May 26 2009
Chrysler Declares Bankruptcy
May 1, 2009, was a sad day as Chrysler filed for Chapter 11 bankruptcy protection. Under Section 363 of the bankruptcy code, a portion of Chrysler’s assets will be sold to the European carmaker Fiat, the United States Government, and the health care fund of the United Auto Workers. The sales will raise money so the company can continue to operate. Its factories are currently closed and will remain so throughout the bankruptcy process.
The Section 363 sale allows the bankruptcy process to proceed quickly, meaning that the company could emerge as early as the end of June, although the end of August is a more likely date.
A mere 20 secured creditors opposed the a loan and stock deal with Fiat and the other parties, which forced the company into bankruptcy as the only means of raising money. The cost of the legal fees for the Chapter 11 is a drain on the already-stressed company. In bankruptcy, only the lawyers win.
The Chrysler bankruptcy is the six-largest in United States history, and the first automaker bankruptcy since Studebaker filed in 1933.
