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Thread: Chrysler Bankruptcy

  1. #19
    Super Moderator UGLY's Avatar
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    Default Re: Chrysler Bankruptcy

    Quote Originally Posted by washed up wrestler View Post
    Foreign cars sell because they are made better. When Chrysler and the big 3 get their heads out of their asses they will realize that an inferior product will have inferior sales.

    It's all the union workers fault.

    You have no idea what you are talking about.

    The Big three are making better cars, people just dont trust them yet. They also make what the people want and that happened to be trucks and SUV's and muscle cars. These cars still have a place in the market.

    I am glad you agree that it is the Unions fault. Now the Union will have to make the tough choices when it comes to running the business, in order for the employees to have a job. Hopefully the UAW does better than the Airline union did with United.

  2. #20
    Super Moderator UGLY's Avatar
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    Default Re: Chrysler Bankruptcy

    Quote Originally Posted by matclone View Post
    Thank you for admitting that labor contributed something to the enterprise. As for the specter of wages, aren't creditors paid interest, not to mention whatever other perks come with that status? In other words, I presume they've already rec'd something for their contributions too. As for future expectations, the workers had them too, not the least their pensions, which are not included in their wages. Priority of payments are a separate matter. I just had to comment in the face of the usual disingenuous argument--the implication that workers contributed nothing and are entitled to nothing, whereas the creditors, the poor creditors, are somehow getting the shaft because of the dirty union that put the CEOs on the floor until they submitted to their demands.
    Labor contributed to the problem by making these outrageous demands and then striking when they didn't get what they wanted. They should have been fired but then they would have sued over the firing. As Zapp said they were paid for their contribution and they received health benefits plus pensions. Now they need to give that up and take a 401k with health and good pay. The Creditors allow the Auto companies to keep those people employed, they also could stand to go under costing more jobs if they are not paid.

    Again both sides are at fault here. The CEO's should be canned and have their pay cut in half at least, with any raises tied directly to company success.

    Still under no circumstance should the UAW be given controlling stock in a company that they are helping to destroy.

  3. #21

    Default Re: Chrysler Bankruptcy

    Quote Originally Posted by UGLY View Post
    Labor contributed to the problem by making these outrageous demands and then striking when they didn't get what they wanted. They should have been fired but then they would have sued over the firing. As Zapp said they were paid for their contribution and they received health benefits plus pensions. Now they need to give that up and take a 401k with health and good pay. The Creditors allow the Auto companies to keep those people employed, they also could stand to go under costing more jobs if they are not paid.

    Again both sides are at fault here. The CEO's should be canned and have their pay cut in half at least, with any raises tied directly to company success.

    Still under no circumstance should the UAW be given controlling stock in a company that they are helping to destroy.
    I'm not exactly sure how it's going to work. However, here's how it was described to me by someone at work. Effectively the government is stepping to the front of the line as a creditor and acting as if they own the company (this will be debated in court). The Obama administration has already forced a few banks who were debt holders of Chrysler to accept egregiously low terms on the debt. The only banks who agreed to these terrible terms were banks who accepted bailout money. There are still a few holdouts (banks, private equity firms, hedge funds) who will not agree to the terms put forth by Obama. Obama's team is confident a judge in bankruptcy will look at the terms agreed to by the bailout banks and force the other debt holders to accept similar terms. Furthermore, the Treasury is guaranteeing the UAW's pension and health benefits (basically a multi-billion dollar handout to the UAW). I believe management (non-union) employees at Chrysler simply lose their pensions and benefits through bankruptcy (except what is guaranteed by PBGC). Once the creditors are out of the way, the Obama administration is basically handing about 55% of the Chrysler equity over to the UAW.

    If this is how it works, it's a gross abuse of power and taxpayer resources to hand over billions (not loans just handouts) to UAW workers and retirees. Then again, this administration is beholden to the unions so a few billion is probably what was promised.

  4. #22

    Default Re: Chrysler Bankruptcy

    Unafraid In Greenwich Connecticut
    Clifford S. Asness
    Managing and Founding Principal
    AQR Capital Management, LLC

    The President has just harshly castigated hedge fund managers for being unwilling to take his administration?s bid for their Chrysler bonds. He called them ?speculators? who were ?refusing to sacrifice like everyone else? and who wanted ?to hold out for the prospect of an unjustified taxpayer-funded bailout.?

