‘The hard path is the right one’

April 30, 2009 05:58 pm

— About a month ago, President Barack Obama demanded what analysts in the financial and automotive communities believed to be the impossible.
He asked Chrysler LLC to require additional concessions from the United Auto Workers, negotiate billions in debt relief from 46 banks and hedge funds, and forge a partnership with Italian automaker Fiat.
And the president asked that Chrysler get it all done within weeks. That or face bankruptcy and, perhaps, liquidation.
But Wednesday, UAW Locals 685 and 1166 joined others across the country and ratified an agreement that nixes Christmas bonuses, shortens vacations, eliminates tuition assistance, reduces worker compensation, among other concessions.
Chrysler’s largest bondholders agreed to cents on the dollar. An arrangement was made with Fiat. It looked as though Kokomo’s largest employer would avoid bankruptcy.
It didn’t, the president announced Thursday. Three lenders – Oppenheimer Funds, Perella Weinberg Partners and Stairway Capital, the Detroit Free Press reported – refused to accept their proposed share of cash for debt.
“[I]t was unacceptable to let a small group of speculators endanger Chrysler’s future by refusing to sacrifice like everyone else,” Obama said.
So the president supported Chrysler’s bankruptcy. He said, “It will not disrupt the lives of the people who work at Chrysler or live in communities that depend on it.”
He offered Chrysler $3.5 billion in financing to keep it operating while in bankruptcy, and another $4.7 billion once it re-emerges as Chrysler-Fiat in 30 to 60 days.
In the years to come, Thursday’s announcement might be considered a watershed moment for Chrysler and Kokomo – much like Haynes International’s bankruptcy in 2004.
The Kokomo-based producer of high-performance alloys, which started as Haynes Stellite Works in 1912, emerged from Chapter 11 bankruptcy after little more than five months stronger than before.
Chrysler is positioned to do the same.