Court blocks Chrysler sale

Discuss: http://online.wsj.com/article/SB124447718295294527.html#mod=rss_US_News

I hope FIAT backs out completely and then VAG swoops in and buys the assets for pennies on the dollar.

But then how would I get an Abarth 500?

Penske wants to do business with Renault which is Nissan. No better place to buy an Abarth 500 than the largest Smart distributors dealer network.

what does renault have to do with fiat?

Whoops... I was just looking at the Renault line up and had it on the brain...

At one point I would've asked, "How can we, in a capitalist society, stop the sale of a product from a consenting seller to a consenting buyer?".

Now I realize that that statement would be based on false premises.

Note the word "temporary" all over that. As in "we gotta pretend we're real serious about protecting the pensioners, then we'll sell it to FIAT anyway."

So these stockholders? are blocing the sale. That means if Fiat pulls out and there's no other buyer, Chrysler goes into REAL bankruptcy and devalues even further. If VAG does buy it for pennies on the dollar, then these 'stockholders' have really screwed themselves big time.

Dummies.

They are hoping to change the govt mandated terms of who gets paid and when. The articles I've read say the stockholders getting basically nothing are not normal.

It's not stockholders who were petitioning the Court, it's bondholders. The idea is, they lent money to Chrysler and had security in the form of a claim on the company's assets. Selling those assets out from under them without their consent is really not the sort of fundamental rule-change that ought to slip by without protest. I know it's tough to focus on the basic commercial principle that a deal is a deal in the context of gigantic vortex of doom like Chrysler, which basically has a huge infrastructure making stuff nobody needs or wants (except Wranglers and RWD vehicles and possibly trucks), but I salute the Indiana guys for daring to stand up and say, "Your Honor, this isn't right." I can live without Fiats, if that's what it takes, if it means keeping some semblance of a commercial bond market people can trust.

Stealthtercel wrote: It's not stockholders who were petitioning the Court, it's bondholders. The idea is, they lent money to Chrysler and had security in the form of a claim on the company's assets. Selling those assets out from under them without their consent is really not the sort of fundamental rule-change that ought to slip by without protest.

Somebody gets it! Thank you! I thought I was the only one.

The back door deals surrounding this whole thing basically equate to theft on a huge scale. The fact that DC wants to waive it's magic wand and leave the secured creditors out in the cold while giving large shares of the company to parties who shouldn't have anything is pathetic.

If Chrysler and GM need to die in order for us to save some semblance of a capitalistic nation, I'm OK with that. Freedom includes the freedom to fail.

DILYSI Dave wrote:

Stealthtercel wrote: It's not stockholders who were petitioning the Court, it's bondholders. The idea is, they lent money to Chrysler and had security in the form of a claim on the company's assets. Selling those assets out from under them without their consent is really not the sort of fundamental rule-change that ought to slip by without protest.

Somebody gets it! Thank you! I thought I was the only one. The back door deals surrounding this whole thing basically equate to theft on a huge scale.... If Chrysler and GM need to die in order for us to save some semblance of a capitalistic nation, I'm OK with that. Freedom includes the freedom to fail.

+1

billy3esq wrote:

DILYSI Dave wrote:

Stealthtercel wrote: It's not stockholders who were petitioning the Court, it's bondholders. The idea is, they lent money to Chrysler and had security in the form of a claim on the company's assets. Selling those assets out from under them without their consent is really not the sort of fundamental rule-change that ought to slip by without protest.

Somebody gets it! Thank you! I thought I was the only one. The back door deals surrounding this whole thing basically equate to theft on a huge scale.... If Chrysler and GM need to die in order for us to save some semblance of a capitalistic nation, I'm OK with that. Freedom includes the freedom to fail.

+1

+2

The Feds have ignored and bypassed (possibly illegally) long-standing bankruptcy laws that have stood for generations. Those laws are intended to honor the contractual obligations to secured bondholders. Said bondholders have plenty of legal recourse to challenge the actions of Obama, et al.

On a slight side note, I heard an interview this afternoon where a pundit suggested that Fiat has little or no capital investment at risk in the proposed merger. If so, the deal can wait until the legal issues are resolved. Hey, if you're getting something for virtually nothing, does it matter if you're getting it now or a few weeks/months from now?

billy3esq wrote:

DILYSI Dave wrote:

Stealthtercel wrote: It's not stockholders who were petitioning the Court, it's bondholders. The idea is, they lent money to Chrysler and had security in the form of a claim on the company's assets. Selling those assets out from under them without their consent is really not the sort of fundamental rule-change that ought to slip by without protest.

