Chrysler/Fiat deal postponed [Archive] - Quarter To Three Forums

Saiban

06-08-2009, 05:53 PM

Justice Ginsburg has ordered a temporary halt to Chrysler's bankruptcy proceedings. (http://www.scotusblog.com/wp/ginsburg-temporarily-blocks-chrysler-deal/)

That certainly came as a bit of a shock to me, I think I and most other people had accepted the Chrysler bankruptcy as a done deal and were focusing on GM.

RSofaer

06-09-2009, 03:12 AM

I think they just haven't finished reading all the documents. It doesn't really matter, as long as it is reinstated this week.

Aeon221

06-09-2009, 04:45 AM

Saiban

06-09-2009, 07:14 AM

Skipper

06-09-2009, 07:29 AM

I think the creditors (like Aeon said, mostly pension funds) were extremely unhappy with their percentage of take or ownership for the new deal and that's what lead to pushing for the delay.

If no deal goes through (Monday is the deadline I think) then I assume we all get screwed, but I'm not sure how quickly anything could happy to change the details more in favor of the creditors at this point.

NoWayJose

06-09-2009, 07:44 AM

When the news first came out, everyone seemed to be happy that Chrysler had been saved; I don't remember anyone mentioning creditors getting screwed. However, when I read about it yesterday, that was one of the first things mentioned. An interesting difference, and in hindsight it seems that it was something important that probably shouldn't have been left out. Thanks, Mainstream Media?
Maybe at the time you were only reading headlines? I recall vividly the private creditors protesting and attempting to block the deal, and in fact Obama making specific mention of them when announcing the bankruptcy, in maybe the most quoted part of his speech:

I don't stand with them. I stand with Chrysler's employees and their families and communities. I stand with Chrysler's management, its dealers, and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars. I don't stand with those who held out when everybody else is making sacrifices.Obviously, they feel differently about the sacrifices they're being forced to make.

Saiban

06-09-2009, 08:43 AM

Maybe at the time you were only reading headlines? I recall vividly the private creditors protesting and attempting to block the deal, and in fact Obama making specific mention of them when announcing the bankruptcy, in maybe the most quoted part of his speech:

Obviously, they feel differently about the sacrifices they're being forced to make.

Actually, you're right, I do remember that. I think at the time that I simply took Obama at his word, that he was talking about, for example, investors just looking out for their bottom line to the detriment to everyone else. I don't, however, remember anyone in the media pointing out who exactly those investors were, or why they were objecting. There was no mention of any sort of breach of contract, or that other groups (Unions) were getting much more favorable terms.

unbongwah

06-09-2009, 08:53 AM

According to the NewsHour last night (http://www.pbs.org/newshour/bb/law/jan-june09/scotus_06-08.html), it's not just creditors who feel threatened by the sale:
There are really three separate parties here. There are the Indiana pension funds that provide benefits for teachers, police officers, and others. And they're claiming that the sale violates the Constitution because TARP money, money used to bail out financial institutions, is being used to bail out auto companies.

The second group are consumer groups, like the Center for Auto Safety, Public Citizen, and they're arguing that the sale wipes out all pending and future lawsuits for injuries caused by Chrysler products. And that's contrary, they say, to state laws.

And then, finally, there is a widow of a man who died of lung cancer allegedly caused by exposure to asbestos when working on auto brakes. And she says her suit, which is in a state court, will also be wiped out by the Chrysler sale.

Aeon221

06-09-2009, 11:06 AM

Actually, you're right, I do remember that. I think at the time that I simply took Obama at his word, that he was talking about, for example, investors just looking out for their bottom line to the detriment to everyone else. I don't, however, remember anyone in the media pointing out who exactly those investors were, or why they were objecting. There was no mention of any sort of breach of contract, or that other groups (Unions) were getting much more favorable terms.

There wasn't much hard data available initially, but most reputable business papers were very up front that this was going to be a deal extremely biased towards the unions.

Anyway, it's not exactly shocking. Obama has been very up front about his pro-union feelings. And he's also made his... hostility towards? dislike of? Anyway, he doesn't like business much.

Which sucks, and doesn't help his cause.

Saiban

06-09-2009, 11:52 AM

According to the NewsHour last night (http://www.pbs.org/newshour/bb/law/jan-june09/scotus_06-08.html), it's not just creditors who feel threatened by the sale:

Right, and that's exactly what I mean. It's such a big change from, "Greedy investors are trying to screw over unions and the American people anyway they can!" to, "Hey, guys, I think the feds just destroyed the retirement benefits of a bunch of teachers and cops..."

