With Chrysler LLC appearing increasingly likely to seek bankruptcy protection, members of Congress are calling for an orderly process that saves the company from liquidation.
“My hope is that it’s not a liquidation,” Sen. Chris Dodd, chairman of the Banking Committee, said Friday morning on the “Early Show” on CBS, “but what they call a debtor-in-possession, sort of Chapter 11 filing, which would allow for the reorganization of these companies.”
Published reports Thursday said Auburn Hills, Mich.-based Chrysler was preparing a bankruptcy filing, which could come as early as next week. Such a bankruptcy would protect the pensions and retiree health care benefits of United Auto Workers union members, The New York Times reported.
One possibility is that a bankruptcy would allow the company to rid itself of unwanted liabilities. That would allow the Italian automaker Fiat SpA ? which has been in talks to acquire a stake in Chrysler ? to select which operations it wants, according to The Wall Street Journal.
“As we move forward in this process, we believe it’s important to keep all options open,” Chrysler said in a statement. “Chrysler will continue to work through the end of the month, based on the direction given by the Presidential Auto Task Force, to secure the support of the necessary stakeholders and reach a successful conclusion that the Administration and U.S. Treasury deems appropriate.”
Messages seeking comment were left with the UAW and the Treasury Department.
Chrysler has been surviving on $4 billion in government aid since the beginning of the year and is six days away from a government-imposed restructuring deadline. The Obama administration has promised another $6 billion to the carmaker if it can arrange a tie-up with Fiat and extract deeper concessions from stakeholders, but that outcome appears increasingly remote.
A major sticking point involves a group of banks and hedge funds that hold about $6.9 billion in secured Chrysler debt. They are negotiating with the Treasury Department over a possible debt-for-equity exchange involving a stake in a Chrysler-Fiat alliance. Most recently, the Treasury has asked the debtholders to forgive $5.4 billion and take a 5 percent stake in the alliance, which is far from the lenders’ latest offer.
Chrysler would file for bankruptcy even if it reaches an agreement with its lenders and Fiat, but if the deals fall through, the company would begin the process of liquidation, the Journal reported, citing several people familiar with the matter.
“I wish we had different results, but the realities are what they are,” said Dodd, D-Conn. “This may be the best option, even though we would have preferred a different one.”
“I hope this is not a liquidation ? I think that would be the wrong step ? but rather one that allows for reorganization,” he said.
Sen. Debbie Stabenow, D-Mich., said late Thursday she continued to oppose bankruptcy for Chrysler.
“With Chrysler, we want to see Chrysler/Fiat come together. We want to see GM be able to make it on their own,” Stabenow said on “The Ed Show” on MSNBC.
She added that banks that have received government aid should “be willing to stand up.”
“I wrote another letter today to them, saying they need to step up and do their part to make sure these companies can be strong,” she said.
Copyright 2009 The Associated Press.