    The responses of hedge fund managers have been, appropriately, outrage, but generally have been anonymous for fear of going on the record against a powerful President (an exception, though still in the form of a ?group letter?, was the superb note from ?The Committee of Chrysler Non-TARP Lenders? some of the points of which I echo here, and a relatively few firms, like Oppenheimer, that have publicly defended themselves). Furthermore, one by one the managers and banks are said to be caving to the President?s wishes out of justifiable fear.

    I run an approximately twenty billion dollar money management firm that offers hedge funds as well as public mutual funds and unhedged traditional investments. My company is not involved in the Chrysler situation, but I am still aghast at the President's comments (of course these are my own views not those of my company). Furthermore, for some reason I was not born with the common sense to keep it to myself, though my title should more accurately be called "Not Afraid Enough" as I am indeed fearful writing this... It?s really a bad idea to speak out. Angering the President is a mistake and, my views will annoy half my clients. I hope my clients will understand that I?m entitled to my voice and to speak it loudly, just as they are in this great country. I hope they will also like that I do not think I have the right to intentionally ?sacrifice? their money without their permission.

    Here's a shock. When hedge funds, pension funds, mutual funds, and individuals, including very sweet grandmothers, lend their money they expect to get it back. However, they know, or should know, they take the risk of not being paid back. But if such a bad event happens it usually does not result in a complete loss. A firm in bankruptcy still has assets. It?s not always a pretty process. Bankruptcy court is about figuring out how to most fairly divvy up the remaining assets based on who is owed what and whose contracts come first. The process already has built-in partial protections for employees and pensions, and can set lenders' contracts aside in order to help the company survive, all of which are the rules of the game lenders know before they lend. But, without this recovery process nobody would lend to risky borrowers. Essentially, lenders accept less than shareholders (means bonds return less than stocks) in good times only because they get more than shareholders in bad times.

    The above is how it works in America, or how it?s supposed to work. The President and his team sought to avoid having Chrysler go through this process, proposing their own plan for re-organizing the company and partially paying off Chrysler?s creditors. Some bond holders thought this plan unfair. Specifically, they thought it unfairly favored the United Auto Workers, and unfairly paid bondholders less than they would get in bankruptcy court. So, they said no to the plan and decided, as is their right, to take their chances in the bankruptcy process. But, as his quotes above show, the President thought they were being unpatriotic or worse.

    Let?s be clear, it is the job and obligation of all investment managers, including hedge fund managers, to get their clients the most return they can. They are allowed to be charitable with their own money, and many are spectacularly so, but if they give away their clients? money to share in the ?sacrifice?, they are stealing. Clients of hedge funds include, among others, pension funds of all kinds of workers, unionized and not. The managers have a fiduciary obligation to look after their clients? money as best they can, not to support the President, nor to oppose him, nor otherwise advance their personal political views. That?s how the system works. If you hired an investment professional and he could preserve more of your money in a financial disaster, but instead he decided to spend it on the UAW so you could ?share in the sacrifice?, you would not be happy.

    Let?s quickly review a few side issues.

    The President's attempted diktat takes money from bondholders and gives it to a labor union that delivers money and votes for him. Why is he not calling on his party to "sacrifice" some campaign contributions, and votes, for the greater good? Shaking down lenders for the benefit of political donors is recycled corruption and abuse of power.

    Let?s also mention only in passing the irony of this same President begging hedge funds to borrow more to purchase other troubled securities. That he expects them to do so when he has already shown what happens if they ask for their money to be repaid fairly would be amusing if not so dangerous. That hedge funds might not participate in these programs because of fear of getting sucked into some toxic demagoguery that ends in arbitrary punishment for trying to work with the Treasury is distressing. Some useful programs, like those designed to help finance consumer loans, won't work because of this irresponsible hectoring.

    Last but not least, the President screaming that the hedge funds are looking for an unjustified taxpayer-funded bailout is the big lie writ large. Find me a hedge fund that has been bailed out. Find me a hedge fund, even a failed one, that has asked for one. In fact, it was only because hedge funds have not taken government funds that they could stand up to this bullying. The TARP recipients had no choice but to go along. The hedge funds were singled out only because
    they are unpopular, not because they behaved any differently from any other ethical manager of other people's money. The President?s comments here are backwards and libelous. Yet, somehow I don?t think the hedge funds will be following ACORN?s lead and trucking in a bunch of paid professional protestors soon. Hedge funds really need a community organizer.

