As suspected, Chrysler filed for Chapter 11 Bankruptcy protection today:
Chrysler, the country’s third-largest auto company, filed today for Chapter 11 bankruptcy protection under a plan that President Obama said will give the troubled automaker “a new lease on life.”
“I have every confidence that Chrysler will emerge from this process stronger and more competitive,” Obama said at a noon press conference, adding, “This is not a sign of weakness, but rather one more step on a clearly charted path toward Chrysler’s revival.”
Chrysler, one of the three pillars of the American auto industry, filed for bankruptcy this afternoon after last-minute negotiations between the government and the automaker’s creditors broke down yesterday. U.S. officials had offered Chrysler’s secured lenders $2.25 billion in cash if they would agree to writedown the $6.9 billion in secured debt that the company owed. But a small group of hedge funds refused the 11th-hour deal.
An administration official this morning expressed disappointment, saying the holdouts had failed to “do the right thing,” but that “their failure to act in either their own economic interest or the national interest does not diminish the accomplishments made by Chrysler, Fiat and its stakeholders, nor will it impede the new opportunity Chrysler now has to restructure and emerge stronger going forward.”
“I don’t stand with those who held out when everybody else is making sacrifices,” Obama said at the White House today.
Shortly before the president’s remarks, a group claiming to represent the holdouts on the deal released a statement claiming that they had been “systematically precluded” from direct negotiations with the government in favor of creditors who had previously received assitance from the government.
Chrysler chief executive Robert Nardelli announced today that he will return to Cerberus Capital Management as an adviser.
“Now is an appropriate time to let others take the lead in the transformation of Chrysler with Fiat,” said Nardelli in a statement. “I will work closely with all of our stakeholders to see that this new company swiftly emerges with a successful closing of the alliance.”
The company’s bankruptcy filing, and the U.S. government’s attempt to save it, amounts to another extraordinary intervention in the economy and a landmark event in the history of the American auto industry.
Of course, if George W. Bush hadn’t folded like a limp noodle back in December, we could’ve done this back then and saved ourselves several billion dollars.