Alert: It's a Deal, and it's a Bankruptcy, too

Chrysler and Fiat are expected to enter into a partnership, and Chrysler will file for Chapter 11 bankruptcy with the bankruptcy court in Manhattan.

According to the president at today's noon press conference, the bankruptcy is to last 30-60 days, the remaining unresolved issue being the hedge funds holding out for more money for their debt holding.

He assured us that the bankruptcy is not the sign of weakness. ???? Equity holders will be wiped out and debt holders are getting 30 cents on a dollar. It's weakness, and nothing wrong at this point with being weak. They are bankrupt.

He also took a swipe at those hedge funds who didn't "do the right thing". It's business, Mr. President. Trying to get more for their money. It will be interesting to see how the bankruptcy court judge handles the hedge funds' claims, particularly if they also have CDS on the debt.

One very positive thing .. actually two: Chrysler CEO Nardelli (of wrecking Home Depot fame) will be gone, and Cerberus (of wrecking many small-town businesses fame) will be reduced to a minority stakeholder. [update: Cerberus will be completely out. 4/30/08] (Oh by the way did you know the former US vice president Dan Quayle runs one of their units?)

I do believe Chrysler, with the partnership with Fiat, will have a chance of success, though not the kind of success that the government is talking about. More on that later.

Tweet