    This is America. We have a free enterprise system that has worked spectacularly for us for two hundred plus years. When it fails it fixes itself. Most importantly, it is not an owned lackey of the oval office to be scolded for disobedience by the President.

    I am ready for my ?personalized? tax rate now

  5. #23

    Default Re: Chrysler Bankruptcy

    By Stephen Grocer

    The Obama administration on Wednesday failed to convince all of Chrysler?s lenders to agree to a debt-reduction deal. The administration?s auto task force tried to get all 46 of Chrysler?s secured lenders onboard, but a number of funds voted no. Now President Obama is expected to announce that Chrysler is going to seek reorganization in bankruptcy court. Here?s the letter from the from non-TARP lenders to Chrysler explaining their decision to vote no.
    * * *

    April 30, 2009 ? As of last night?s deadline, we were part of a group of approximately 20 relatively small organizations; we represent many of the country?s teachers unions, major pension and retirement plans and school endowments who have invested through us in senior secured loans to Chrysler. Combined, these loans total about $1 billion. None of us have taken a dime in TARP money.
    As much as anyone, we want to see Chrysler emerge from its current situation as a viable American company, and we are committed to doing what we can to help. Indeed, we have made significant concessions toward this end ? although we have been systematically precluded from engaging in direct discussions or negotiations with the government; instead, we have been forced to communicate through an obviously conflicted intermediary: a group of banks that have received billions of TARP funds.
    What created this much-publicized impasse? Under long recognized legal and business principles, junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full. Nevertheless, to facilitate Chrysler?s rehabilitation, we offered to take a 40% haircut even though some groups lower down in the legal priority chain in Chrysler debt were being given recoveries of up to 50% or more and being allowed to take out billions of dollars. In contrast, over at General Motors, senior secured lenders are being left unimpaired with 100% recoveries, while even GM?s unsecured bondholders are receiving a far better recovery than we are as Chrysler?s first lien secured lenders.
    Our offer has been flatly rejected or ignored. The fact is, in this process and in its earnest effort to ensure the survival of Chrysler and the well being of the company?s employees, the government has risked overturning the rule of law and practices that have governed our world-leading bankruptcy code for decades.
    We have a fiduciary responsibility to all those teachers, pensioners, retirees and others who have entrusted their money to us. We are legally bound to protect their interests. Much as we empathize with Chrysler?s other stakeholders, the capital is just not ours to contribute to their cause by accepting a deal that is outside the well established legal framework and cannot be rationalized as being commercially reasonable.
    We are continuing to discuss our position with the United States Treasury. We have made a proposal which we earnestly believe is fair and would appropriately recognize our legal position.
    As President Obama implied yesterday, it is likely that Chrysler will have to file Chapter 11 whether or not all lenders agree to any particular proposal. Chapter 11 is often used to help implement an agreed deal and dispose of unwanted legacy liabilities. We are hopeful and optimistic that we will reach a positive resolution of our issues so that all stakeholders will move forward together to implement Chrysler?s ?quick trip? restructuring in an un-contested proceeding. Our Group will never initiate a bankruptcy filing on Chrysler ? that is a decision for the Company and the Administration to make.
    As we all appreciate, laws are the foundation of our economy and society. Despite recent travails, our country remains the economic envy of the world and the United States remains a vital engine of global growth. The rule of law made it that way. We urge that people remember this and not succumb to unproductive and unwarranted finger pointing.
    The Committee of Chrysler Non-Tarp Lenders

    from here:

  6. #24

    Default Re: Chrysler Bankruptcy

    The following article was written by Vitaliy Katsenelson. I thought it summed up many problems with the Obama Administration's approach toward Chrysler's bankruptcy.