Somebody gets it! Thank you! I thought I was the only one. The back door deals surrounding this whole thing basically equate to theft on a huge scale.... If Chrysler and GM need to die in order for us to save some semblance of a capitalistic nation, I'm OK with that. Freedom includes the freedom to fail.

+1

+11tybillion And I also thought I was the only one...

oldsaw wrote:

billy3esq wrote:

DILYSI Dave wrote:

Stealthtercel wrote: It's not stockholders who were petitioning the Court, it's bondholders. The idea is, they lent money to Chrysler and had security in the form of a claim on the company's assets. Selling those assets out from under them without their consent is really not the sort of fundamental rule-change that ought to slip by without protest.

Somebody gets it! Thank you! I thought I was the only one. The back door deals surrounding this whole thing basically equate to theft on a huge scale.... If Chrysler and GM need to die in order for us to save some semblance of a capitalistic nation, I'm OK with that. Freedom includes the freedom to fail.

+1

+2 The Feds have ignored and bypassed (possibly illegally) long-standing bankruptcy laws that have stood for generations. Those laws are intended to honor the contractual obligations to secured bondholders. Said bondholders have plenty of legal recourse to challenge the actions of Obama, et al. On a slight side note, I heard an interview this afternoon where a pundit suggested that Fiat has little or no capital investment at risk in the proposed merger. If so, the deal can wait until the legal issues are resolved. Hey, if you're getting something for virtually nothing, does it matter if you're getting it now or a few weeks/months from now?

+3

If the bond holders get screwed in this deal, then bonds are just as risky as stocks and there is a good chance the bond market will puke. The bond market is where not only companies borrow money, but governments as well. People buy bonds because they are guaranteed by physical assets or by a government. Bond holders always get paid first and most in a bankruptcy. Usually up to 100 cents on the dollar. The feds have decided they don't like that so the rewrote the rules to suit them and only want to pay 29 cents on the dollar. They are basically telling the bond market that the USA is not going to honor bonds if it doesn't suit them. If they get away with that capitalism is screwed. Not only that but a lot of money invested in the US and in US companies will leave and go overseas where governments aren't changing contracts and screwing investors on a whim. This has gone past Chrysler and Fiat, and gotten serious. There is a lot of investor confidence in this deal now.

There are also some concerns about the legality of using TARP money to bail out auto companies. This is also being looked at by the courts.

DILYSI Dave wrote: If Chrysler and GM need to die in order for us to save some semblance of a capitalistic nation, I'm OK with that. Freedom includes the freedom to fail.

Devils advocate mode entering now....

If they fail, then the auto suppliers fail. If the auto suppliers fail, their subtier will fail, and so on and so forth. Auto suppliers comprise most of the foundries and large high volume machine shops in the United States.

http://www.modernind.com/newweb/Corp/InudstryServed/IndustryMain.htm <--- See the number one industry served on that list. Not any more. A company I worked for desourced them and they are already teetering on the edge. One more push and they are gone. Plus about 10 other companies I can name off the bat.

Now.. I will say whats going on with the stock isn't right, but it's shaft some bondholders or severly cripple/kill manufacturing in the United States.

edit: I'm out of auto, but I worked in supplier development/supplychain for long enough to know how interconnected all the machining and casting suppliers in the US are....

But if the bond market pukes you can forget about getting a home loan and the real estate industry is the largest industry in the country so you could have even more major ramifications that would hit everyone, not just a few selected companies and their employees.

The legality of the whole auto industry bailout and government ownership is highly questionable! The legality of this while being glossed over now will come back to get the messiah. At some point hopefully congress will wake up and realize that they are the one's charged with making laws, and not being a bunch of hacks for the president.

ignorant wrote:

DILYSI Dave wrote: If Chrysler and GM need to die in order for us to save some semblance of a capitalistic nation, I'm OK with that. Freedom includes the freedom to fail.

Devils advocate mode entering now.... If they fail, then the auto suppliers fail. If the auto suppliers fail, their subtier will fail, and so on and so forth. Auto suppliers comprise most of the foundries and large high volume machine shops in the United States. http://www.modernind.com/newweb/Corp/InudstryServed/IndustryMain.htm <--- See the number one industry served on that list. Not any more. A company I worked for desourced them and they are already teetering on the edge. One more push and they are gone. Plus about 10 other companies I can name off the bat. Now.. I will say whats going on with the stock isn't right, but it's shaft some bondholders or severly cripple/kill manufacturing in the United States. edit: I'm out of auto, but I worked in supplier development/supplychain for long enough to know how interconnected all the machining and casting suppliers in the US are....

