Chrysler holdouts face a bit of a backlash

Posted by: David Welch on May 1, 2009

It was just a handful of firms who pushed Chrysler into bankruptcy. And they may feel the wrath of politicians whose states rely on Chrysler for jobs. A few firms refused the Treasury Department’s offer of $2.25 billion for the $6.9 billion Chrysler owed them. While most of the creditors agreed to take the cram down, the hold outs were enough to push Chrysler into bankruptcy.

Michigan’s politicians are moving to lock them out of any business dealings in the state. The State’s House of Representatives issued a statement asking the state not to do business with Oppenheimer Funds, Perella Weinberg Partners’ Xerion Capital Fund and Stairway Capital Management, according to a Reuters report. Michigan’s House of Representatives even asked neighboring states Indian and Ohio to join in and divest any holdings with those firms.

Will it have much of an impact? Probably not. Michigan doesn’t even have pension money with those firms. And outside the industrial Midwest, it’s easy enough to find taxpayers who are angry over bailouts for banks and carmakers but also blame Wall Street for the economic woes the nation faces. But there are seeds of a backlash. One CNN anchor was trying to find out names of the holdouts to list them onscreen yesterday. Now that the firms have been identified, we’ll see whether the public is more angry with Wall Street or Detroit, which has is own image problems to solve

Reader Comments

Consumer

May 1, 2009 12:36 PM

Does Fiat still have a cash-burn rate of $1.9 billion a year as reported in Business Week per http://www.businessweek.com/bwdaily/dnflash/feb2005/nf20050214_8224_db016.htm

Arie Covrigaru

May 1, 2009 1:59 PM

It is amazing to see how Law Makers turn into a vigilante gang. In our system secured bond holderws are the first to be compensated in bankrupcy. These firms did not take TRP MONEY so they could not be intimidated like the other{Banks} bondholders. This is The Bankrupcy Law Process, let it work! It's nice to see the socialist Obama Regime stopped for now. The Unions get a 55% share of his reborn Chrystler, how rediculous.

dw

May 1, 2009 2:00 PM

while i can relate to why they didn't want to agree, I can also understand why those who want to punish them. and i don't have a problem with that. these hold out have inflicted pain of them. they will get pain back. they just need to get used to having pain shared with them

t kunst

May 1, 2009 2:01 PM

how does the Obama administration and MI politicians think it's OK to overturn long established bankruptcy laws....GOOD for these guys to hold out!!!! Sick and tired of bowing to the demands of the UAW---they're responsible for the current (and historical) mess in the auto-industry. NO MORE MONEY FOR THE UAW!!! We've alreay threw away $4 billion since last December (BIG MISTAKE OF THE BUSH ADMINISTRATION)--now they need another $8 billion. When is the UAW going to step in and make REAL concessions which will provide Detroit a realistic labor costs structure??? Unless and until the UAW contracts are torn-up and started over---these issues will continue every couple of years----research the archives--the CEO's of these companies have been complaining about the same issue (trying to reduce costs; compete w/foreign car companies) for decades!! Maybe we do not need 3 domestic car companies!!!

WC

May 1, 2009 2:05 PM

Bondholders, hang in there! This is a principle question. I did not have too much love for you guys, simply because you guys are super rich but I am just getting by. However, I am always against penalizing the rich for the sake of poor. Equality is the key. Why should the bondholders suffer while the UAW gaining ownership of the company? Obama is totally unfair.

CanadaMark

May 1, 2009 2:28 PM

I guess these same politicians aren't planning on wielding their wrath on the unions who endlessly sucked the company dry or even Chrysler itself which believed that making sub-par autos for the past 25 or 50 years? If the product was even remotely up-to-date/reliable/competitive these handful of firms would not be forced to protect their client’s best interests. I read (on the BW website) the quote by Chrysler how in the past 2 years they had made great strides in quality etc, are they kidding? Great strides that have the little amount of product they make at the bottom of every list. Good riddance, see you over at the Kia dealer where the product improves each generation....

Chris Tomlinson

May 1, 2009 2:38 PM

I don't blame the firms for not caving into unreasonalble demands. They hold Senior Secured notes, and were being offered a lot less that the UAw, who was not a secured lein holder. These companies do represent investors they are responsible to, and might have faced legal action from shareholders. I think it is clear that the President was trying to take advantage of these financial companies, in favor of the UAW, to whom he is in their pocket.

tom

May 1, 2009 2:41 PM

get realistic....... chrysler/unions were slated for this....go back to Roger Smith and Ross Perot...detroit indeed has it's problems...but it should not be at the taxpayers expense

anonymous

May 1, 2009 2:46 PM

Answer to last question: Detroit.

james

May 1, 2009 2:57 PM

I'm glad they had the guts to do it.
The Hussein government trying to make them
eat his loss.

