When President Obama announced that Chrysler LLC would be filing for Chapter 11 bankruptcy in late April, he mentioned that the beleaguered automaker could emerge after 60 days. "Well, that's not so bad," we all thought. Turns out that as details of Chrysler's reemergence begin to surface, the actual time table for bankruptcy to be completed could be as much as two years, not two months.
A condition of Chrysler's emergence is splitting the company into two entities – a good Chrysler and a bad Chrysler. The good entity would contain everything within the company that's valuable like the Jeep brand and Dodge trucks and their associated assembly plants. That entity would be the one controlled by Fiat and owned by the UAW VEBA fund, the U.S. and Canadian governments and Fiat. President Obama was likely referring to this entity when he mentioned the 60-day time table, as a judge has already scheduled these good assets to be transfered into the new entity by May 27th.
The other entity, the bad one, will contain non-valuable assets like shuttered plants and be responsible for most of the companies debts and liabilities. Governments, creditors and any one else owed money by Chrysler would have to wait for these bad assets to be sold before they could receive any payment, and what they'll get is likely pennies on the dollar of what they're owed. This process of selling off the diseased parts of Chrysler is what administration officials are now reportedly saying may take up to two years. By that time, the good Chrysler may be humming along nicely under the leadership of Fiat while the last remaining vestiges of what went wrong are sold to the highest bidder.
[Source: Bloomberg, Source Image by Scott Olson/Getty ]
A condition of Chrysler's emergence is splitting the company into two entities – a good Chrysler and a bad Chrysler. The good entity would contain everything within the company that's valuable like the Jeep brand and Dodge trucks and their associated assembly plants. That entity would be the one controlled by Fiat and owned by the UAW VEBA fund, the U.S. and Canadian governments and Fiat. President Obama was likely referring to this entity when he mentioned the 60-day time table, as a judge has already scheduled these good assets to be transfered into the new entity by May 27th.
The other entity, the bad one, will contain non-valuable assets like shuttered plants and be responsible for most of the companies debts and liabilities. Governments, creditors and any one else owed money by Chrysler would have to wait for these bad assets to be sold before they could receive any payment, and what they'll get is likely pennies on the dollar of what they're owed. This process of selling off the diseased parts of Chrysler is what administration officials are now reportedly saying may take up to two years. By that time, the good Chrysler may be humming along nicely under the leadership of Fiat while the last remaining vestiges of what went wrong are sold to the highest bidder.
[Source: Bloomberg, Source Image by Scott Olson/Getty ]
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