NoWayJose

06-09-2009, 01:54 PM

Right, and that's exactly what I mean. It's such a big change from, "Greedy investors are trying to screw over unions and the American people anyway they can!" to, "Hey, guys, I think the feds just destroyed the retirement benefits of a bunch of teachers and cops..."
Welcome to the world of spin doctors.

Saiban

06-09-2009, 03:37 PM

Welcome to the world of spin doctors.

I like to think I'm pretty aware of their BS, but it's nice to know I can still be caught unawares!

Huzurdaddi

06-09-2009, 05:52 PM

The rights of private creditors (in this case, pension funds) holding secured debt were virtually ignored, while the unions, which held unsecured debt, were treated preferentially. The transaction is obviously only possible because of the government breaking a lot of contract laws, and there's almost no chance it'd pass a fair hearing.

It sets a terrible precedent, so I'm glad the Justice is giving it a longer look.

Garbage. The following article (http://www.slate.com/id/2217653/) gives a reasonably clear accounting of the issue, however it does suffer from a very weak 1st couple of paragraphs.

The bond holders are simply attempting to extort money out of the federal goverment by endangering the livelihood of car workers. Period. I am glad that Obama did not acquiesce to their demands back in May and I am sure that the government will prevail in this case.

Brandon Clements

06-09-2009, 05:55 PM

Garbage. The following article (http://www.slate.com/id/2217653/) gives a reasonably clear accounting of the issue, however it does suffer from a very weak 1st couple of paragraphs.

The bond holders are simply attempting to extort money out of the federal goverment by endangering the livelihood of car workers. Period. I am glad that Obama did not acquiesce to their demands back in May and I am sure that the government will prevail in this case.
Basically this. Or, in more pithy phrase (and bago linked to it (http://epicureandealmaker.blogspot.com/2009/05/more-of-kickin-sitcheyation.html) awhile ago)
Here's a clue for the novices in the room: It's called politics, you fucking morons. Stop being such a bunch of whiny pansies.

Aeon221

06-09-2009, 06:34 PM

Garbage. The following article (http://www.slate.com/id/2217653/) gives a reasonably clear accounting of the issue, however it does suffer from a very weak 1st couple of paragraphs.

The bond holders are simply attempting to extort money out of the federal goverment by endangering the livelihood of car workers. Period. I am glad that Obama did not acquiesce to their demands back in May and I am sure that the government will prevail in this case.

Garbage yourself. The law is clear. And that article neither addresses the legal reality, nor does it manage a coherent point -- or any point other than "wah wah capitalism is unfair." No shit, Sherlock.

A better claim would be that the pension funds have no standing to challenge the use -- or misuse -- of TARP funds as they aren't directly impacted.

Brandon Clements

06-09-2009, 06:36 PM

Stay's vacated, by the way.

EDIT: scan of order here (http://www.bankruptcylitigationblog.com/uploads/file/chrysler-order-6-9-09(2).pdf)

Huzurdaddi

06-09-2009, 08:25 PM

Garbage yourself. The law is clear.

Clear, lol, you make me laugh (http://www.bankruptcylitigationblog.com/archives/bankruptcy-in-the-news-chrysler-bankruptcy-analysis-part-iii-will-the-absolute-priority-rule-kill-the-sale.html). Further, the government was, by some accounts, quite generous (http://www.bankruptcylitigationblog.com/uploads/file/manzo%20decl.pdf).

Chris Nahr

06-10-2009, 12:25 AM

The bond holders are simply attempting to extort money out of the federal goverment by endangering the livelihood of car workers.

You mean the same car workers whose livelihood those evil bond holders guaranteed by providing their capital in the first place?

Sarkus

06-10-2009, 01:03 AM

The whole point of bankrupty is for a company to get rid of the debts that are making it impossible for the company to continue. So obviously there were going to be parties involved in this that were going to take losses. As there will be in the GM case. The problem with the small Indiana group is that they represent a very small share of what is at stake here.

And the bigger issue is that if Chrysler liquidated, those Indiana bondholders would not be in any better shape then they are under this deal. In fact, they'd probably be in worse shape. The same is true for everyone else that is complaining.

Finally, the TARP argument is just stupid. Even if you could get a court to decide it was a legitimate problem, Congress and Obama would just come up with the money somewhere else. Do we really need to create another program just to cross the t's and dot the i's for super legalistic anal idiots?

Chris Nahr

06-10-2009, 02:11 AM

Quite so, but there's no need to wrap a sad necessity in neo-Marxist propaganda rhetoric that makes it sound as if bondholders were some kind of highway robbers, coming out of nowhere to steal from those noble proletarians who had built the entire GM imperium without any outside help.

