April 24, 2009Chrysler to File for Bankruptcy

Chrysler 300C (via www.chrysler.com)

So what does this mean and what’s entailed?  

Well, I’m honestly not sure.  And, it’s been a brutal week (one that included a Tumblr mishap that resulted in the accidental deletion of the draft of a piece on the Porsche Panamera that I’d been working on for weeks just as I was reaching the “finishing touches” stage - note to self: write longer pieces in MS Word!), so I haven’t been able to keep abreast or write as much as I would like.  

That said, here’s the run-down from what I can gather…

Fiat is still very much in the picture.  Chrysler continues to try to strike a deal with the Italian automaker and bankruptcy proceedings will not affect whether or not Chrysler sells itself to Fiat.  If Chrysler moves ahead with filing for Chapter 11 (which seems almost 100% likely) and an agreement with Fiat is arrived at, Fiat would, essentially, be able to pick and choose what elements of the Chrysler operation it wants.  If, however, a deal between Chrysler and Fiat cannot be made, Chrysler will be forced to liquidate, which may mean selling pieces of itself to multiple entities and/or shuttering particular pieces of the operation.  The latter scenario would be messy.

Read a very informative piece in Business Week or in the Miami Herald.

From Today’s Wall Street Journal:

A Chrysler bankruptcy filing, while long expected by some, would nonetheless represent a watershed moment in Detroit’s long decline as the first such move among the once-dominant Big Three auto makers. GM is working through similar issues and could be forced to file for bankruptcy in May.

In either Chrysler scenario, the impact would ripple through the supply chain of car dealers, parts makers and others, as well as the economies of Midwestern states. The Obama administration said a bankruptcy proceeding wasn’t inevitable, with officials insisting that a successful outcome outside of court was still possible.

From Today’s New York Times:

The company faces a deadline of April 30 to come up with a viable business plan supported by its creditors, theUnited Automobile Workers union, and Fiat, the Italian car company that wants to acquire a stake in Chrysler.

The Obama administration has told Chrysler it will provide up to $6 billion in new financing, on top of the $4 billion in loans it has already given the company, if Chrysler can complete a deal by next Thursday with a cost structure that gives it a chance of survival. The creditors have so far balked at the terms suggested by the Treasury.