Lessons to be learned from the Chrysler bankruptcy

Lessons to be learned from the Chrysler bankruptcy

The bankruptcy of Chrysler — a company that produced state-of-the-art technology and cutting edge styling in its best years — is an unfortunate sign of the times.

A relatively small group of about 20 creditors who held $1 billion of Chrysler’s $6.9 billion in debt rejected an offer of 30 cents on the dollar for their bonds and forced Chrysler and the President’s Task Force on the Auto Industry to conclude that filing for bankruptcy protection was the only option remaining.

We’re already seeing results of that decision. Documents filed in New York bankruptcy court revealed that the Chrysler stamping plant in nearby Twinsburg is one of eight plants that will be closed. All plants are on furlough until the Italian automaker, Fiat, takes control of Chrysler.

Such ominous events notwithstanding, initial reports paint an encouraging picture for members of the United Auto Workers union, predict the deal with Fiat will be quickly finalized and suggest a lightning-fast emergence from bankruptcy — as quickly as 30 to 60 days.

Those first 30 days will be the most interesting for the Mahoning Valley, because it mirrors the time General Motors has to accomplish its restructuring without going to bankruptcy court.

Painful cuts

We remain convinced that bankruptcy is the least desirable option for GM. The company has already made painful decisions in an effort to avoid bankruptcy — abandoning the Pontiac, Saturn, Hummer and Saab brands, cutting tens of thousands of jobs, closing plants and announcing that it will eliminate thousands of dealerships. The UAW has made significant concessions.

Some of Chrysler’s unhappy creditors will move to seize Chrysler’s assets at the expense of those who the creditors say were treated too kindly, primarily Chrysler’s employees and retirees.

How quickly this happens and how the court reacts could have major implications for any GM plan — inside or outside of bankruptcy.

It will be interesting to see how the public responds to the minority debt holders as their identities become more widely known. And it will be equally interesting to see who their counterparts are among GM debt holders — and how the public reacts if an inflexible minority pushes the nation’s largest automaker into bankruptcy court.