AndrewM

06-10-2009, 07:29 AM

The whole point of bankrupty is for a company to get rid of the debts that are making it impossible for the company to continue. So obviously there were going to be parties involved in this that were going to take losses. As there will be in the GM case. The problem with the small Indiana group is that they represent a very small share of what is at stake here.

And the bigger issue is that if Chrysler liquidated, those Indiana bondholders would not be in any better shape then they are under this deal. In fact, they'd probably be in worse shape. The same is true for everyone else that is complaining.

Yes, but instead of following the law to determine the priority of restitution of investors, they are following political priorities. A very banana republic move, and one that is bad for the car industry (or other politically sensitive industries) in the long term, as people will be less likely to invest in them if they think that the government can just come in and hand out favors to certain parties in defiance of the law.

Kraaze

06-10-2009, 07:45 AM

Yes, but instead of following the law to determine the priority of restitution of investors, they are following political priorities. A very banana republic move, and one that is bad for the car industry (or other politically sensitive industries) in the long term, as people will be less likely to invest in them if they think that the government can just come in and hand out favors to certain parties in defiance of the law.

Nonsense. The government stepping in to prop up a teetering economy is going to encourage more investing that the fear of govt-rushed bankruptcy will discourage.

unbongwah

06-10-2009, 09:14 AM

The bond holders are simply attempting to extort money out of the federal goverment by endangering the livelihood of car workers.
They're trying to get a better deal than what they've been offered. They will probably fail, either because the courts rule against them or Chrysler goes down the tubes and they lose out anyway. But they're doing what most people do: acting in their own best interests within the bounds of the law. I neither sanctify them as holy defenders of the rule of law as some on the Right have; nor condemn them as evil money-grubbing mustache-twirlers stealing food from autoworkers' babies as some on the Left have.

At this point, there's no question all of Chrysler's stakeholders are going to suffer major losses; the question is how do you spread those losses around as fairly as possible while restoring Chrysler to some level of profitability someday. [Frankly, I think it's a lost cause; Chrysler's been on life support for ages. Just let it die and we can have the Big Two instead.] My biggest qualm about Uncle Sam stepping in is the federal government's tendency to make decisions based on political expediency rather than economic reality. I think something about good intentions and the road to hell may apply here?

AndrewM

06-10-2009, 09:54 AM

Nonsense. The government stepping in to prop up a teetering economy is going to encourage more investing that the fear of govt-rushed bankruptcy will discourage.

Investing in something, certainly, but if you were deciding between investing in two slightly tenuous companies, which would you pick: the one with unionized labor or the one without unionized labor, knowing that in the former case if the company you pick fails, the government might step in and say "oops, we're giving priority to the unions who have less secured debts"? It seems that rational investors should regard all investments in companies with large unionized workforces as being lower in priority than they are normally.

Huzurdaddi

06-10-2009, 12:13 PM

Investing in something, certainly, but if you were deciding between investing in two slightly tenuous companies, which would you pick: the one with unionized labor or the one without unionized labor, knowing that in the former case if the company you pick fails, the government might step in and say "oops, we're giving priority to the unions who have less secured debts"? It seems that rational investors should regard all investments in companies with large unionized workforces as being lower in priority than they are normally.

So much nonsense. What priority exactly? The bond holders got 29 cents on the dollar, far better than they would have done in liquidation. They wanted more government largess. Booohoo, who doesn't? I sure wish that the government wrote me a big check. The government wrote the unions a big check, yes, but that in no way entities other entities more cash.

Pound sand.

Huzurdaddi

06-10-2009, 12:21 PM

They're trying to get a better deal than what they've been offered.

What was the mechanism? By endangering the livelihood of Chrysler workers. They know that Chrysler can not pay, its liquidation value is less than they are getting. All they can do is extort hoping that a third party (the government) will come in and give them free cash. They won some free cash already and now they want more. I understand why the Obama adminstration did not break their backs and go to court with this since it would have hurt the Chrysler workers and all companies who are dependent upon its continued existence. But part of me wishes that they would have truly screwed the bond holders who held out.

They will probably fail, either because the courts rule against them or Chrysler goes down the tubes and they lose out anyway.

Not probably. They failed. The end.

Shadarr

06-10-2009, 04:54 PM

Investing in something, certainly, but if you were deciding between investing in two slightly tenuous companies, which would you pick: the one with unionized labor or the one without unionized labor, knowing that in the former case if the company you pick fails, the government might step in and say "oops, we're giving priority to the unions who have less secured debts"? It seems that rational investors should regard all investments in companies with large unionized workforces as being lower in priority than they are normally.

Well, if it's true that the protesting bondholders are getting more out of this settlement than they would've out of a bankruptcy liquidation, then it makes sense to invest in the debt of the company with the unionized workforce.