The Administration is talking like it has the judge who will preside over the Chrysler Chapter 11 in its pocket. Obama recently made the comment that “it will be a quick trip through bankruptcy.”
The government also indicated that it was close to finishing a deal with Fiat to manage Chrysler and get a 20% stake in the company which could eventually grow to 35%. This means that the car company’s wandering CEO Robert Nardelli is out of work again.
Several Administration staff members have told the press that the Chapter 11 process might only take a little more than a month. That is preposterous. There is no guarantee that a court will approve 100% of the plans of the government, the UAW, or Fiat.
With $6.9 billion in debt on the line, Chrysler’s creditors have every reason to push an expensive and prolonged legal battle. Some of the Chrysler brands like Jeep have a substantial value. If the N0.3 car company in the US is broken into pieces, creditors might do substantially better than the offer that they rejected, which triggered the Chapter 11 filing. Or, the court may simply offer them a larger equity position in Chrysler as part of an overall settlement, which would bring the pieces that the union and Fiat would get down.
This may be a good chance for the judicial branch to show the Administration that it can’t be kicked around.
Douglas A. McIntyre
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