dominance of personal automobiles in terms of person-miles traveled. But that's not what's happening in the short-term stimulus. Most of the money is going to repairing old roads and bridges and building new ones, because they're ready to go and all they need is funds. That helps the economy as a whole at a crucial time, and I accept that trade-off, even though it makes the auto dependence problem worse in the short-term. Is that a sufficient answer? How about you on the broader considerations?

Like Reply
Mimizhusband on Jun 10, 2009

Long126mike: I would have let Chrysler die in 1979, since I think that bailout sewed the current seeds of destruction. I am very eager to see what Penske can do with Saturn. I currently drive Toyotas but I am open to an quality product. I just will have to have a lot more grey hair before I return to GM. I absolutely loved this comment: If I ran the world, he’d be lucky that the least I did was seize everything he owns and put him in a work camp shoveling cow dung for the next 5 years. Thanks

Like Reply

Recent Comments

Redapple2 Love the wheels
Redapple2 Good luck to them. They used to make great cars. 510. 240Z, Sentra SE-R. Maxima. Frontier.
Joe65688619 Under Ghosn they went through the same short-term bottom-line thinking that GM did in the 80s/90s, and they have not recovered say, to their heyday in the 50s and 60s in terms of market share and innovation. Poor design decisions (a CVT in their front-wheel drive "4-Door Sports Car", model overlap in a poorly performing segment (they never needed the Altima AND the Maxima...what they needed was one vehicle with different drivetrain, including hybrid, to compete with the Accord/Camry, and decontenting their vehicles: My 2012 QX56 (I know, not a Nissan, but the same holds for the Armada) had power rear windows in the cargo area that could vent, a glass hatch on the back door that could be opened separate from the whole liftgate (in such a tall vehicle, kinda essential if you have it in a garage and want to load the trunk without having to open the garage door to make room for the lift gate), a nice driver's side folding armrest, and a few other quality-of-life details absent from my 2018 QX80. In a competitive market this attention to detai is can be the differentiator that sell cars. Now they are caught in the middle of the market, competing more with Hyundai and Kia and selling discounted vehicles near the same price points, but losing money on them. They invested also invested a lot in niche platforms. The Leaf was one of the first full EVs, but never really evolved. They misjudged the market - luxury EVs are selling, small budget models not so much. Variable compression engines offering little in terms of real-world power or tech, let a lot of complexity that is leading to higher failure rates. Aside from the Z and GT-R (low volume models), not much forced induction (whether your a fan or not, look at what Honda did with the CR-V and Acura RDX - same chassis, slap a turbo on it, make it nicer inside, and now you can sell it as a semi-premium brand with higher markup). That said, I do believe they retain the technical and engineering capability to do far better. About time management realized they need to make smarter investments and understand their markets better.
Kwik_Shift_Pro4X Off-road fluff on vehicles that should not be off road needs to die.
Kwik_Shift_Pro4X Saw this posted on social media; “Just bought a 2023 Tundra with the 14" screen. Let my son borrow it for the afternoon, he connected his phone to listen to his iTunes.The next day my insurance company raised my rates and added my son to my policy. The email said that a private company showed that my son drove the vehicle. He already had his own vehicle that he was insuring.My insurance company demanded he give all his insurance info and some private info for proof. He declined for privacy reasons and my insurance cancelled my policy.These new vehicles with their tech are on condition that we give up our privacy to enter their world. It's not worth it people.”