    I never write about politics. First of all, it bores me. Second, it's guaranteed to upset about 53% of my readers, which normally I would not mind, but since I won?t be able to change their mind why bother. Third, and most importantly, my writing is a byproduct of my investment process ? I am an investor who thinks through writing, not a writer who invests. The following article is not meant to be a political one, though I am sure it has turned out as such, but was written to defend free markets.
    By shafting bondholders and undermining the bankruptcy system, the Obama administration may change the way investors view risk.
    On May 1, the United States took a drastic step toward becoming Russia. Not Russia at its best, not the motherland of Dostoevsky, Tolstoy, Rachmaninoff?
    Instead, Russia at its worst, the one that in 1917 took from the bourgeois and gave to the working class; the one that signed contracts with western oil companies in the 1990s when oil prices were low and then ? in 2007 when oil prices skyrocketed ? blatantly and unilaterally ?renegotiated? those contracts.
    Wielding the public?s empathy as a weapon, President Obama took Chrysler from its rightful owners: secured loan holders (a.k.a. TARP-tainted banks, the ?evil? hedge funds, faceless pension funds). And he gave it to struggling, very sympathetic, $40-an-hour earning (including benefits, this is not a typo), blue collar workers ? Chrysler?s employees and the United Auto Workers union. Chrysler, simply, was stolen from its rightful owners.
    Fixed-income investors spend an enormous amount of time studying bond covenants, which spell out how assets are disbursed in the event of a bankruptcy. Secured senior lenders have dibs on the secured assets; unsecured, junior bondholders and loan-holders follow (as a part of leveraged buyout Chrysler had no unsecured outstanding bonds or loans); unions and employees are next in line; and equity investors get whatever is left, which in this case would be almost nothing.
    The White House fish-fry
    For two hundred years our country has had a well functioning bankruptcy-court system that was designed to make sure that division of assets is equitable. Now that system is threatened.
    The banks, the ones that received billions of Federal funds, were forced to give up their legal ownership first. Were they told they would fail the recent stress tests (which they recently passed) if they didn?t give up their rights? Or maybe their CEOs were told they?ll be fired if they did not go along? These days you don?t have to be a conspiracy theorist to make these accusations. After all, then-Treasury Secretary Hank Paulson and Federal Reserve Chairman Benjamin Bernanke used the latter tactic to get Ken Lewis, CEO of Bank of America, to lie to his board and shareholders about the purchase of imploding Merrill Lynch. We may never know what happened, but I?ll promise you this ? banks did not walk away from billions of dollars of the desperately needed money, not at their own will.
    After the big fish were fried, President Obama went after smaller loan-holders ? he called these hedge funds and pension funds ?speculators? ? who put up a fight. Those institutions were not tainted by TARP money, thus the president had to use populist rhetoric, saying that they ?endanger Chrysler?s future by refusing to sacrifice like everyone else.? He turned public opinion against the loan-holders, whose only fault was that they financed the dysfunctional automotive sector for too long and maintained fiduciary duty to their investors by attempting to collect what was legally due.
    President Obama is popular and hedge funds are not. Thus as the financial and political costs became too high, these smaller fish jumped into frying pan with the banks. The fact that these pension funds and hedge funds invest money for regular folks like you and me is ignored. Average Joes aren?t paying close enough attention to catch that little detail; and unlike the UAW, they did not bankroll Mr. Obama?s campaign.
    Losing the empathy contest
    The consequences of what took place May 1 are not immediately apparent, but there are consequences. Forget about right or wrong, forget about politics: If any other President had done what Mr. Obama did you would have been reading the same thoughts from me. The rule of law, the bedrock of our system, was chipped two weeks ago. Instead of company ownership being redistributed based on the provider?s place in the capital structure ? as the law requires ? the asset redistribution took place based on a very subjective criterion, empathy. Banks, hedge funds and pension plans don?t win empathy contests these days, especially when competing with down-and-out workers.
    President Obama?s actions will have a twofold impact:
    First ? and this is certain ? they impaired auto companies? ability to borrow from the fixed income market for at least a generation, and that?s regardless of whether they have secured collateral. A fixed-income investor, when pricing a security, makes certain assumptions of recovery based on the collateral and its place in the capital structure in the event of bankruptcy. The better the collateral and the closer it is to the front of the capital structure, the less money they stand to lose, and thus the lower the interest rate they expect to receive.
    In the case of Chrysler, loan holders expected to recover around 70-80 cents on the dollar if the letter of law was followed. After the company was given away to UAW, however, that number dropped to 29 cents. Would you buy an auto company?s bonds in your retirement account if you knew that this industry often flirts with death, the rule of law is suspended and empathetic workers take your money if/when things go wrong?
    The second impact is more significant to the US economy, but will depend on future government actions. If the empathetic distribution of wealth stops with the auto industry, investors may look at it as a one-off deal, specific to the dysfunctional auto industry. But if Mr. Obama repeats this even once outside of the auto industry ? and he?ll have plenty of chances as we are in a prolonged recession ? the political risk of the US will increase. Lenders, be it bond or loan holders, will lower recovery assumptions for even very secured assets, and the risk premium and thus borrowing costs will rise for all companies.
    Empathy is an honorable emotion, we feel bad for people losing jobs, but changing the rules, in this case the law, in the middle of the game in most developed countries would be considered criminal, shortsighted and not good for the system. If you don?t trust the rules, you cannot play the game. I hope our president stops while he is behind.

