'Private Equity' Archive
That’s how many days Chrysler (now rechristened Chrysler Group) spent in Chapter 11 bankruptcy reorganization — 42 days, or six weeks. The “quick” and “efficient” reorganization promised by President Obama came to an end this week, albeit with a quick run through the Supreme Court. (I know it’s not officially summer yet, but it’s already hot and dry in Texas.)
Fiat is running the show at Chrysler now, although the Italian carmaker owns just 20% of the restructured company. The UAW’s retiree health care trust now holds 55% of Chrysler. Ciao, Cerberus Capital Management!
Sergio Marchionne, the CEO of Fiat, sent a letter to all Chrysler employees in his new role as the CEO of Chrysler. (How can one man run two car companies? Hey, Carlos Ghosn’s been running both Nissan Motor and Renault for years.)
Hundreds of Chrysler dealers closed this week, as the US Bankruptcy Court approved the company’s petition to terminate immediately its dealership agreements with about one-quarter of its retail outlets.
Meanwhile, General Motors is marking its 10th day in Chapter 11, and they’ve been busy in the Ren Center, too. The company last week struck deals to sell the HUMMER brand to an obscure Chinese manufacturer of heavy construction equipment and to divest the Saturn brand to Penske Automotive Group. A deal to unload Saab Automobile may be close at hand, although Fiat is reportedly out of the running in that auction. The GM bankruptcy is going to take more than six weeks to complete; Labor Day weekend might be a realistic and somewhat ironic deadline.
What seemed improbable two months ago yet became very probable in the last week came to pass this morning: General Motors filed for Chapter 11 bankruptcy protection from creditors this morning in New York City.
The news was accompanied by a statement from the White House by President Obama. The president said GM now has “a viable, achievable plan” to restructure its operations, and predicted the company will be able to “progress toward making better cars.”
In announcing its decision to go ahead with a bankruptcy reorganization, GM also laid out the details of North American plants that will be closed or furloughed in the coming months. Meanwhile, Delphi announced it is a step closer to emerging from Chapter 11, under which it’s been operating for nearly 44 months.
While GM is getting used to the US Bankruptcy Court in Manhattan, Chrysler shortly will be vacating the premises. Its emergence from Chapter 11 may be delayed by a few petitioners, but the judge hearing the case isn’t brooking any objections to the deal with Fiat.
A historic day, indeed, with the biggest industrial bankruptcy in US history. More history will be made if and when GM emerges from this reorganization.
Before we had to go to war against Germany again (just kidding!), news came today that there may be resolution of the General Motors situation in Europe. While European Commission ministers jawed in Brussels, GM got down to it with Magna International and cut a deal on control of Adam Opel and Vauxhall Motors.
All is still tentative (isn’t life in general?), but it looks like the deal would have Magna take a 20% stake in Opel/Vauxhall, GM keeps 35%, Sberbank of Russia gets a 35% slice, and 10% is held aside for Opel employees. Sberbank’s ownership could usher in a role in GM Europe for GAZ, the beleaguered Russian automaker. Fiat apparently gets shut out, eliminating one aspect of its plan for automotive world domination.
The Italian carmaker reportedly is one of the potential buyers for Saab Automobile. The other two bidders, according to news reports, are Koenigsegg Automotive, a Swedish manufacturer of high-performance cars, and The Renco Group, an American holding company.
Whatever happens on the Continent, the day of reckoning is at hand for GM. Some see the giant automotive manufacturer entering bankruptcy reorganization on Sunday or Monday. (If it’s Sunday, that may mean a Chapter 11 filing in Delaware, where the US Bankruptcy Court keeps weekend hours, but I’m sure the bankruptcy court offices in New York City would make an exception for what may be one of the biggest bankruptcy cases in US history.)
Meanwhile, the Chrysler saga is still playing at the US Bankruptcy Court in Manhattan; the company is hoping that after two days of marathon hearings, it could get the bankruptcy judge’s OK for its merger with Fiat today, or someday soon.
There’s LOTS going on in the automotive industry, with almost hourly news developments on various fronts. Some quick highlights:
• General Motors announced a deal with some of its bondholders that would see the creditors get up to 25% of the equity in the “New GM” after the automotive giant goes through bankruptcy reorganization. This could result in the company filing for Chapter 11 next week, with hopes that the reorganization may take 60 to 90 days.
• The sale of Adam Opel and Vauxhall Motors is turning into an international incident, with German government officials blaming GM and officials of the Obama administration for throwing wrenches into the machinery at the last minute. No deal emerged overnight in Berlin; the German foreign minister is talking to Secretary of State Hillary Clinton about what’s going on. Chancellor Merkel and President Obama will have a lot to talk about when they meet in Dresden next week.
• Two big Michigan-based suppliers of auto parts, Visteon and Metaldyne, filed for Chapter 11 protection from creditors, beating GM to the courthouse. Visteon was spun off from Ford Motor nine years ago, and Ford still is the company’s biggest customer.
• Chrysler still is bogged down in a Manhattan courtroom, trying to get permission from the US Bankruptcy Court to sell its assets and to emerge from Chapter 11. A decision may come tomorrow.
• Saab Automobile still is talking to its three suitors. That may be the quietest, calmest corner of the automotive industry this week.
Stand by for news!
As expected, the debt-for-equity exchange offer General Motors made to its unsecured bondholders fell well short of the acceptance level the company and the US Department of the Treasury were hoping for. The exchange offer expired last night, and GM’s board will meet to decide what its next steps will be.
The failure of the exchange offer doesn’t automatically mean that the carmaker is headed for Chapter 11, and it also doesn’t mean that the company can’t work out a better deal with its bondholders. Many things could happen between now and Monday, when GM faces the Obama administration’s deadline to get its house in order and continue receiving Treasury loans, which now total $19.4B and counting.
Absent a way to reduce or wipe clean GM’s $27B in unsecured debt, the company could be headed for bankruptcy court next week, or sooner.
Where GM would file for Chapter 11 is a matter of conjecture. Officials in Michigan are hoping it would be in Detroit, where the company makes its headquarters, but it’s more likely that the giant automotive manufacturer would file in New York City (as rival Chrysler did) or in Delaware, where GM is incorporated.
Chrysler heads to US Bankruptcy Court today for a crucial motion on its plans to sell most of its assets to Fiat.
Meanwhile, they may be burning the midnight oil at the Finanzministerium in Berlin tonight, as the German government tries to work out a deal for control of Adam Opel and its sister company, Vauxhall Motors. Complicating matters at the last minute is an offer by Beijing Automotive Industry Holding (BAIC) to purchase the GM Europe assets in play. BAIC’s attempt to enter the bidding may be too late to be taken seriously; it’s more likely that the choice of a preferred bidder will come down to Fiat or Magna International. GM has the final call on the pending deal, but the German government is expected to provide a loan guarantee of 1.5B euros (about $2.1B) to help the deal go forward.