I would rather work for minim wage, digging ditches, living in the crappiest apartment and be free. Having the government rewrite laws and rules in a dark room to suit their wants and agendas with no judicial review or legislative input is wrong any way you slice it. If it wasn't for the few bond holders who refused to be pushed around by the administration we would have heard about this after the fact. As usual the guys at the top are doing what ever they want to to get reelected rather than what is right. This isn't about what is easy or comfortable, it is about right and wrong. It is about freedom and the freedom to fail and with out the ability to fail, you aren't really free.

Bonds are NOT guarunteed by the govenment. They have insurance- AKA credit default swaps. Bankcruptcy means the bonds are worthless, which is why there is insurance. And to call ANY financial instrument risk free isn't correct- all have risks, some have back up/insurance (FDIC for savings accounts), most don't.

What we don't know about this is who insures the bonds? Are they solvent enough to cover those outstanding bonds, as we pretty much know that liquidation of Chrysler will not cover them.

And whether you are on one side or the other, let's be clear that this is totally a political move- the fund will only loose $6M out of $42- loss of 15%. This is a political move to test the legality of the settlement. I'm still not sure about it, personally. Knowing how the Fed protected the financial market so that it would not collapse when one of them went bankrupt and started the whole house of cards falling? Behind the scenes, there might be a shaky company that can't back up the bonds that they insured....

Let's not forget that both parties have been doing what's neccessary to protect the financial markets. We don't know if this is similar to that. Oh, and thanks to the Great Depression, the Fed has a LOT of power to prevent a runaway failure.

And they have one week to settle this argument.

Wow- just reading what I wrote- 0% car stuff.

Ok- 105/115 Alfas rule. How's that? E-

I would rather work for minim wage, digging ditches, living in the crappiest apartment and be free. Having the government rewrite laws and rules in a dark room to suit their wants and agendas with no judicial review or legislative input is wrong any way you slice it. If it wasn't for the few bond holders who refused to be pushed around by the administration we would have heard about this after the fact. As usual the guys at the top are doing what ever they want to to get reelected rather than what is right. This isn't about what is easy or comfortable, it is about right and wrong. It is about freedom and the freedom to fail and with out the ability to fail, you aren't really free.

Perfectly said, could not agree more

I'm not real knowledgeable about the bond market. But I see a problem: OK, so the bondholders get 100% of their investment back and everyone else gets zip or some tiny amount on theirs? My position: bonds may not be as risky as, say, GM common stock but they do carry some risk, particularly in a situation like this. And they should. There ain't no such thing as a free lunch, folks.

So June 15th passes, the deal falls apart and they drive Chrysler into REAL bankruptcy. I mean the sell it off piece by piece kind. Like alfadriver says, the sell off still won't cover the bonds so they still won't get 100%. Like ignorant says, that will sound the death knell for many of the suppliers and then there will be big problems. Remember, all the other US plants (GM, Ford, Honda, Toyota, BMW, Mercedes, etc) all use the same suppliers. So what happens then?

So what will they have accomplished? Zip. I wasn't for a government bailout in the first place and I still don't agree with it. I think these bondholders saw the TARP money being pumped into Chrysler and said 'I want some of that', went with a more highly leveraged lawsuit to try to 'get some of that' and here we are.

So then Fiat will watch the whole thing crumble, buy a couple of plants at fire sale prices and set up assembly of their own cars here in the states.

I think alphadriver is on to something. Who is insuring the Chrysler bonds? That is exactly who The O and The Fed is protecting right now. That, I think, is the missing piece of this little puzzle. It's like AIG or GS or whichever one it was. They sat around and bailed them out because they were insuring all the Europeans, Chinese and Arabs that held the bonds. Company A floats a bond. Arabs buy it because Company B insured it, so if Company A doesn't pay, Company B will give them their money back. That's great for everyone, Co A get a better rate on its bonds, Co B gets money for nothing, the Arabs get an insured investment. Now, Co A goes poof, Co B doesn't have any money to pay the Arabs. The O steps in with TARP or whatever and "bails out" Co A or Co B and the Arabs get their (our) money back. Same thing is likely happening with Chysler now. Someone is insuring those bonds. If Chrysler goes poof, they will have to pay up with funds they don't have and it will bring them down as well.

Oh, and Fiat, if you look at the details, get managerial control and a significant ownership chunk of Chrysler for no investment at all. The Unions get the majority of the ownership. We get screwed.