    <SCRIPT type=text/javascript _extended="true">SeekingAlpha.Initializer.LogAndRu n(load_article_toolbar);</SCRIPT>

  7. #25

    Default Re: Chrysler Bankruptcy

    So the plot thickens. IN pension funds believe the Chrysler bankruptcy plan orchestrated by the Obama administration violates creditors' rights.

    Pension Funds Object to Chrysler Sale, Want Trustee (Update3)
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    By Christopher Scinta and Bob Van Voris
    May 20 (Bloomberg) -- A group of Indiana pension funds that hold first-lien debt of Chrysler LLC objected to a plan to auction the company?s assets and said a U.S. District Court judge should rule on whether the sale is lawful.
    The Indiana State Teachers Retirement Fund, Indiana State Police Pension Trust and Indiana Major Move Construction filed court papers late yesterday and today asking U.S. Bankruptcy Judge Arthur Gonzalez in New York to block the sale, claiming the plan is illegal and tramples their rights. A hearing to approve the sale to a group led by Fiat SpA, or a bidder that tops its $2 billion offer, is scheduled for May 27.
    Gonzalez denied a motion by the funds to stay the sale process while they seek a review by the U.S. District Court of whether the sale is proper. The funds? attorney, Thomas Lauria, said after today?s hearing that the group already had filed papers with the district court.
    The funds also have asked for the appointment of a trustee to run Chrysler, saying the company has ?ceded control over their business and their restructuring efforts to the United States Treasury Department,? which is using the bankruptcy to reward certain creditors that ?the government deems politically important,? according to one of the filings.
    ?The Treasury Department has taken constructive possession of Chrysler and is requiring it to adopt a sale plan in bankruptcy that violates the most fundamental principles of creditor rights,? lawyers for the pension plans wrote.
    Non-TARP Lenders
    The funds are represented by Lauria and other lawyers at White & Case LLP, the same law firm that represented a group known as Chrysler?s Non-TARP lenders.
    U.S. District Judge Thomas Griesa in New York scheduled a hearing on the pension funds? request for May 26 at 11:30 a.m. Court papers must be filed before then, he said.
    President Barack Obama criticized the Non-TARP lenders for refusing to accept an offer that would have paid them about 30 cents on the dollar, saying they forced the automaker?s bankruptcy. The Non-TARP group abandoned its fight to block Chrysler?s sale plan earlier this month, citing political pressure.
    The case is In re Chrysler LLC, 09-50002, U.S. Bankruptcy Court, Southern District of New York (Manhattan)
    To contact the reporters on this story: Christopher Scinta in U.S. Bankruptcy Court in New York at; Bob Van Voris at
    Last Updated: May 20, 2009 16:59 EDT

  8. #26
    Super Moderator UGLY's Avatar
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    Default Re: Chrysler Bankruptcy

    Nice work Army Fan. Not much opposition to the facts.

  9. #27
    Olympic Champ RYou's Avatar
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    Mar 2007
    New Jersey

    Default Re: Chrysler Bankruptcy

    It's pretty clear, Obama bought a Chrylser lemon sometime in the past.

    I find it incredible conflicting that Obama wants to control salaries bonuses and hiring of the financials that receive TARP cash. He forced union concessions, salary and benefit reductions from the auto makers that received TARP cash. But, he has imposed no similar obligations on any state that is receiving TARP cash.
    Life's not the breaths you take, the breathing in and out that gets you through the day ain't what it's all about. It's the moments that take your breath away.

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