Chrysler Files for Bankruptcy

In Financials, Politics on April 30, 2009 at 20:37

chryslerUS automaker Chrysler have filed for Chapter 11 bankruptcy protection which protects the company from its creditors allowing it to rearrange its finances while still trading at the stock exchange. Chrysler is also expected to receive $8 bln in additional government aid – of which $4.7 bln will be repayed over an 8 year period. The administration described it as a “surgical short bankruptcy” that will last from 30 to 60 days.

The new Chrysler ownership structure will be as follows: Fiat gets 20% stake with the potential of reaching to 35%, the Treasury will have an 8%, a union trust VEBA takes 55%(!) and the governments of Canada and Ontario a combined 2%. Moreover, Daimler will give its 19.9% stake to Chrysler and the latter’s bondholders will receive $2 bln in cash forgiving their $6.9 bln debt.

It’s worth mentioning that Fiat won’t have to pay anything for its share, allowing the Italian carmaker to enter the US market at zero cost. Fiat’s technology will endow Chrysler with the production of smaller and fuel-efficient cars.

I’ m really glad to see Mr. Obama taking a strong grasp on the situation. The questions however is, what holds him back from doing the same with (some) investment banks (i.e. let them file for bankruptcy)?

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