U.S. Is Said to Prepare Filing for Chrysler Bankruptcy

The New York Times ^ | April 23, 2009 | By MICHELINE MAYNARD and MICHAEL J. de la MERCED

[MaestroLC]

DETROIT — The Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler that could come as soon as next week, people with direct knowledge of the action said Thursday.

The Treasury has an agreement in principle with the United Automobile Workers union, whose members’ pensions and retiree health care benefits would be protected as a condition of the bankruptcy filing, said these people, who asked for anonymity because they were not authorized to discuss the case.

Moreover, Fiat of Italy would complete its alliance with Chrysler while the company is under bankruptcy protection.

The only major question that remains unresolved is what happens to Chrysler’s lenders, who hold $6.9 billion in company debt. The government’s most recent offer, presented Wednesday, would give the company’s lenders about 22 cents on the dollar, or $1.5 billion, and a 5 percent equity stake in a reorganized Chrysler. Earlier this week, a steering committee of the lenders proposed that they receive 65 cents on the dollar, or $4.5 billion, and a 40 percent equity stake.

Officials at Chrysler and the Treasury were not immediately available for comment.

A bankruptcy filing by Chrysler would be the first among Detroit’s troubled automakers, who have been mired in a devastating sales slump since last fall. Treasury is also working with General Motors to prepare a possible bankruptcy case, and the terms of a Chrysler filing might offer a glimpse into the shape of G.M.’s own filing.

Some analysts questioned whether the Treasury’s steps to prepare a bankruptcy case were an effort to put more pressure on lenders, with which it has exchanged proposals meant to reduce Chrysler’s debt. Chrysler faces an April 30 deadline from the Treasury, while G.M. faces a June 1 deadline in its own efforts to draft a new restructuring plan.

[TenthAmendmentChampion]

Chrysler & GM both filing for Bankruptcy?
http://www.freerepublic.com/focus/f-news/2219518/posts

More information here

[happygrl]

They are sacrificing current workers though it appears. I don’t know how many more job losses we can absorb and still climb out of this mess.

How do they expect to have a company if they continue to sacrifice the present for the past ?

[Nachum]

Thanks for the heads up.

The bankruptcy itself is not Obama’s doing, but I want to be sure before posting the business about agreements with the unions to pay their benefits once the company goes down. I have to think on this more.

[JenB987]

“the reason for this is the bondholders have refused to budge”

And it has NOTHING to do with the UAW? The fact that they are forcing the tax payers to pick up the tab for the union workers during the mess that they themselves created by manufacturing low-grade vehicles with top shelf prices?

I can think of so many reasons GM and Chrysler are in this mess and the word “bondholder” never comes to mind.

[devistate one four]

We want our money back!

[nyconse]

Very true, but it’s not that simple. The retirees worked for their pensions-paid into their pension and were promised health care. How can you take retired people and pull the rug out from under them? It’s a tough situation, and I don’t know the answer.

[TenthAmendmentChampion]

It may be rejected in BK court anyway, so yeah you probably want to hold off.

[Crawdad]

Very true, but it’s not that simple. The retirees worked for their pensions-paid into their pension and were promised health care. How can you take retired people and pull the rug out from under them? It’s a tough situation, and I don’t know the answer.

Oh boy.

[nyconse]

Look, I am not arguing about the union. I am not saying that unions have caused no damage or whatever...merely that Chrysler has reached an agreement which satisfies Fiat or so I’ve been told -hearsay- and the bondholders have rejected the latest government offer which would in fact kill the Fiat deal...it’s on all the news sites.

[newgeezer]

I wish my 401K would have been protected...Can you spare a bailout brother?

Don't lose all HOPE; perhaps the Obamanation is still planning to offer you a guaranteed 3% APY and restoring your 401(K) balance to its August, 2008 level in return for your handing it over to the gov't...

[Lurker]

The retirees worked for their pensions-paid into their pension

They should have had a little bit more caution about what they were asking for in benefits then.

were promised health care.

No. They were promised health insurance. There's a big difference.

How can you take retired people and pull the rug out from under them?

Stick around and watch.

It’s a tough situation, and I don’t know the answer.

I do. A real Chapter 11 filing.

L

[Nachum]

OK, I figured out how to post it now. I am specifically naming the New York Times as the source. That way, if it is thrown out, it is not stated as "fact". However, the idea that the administration would hold the pensions and health benefits out as a tax payor paid benefit is outrageous in itself.

THAT is worth posting. Here is how it now looks on the site:

New York Times: The Treasury has an agreement with the UAW to protect members’ pensions and retiree health care benefits after Chrysler bankruptcy filing

[nyconse]

What if it was your Dad or Mom...why do we defend bonuses for those at AIG-many not with the company at taxpayer expense, but shred contracts with average middle class people who did in fact work for their pension which is more than can be said about AIG execs...why does the little guy always get the shaft?

[bert]

There is a pension grantee fund. It is not funded enough to handle all the UAW problems but it is there as a tool. The absorption of the UAW retirees absolutely has to happen regardless of bankruptcy or failure or any other condition of the companies. It is absolutely not politically possible for any other outcome. They won.

I have pretty much taken for granted since day one it would be handled this way. What we don’t know is if the medical benefits will revert to some form of medicare or if they will remain solid gold with diamond inserts.

Don’t forget, underlying the whole mess is the State of Michigan. As go the UAW retirees, goes the State. If they lose all, the State dies.

[nyconse]

Well Lurker, I like and respect you, but do disagree on this issue. I am as most know a people person and have empathy for my neighbors many who have had their pensions yanked (Delphi). It’s a personal tragedy for many and for our country.

[Crawdad]

My dad worked his ass off and became president of the company. He cut his own retirement deal. He thought for himself and did not subjugate himself and his future to the whims of union bosses.

[Red Badger]

put more pressure on lenders?.................not the Unions?.......It’s not gonna work.................

[TenthAmendmentChampion]

Excellent

[swarthyguy]

Great point you bring up.

Millions for individual executives.....

The short answer, is because the execs know how to bribe people. At all levels.

[nyconse]

There are many GM, Chrysler and Ford retirees in the South as well you know. If Chrysler/Fiat comes back the government/taxpayer owes nothing...if they don’t it goes to pension guarantee anyway.