Sledtech

May 1, 2009 6:28 PM

Now we have a horse race (pun intended)

Ford - marketplace, take responsibility
Chrysler, Bankrupcy court decides
GM Goverment Motors Obeyme micromanages

Doug

May 1, 2009 7:19 PM

The UAW didn't tell Chrysler to manufacture cars which the public didn't want to buy; Chrysler management did.

Doug

May 1, 2009 7:19 PM

The UAW didn't tell Chrysler to manufacture cars which the public didn't want to buy; Chrysler management did.

Paul (Vw)

May 1, 2009 7:45 PM

>>> Now that the firms have been identified, we’ll see whether the public is more angry with Wall Street or Detroit [UAW&mgmt?], which has is own image problems to solve.

Uh...you left out government. Which of the three will be left with the worst image? It's a fast race as all three motor to the bottom.

You know there is something wrong when a president vilifies companies after an unsuccessful to extort from them their legal contractual rights. After all, Mr. Obama is already spending gobs of money...he could have easily printed another $10 billion to get Chrysler out of the red.

But the real question now is...

Who will lend money or do business with Chrysler--er--UAW Motors in the future if the government acts like a banana republic and expects legal rights to be sacrificed on demand? Michigan is going to need more than a Jeff Daniel's commercial if it wants companies to do business there now:

>>> Michigan’s politicians are moving to lock them out of any business dealings in the state.

Viking

May 1, 2009 9:42 PM

Good for the holdouts!!At last someone are willing and brave enough to stand up to the stalinist government in Washington.How dare these people threaten these bondholders.They have the right to fight for their position in the capital structure without being threatened by government bureacrats and militant unions!!Oh by the way,we have a process for handling these kinds of situations.It is called bankruptcy!!Let's get on with it!!

Paul (Vw)

May 2, 2009 10:43 PM

Hmm...I wonder what's going on here...

http://blogs.abcnews.com/politicalpunch/2009/05/bankruptcy-atto.html

>>> A leading bankruptcy attorney representing hedge funds and money managers told ABC News Saturday that Steve Rattner, the leader of the Obama administration's Auto Industry Task Force, threatened one of the firms, an investment bank, that if it continued to oppose the administration's Chrysler bankruptcy plan, the White House would use the White House press corps to destroy its reputation.

Richard

May 3, 2009 9:50 PM

why don't they just let Chrysler die a decent and appropriate death? The UAW is paying for the ridiculous concessions they extorted over the years. The demise of the company is ineviatble. Actually I feel the same about GM. Do I hate the UAW workers? of course not! Do I hate the corrupt idiots at the head of the UAW? YES! They are getting what they deserve....too bad the workers are the ones that will suffer!

Moose

May 4, 2009 10:15 AM

What a boondoggle. The government is THRILLED to be able to blame someone else for Chrysler being in a bankruptcy that the govt. most certainly desired. That was the only way they could destroy dealer contracts and get the rapid decline in dealership numbers needed as part of their restrux plan. Not to mention how much easier bankruptcy makes it to negotiate with all the other parties that still need to capitulate their good-faith stakes in the former Chrysler.

chrysler bondholders

May 4, 2009 1:43 PM

the absolute nerve of these bondholders to refuse to roll over for Fiat, the Unions, the US government, and Chrysler's inept management.

And who were these evildoiers - hedgeunders and stock manipulators - well, they were representing teachers' pension plans.

SIX-BALL

May 5, 2009 7:40 PM

THE BOND HOLDERS SHOULD STAND UP TO THAT MONKEY.HUSSEIN IS GOING TO RUIN EVERYTHING IN THIS COUNTRY.

Paul (Vw)

May 6, 2009 9:18 AM

I feel like I went to bed back in January in a country with a bad economy, only to wake up in a banana republic....

http://www.washingtonpost.com/wp-dyn/content/article/2009/05/05/AR2009050504026.html?nav=rss_business

>>> A federal bankruptcy judge ruled today that lenders opposing the sale of Chrysler must reveal their identities, increasing the likelihood that the dissident debt-holder group may diminish in size.

>>> Gonzalez ruled the group's identity must be revealed by 10 a.m. Wednesday.

By 10am? In time for Regis & Kelly? Why not just (as Joe Wilson would say) "frog march" them through downtown Motown?

Often times if you do a quick search on judges who make decisions like this, you are rarely surprised to see during which presidency they were appointed.

I'd hate to see Chrysler implode. But I'd also not like to see the government intimidate groups into relinquishing their legal rights. If you make the environment toxic for investment you'll have done more harm than Chrysler completely disappearing.

I suppose the real question I'd like to have answered is it possible to save Chrysler without the president trying to vilify (and yes he did) legitimate investors with valid legal claims? I understand the importance of "Never let a serious crisis go to waste," but at what cost to the whole?

JD Plus

May 13, 2009 11:47 PM

This President must learn that he represents ALL of the people. This President must learn he is to avoid trying to be a Judge. This President must learn to not SINGLE out ANY group or any person, as they are all Americans. EVERY last one.

We have laws. He needs to go back to school and learn them.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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