Word: chryslers
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...time Chrysler filed for Chapter 11 yesterday, it was no longer a large American company. Although the firm is private, most estimates are that the No.3 U.S. car company may only have $35 billion in revenue this year. If that is true, it would not be among the top seventy companies in the Fortune 500. Its 2009 sales may be less than Apple's (AAPL). With 54,000 employees, Chrysler has fewer workers than Cisco (CSCO...
...news up to and including the Chrysler bankruptcy was "above the fold" in many newspapers and news websites. However, the amount of debt that the creditors and government were fighting over was only $6.9 billion. There are scores of American companies with larger debt loads. (See pictures of the Top 10 scared traders...
...might argue that given GM's troubled state, the market value of the bonds is not $27 billion but more like $3 billion. But if you accept that troubled-debtor logic, then it's only fair to apply the same logic to the money owed by Chrysler to the UAW's VEBA - so its chips should be marked down as well. (In fact, by law the VEBA's IOU is junior to the bondholders' IOU.) Thus, the VEBA's IOU should not translate into a 39% equity stake but a small sliver of that. (Read about Detroit's attempts...
...losses are well deserved. But union leaders in Detroit negotiated the richest benefits packages of any industry - GM's health-care outlays grew so big that one Wall Street analyst dubbed the company "an HMO on wheels" - and that played some role in the declining competitiveness of GM and Chrysler. Don't the autoworkers and their union leaders bear some responsibility for that...
...wonder that some of Chrysler's creditors said no, and it's also no surprise that a group of GM bondholders is putting forward an entirely new plan for that automaker, cutting out the government, which is slated to become a majority owner. The creditors' new plan suggests giving them a controlling equity interest instead and keeping the government (i.e., American taxpayers) as a creditor. Obama has made it clear that he has no interest in running a car company, so this offer may be one worth considering...