Chrysler LLC filed for bankruptcy on Thursday after talks to restructure its debt with lenders broke down. Despite intense negotiations over the past few weeks, Chrysler failed to gain the full support from its lenders to avoid the first-ever bankruptcy filing by a major U.S. automaker. At the same time, Chrysler as expected entered into an alliance with Italian automaker Fiat SpA (FIA.MI) where it sold a stake starting at 20 percent and in which Fiat can become the
majority owner once the government loans are repaid.
The Chapter 11 filing, in U.S. Bankruptcy Court in Manhattan, will send shock waves through the entire industry – including Chrysler’s rivals, suppliers, dealers and the hundredsof thousands who rely on the industry for their livelihoods. As part of the filing, the U.S. government will provide up to $3.5 billion in debtor-in-possession (DIP) financing and up to $4.5 billion in exit financing. Obama said he hopes the entire bankruptcy process will take only 30 to 60 days.
Source: Reuters
The bankruptcy signals that Obama is prepared to play hardball with holdout lenders rather than knuckle under to their demands and will likely set the tone for similar discussions with bondholders of General Motors Corp (GM.N) – which is now on the clock to restructure its operations by the end of May.
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I hope the other companies see this and take notice that the president has what it takes
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