After the banks, new heads have begun to roll! Chrysler is the first one to face the guillotine. America’s third largest manufacturer is headed for bankruptcy protection under the Obama rule. Although the lenders have rejected the latest plan to forgo the debts as proposed by the US Treasury, however, hopes are still alive as Fiat is expected to have a merger with the company.
Chrysler's fate come as a pre-packaged bankruptcy where every party agrees on the proposed agreement. It is basically like getting everyone on the same page before the trigger is finally pulled. All talks between Obama Auto Task Force and the lenders have ended in no final conclusion and the company is finally heading for filing chapter 11 under the US law. The US treasury had increased its offer to Chryslers’ lenders by $250 million to $2.25 billion. Lenders and the hedge funds were asked to forgo the complete $6.5 billion debt in return. After a 90 minutes timeline given to the banks and the hedge funds, every one voted against the proposal from the government.
"We have to understand that the majority of people employed in the auto industry are not in the manufacturing or engineering end. They're at the dealership level, and they're spread throughout the entire country. It touches every town in the country, and that's something that not many people have really quite understood. If your automaker goes bankrupt, they have nothing to sell, and there is not going to be any more vehicles coming in, if they go into a liquidation bankruptcy," said Aaron Bragman, Auto Analyst at IHS Global Insight.
According to a hearing on Friday in the Manhattan Bankruptcy court, Chrysler attorney Corinne Ball said the company will also file its motion to sell substantially all of its assets to Italian automaker Fiat Group SpA before Saturday morning. This means that a merger with Fiat will allow the company to stay in business after all!