Chrysler - Possible Bankruptcy

[Mr E]

Chrysler are in big trouble over talks with their creditors.

One of the conditions of the US government assistance programme was that some $7 billion of debt be removed, which is held in the form of bonds. Chrysler have been talking with creditors looking at various stock and cash options - initially at 15c/$ and now edging closer to 30c/$ (following some extra government cash).

However, it looks as if the fund managers don't want to know. This means that the board and US government are looking at a "tactical" bankruptcy in order to remove the debt.

The problem (from a couple of Chryser insiders I know) seems to be that some of the funds look to receive more from their "insurance" (CDSs?) than is being offered under this deal. Whether that is true I don't know, but it does seem to fit in with the ethos in the banking industry in the recent past.

I've also been looking at the Fiat merger - a no-cash 31% holding given to Fiat by Chrysler, with an additional $6 billion from the US government. Fiat have been looking to diversify and merger-up for quite a while, but have no cash to do so. So this looks to be an offer they can't refuse and it gives Chrysler access to a european network and small car expertise.

 

[A-AvantGarde]

Chrysler file for Chapter 11

http://business.theglobeandmail.com...slerybankruptcyPlan0430/BNStory/Business/home

 

[miro]

The reason why the car makers have so much debt is because the pension plans and medical plans cost them billions.

The unions have loaded so much overhead into these companies that the collapse of the car makers would send a shock-wave into the medical insurance profession.

 

[whitenemesis]

This isn't so bad for Chrysler, the US gov is bailing them out. Just a way of clearing themselves of debt. They will be back as if nothing happened

 

[mb240]

I bet Dieter Zetsche is still thanking his good fortune to have separated Diamler AG from them last year.

 

[whitenemesis]

I bet Dieter Zetsche is still thanking his good fortune to have separated Diamler AG from them last year.

If it is just down to 'good fortune' they are in big trouble!

 

[miro]

I bet Dieter Zetsche is still thanking his good fortune to have separated Diamler AG from them last year.

The Germans were publishing several stories around that time, making it inevitable. As early as 12 months ago I was already sending out the red alert to friends who's jobs were on the line. Now those friends are still employed.

 

[Mr E]

Some other doom and gloom news from the US:

Chrysler is shutting down production at all US and Canadian plants whilst going through its "bankruptcy" processes. On top of this, GM has announced a 9 week shutdown in North America rather than the usual 2 week shutdown it runs for model year changeover.

Upshot is that many Tier 1 and Tier 2 suppliers who were stung by the Chrysler filing are now looking at a triple wammy - little or no return on outstanding payments due from Chrysler, no new business from Chrysler for at least 60 days, and the same with GM.

Ratings have dropped on major suppliers such as Magna, Johnson Controls and TRW.

The one bit of goods news is it seems that other OEMs are beginning to stockpile parts inventory and widen the supply chain.

There is a Supplier Support Program, but the $5 billion in that does not cover the outstanding credit lines to Tier 1 suppliers let alone those further down the chain.

Sit back and watch as it all begins to unravel...