Chrysler, an American Bankruptcy
Chrysler’s private equity owners Cerberus, or at least their lawyers, will arrive at bankruptcy court in Manhattan later this morning. Yesterday, President Obama assured hand-wringing industrialists that the process would be quick and efficient and that Chrysler would emerge a leaner, meaner machine.
To some degree, one can look at the U.S. airline industry in the same light. But that industry, while “saved” through bankruptcy numerous times, is today a shadow of its former self, and remains haunted every so often by the threat of a return to that business mortuary for rebirth.
But a lot has changed since the crisis mad bankruptcy court so busy. The key for the new age of court-run restructuring is to sell major assets before going to court — effectively leaving creditors to haggle over the dregs. Some disgruntled creditors contend that the quick bankruptcy promised by Obama is being engineered in such a way because the sales would never make it past a judge.
In the first major bankruptcy for the auto industry since the crisis began, Obama criticized a handful of “speculators” for greedily holding out for more taxpayer money. He praised union workers for making concessions and financial institutions, led by JPMorgan, for agreeing to take losses up front. He even praised the car company’s management.
But if you look closely, you may start to sympathize with anyone who bought a bond and is being told to settle for less to serve the common good. And to have the management of the company and its bankers praised for effectively engineering a lot of this mess might well make your eyes cross in disbelief.
Deals of the Day:
* Sumitomo Mitsui Financial Group, Japan’s third-largest bank, will buy Citigroup’s Japanese brokerage and key investment banking units in a $5.9 billion deal that will create a banking powerhouse.
* Citi execs are using the sale of its Japanese retail brokerage Nikko Cordial to ease demands from the U.S. stress tests on banks, arguing the sale of non-core assets such as Nikko would strengthen its balance sheet, the Financial Times reported, citing people close to the matter.
* General Motors will talk to the Korea Development Bank (KDB) about selling a stake in GM Daewoo, if that would help the South Korean car-making unit in the long term, a top executive said.
* Australia should veto China’s planned $19.5 billion investment in miner Rio Tinto, Australia’s main opposition Liberal Party said as political opposition to the deal continued to grow.
(PHOTO: The Chrysler logo is reflected in the rear view mirror of a vehicle on the lot at Clark Chrysler Jeep Dodge dealership in Methuen, Massachusetts April 30, 2009. )