Thursday, April 23, 2009

Chrysler Preparing For Bankruptcy Filing

This shouldn't come as a surprise. Chrysler has been hemorrhaging money for years, and its merger with Daimler-Benz was a disaster. It's subsequent takeover by Cerberus Capital didn't improve matters.

Reorganization under Chapter 11, here we come.
The Treasury Department is preparing a Chapter 11 bankruptcy filing for struggling U.S. automaker Chrysler that could come as soon as next week, according to a New York Times report.

People with direct knowledge of the action told the newspaper that the U.S. Treasury has an agreement in principle with the United Automobile Workers union, whose members’ pensions and retiree health care benefits would be protected as a condition of the bankruptcy filing.

In March, the Obama administration gave Chrysler has until the end of the month to reach agreements for an alliance with Italy's Fiat, a reduction in secured debt and resolution of labor issues with its unions.

President Obama said the turnaround plans that the automakers presented to Congress earlier this year hadn’t gone far enough. He gave Chrysler one last chance to turn its operations around, raising the threat that he might force the company into a quick, managed bankruptcy if that proves to be the fastest way to restore it to health.
So, the bankruptcy filing will mean that taxpayers are on the hook for Chrysler's pension and health benefit obligations. That's quite the sop to the UAW, but we expect nothing less when dealing with the Democrats biggest backers.

There was nothing that Chrysler could do that would turnaround the company. Producing products that the public didn't want and which cost too much because of those pension obligations meant that Chrysler was at a disadvantage. Couple that with the left's assault on the very vehicles that Chrysler excelled at making - SUVs and minivans - and it was a recipe for disaster.

No auto company could manage a turnaround in a short period of time when factoring in the design and production costs with creating new vehicles.

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