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June 9, 2009

WSJ: Chrysler Sale on Hold with High Court

The Wall Street Journal reported today that the Chrysler sale to Fiat is on hold while the Supreme Court reviews the case. The article also mentions that the bankruptcy Chrysler went through "broke with longstanding tradition concerning rights in a bankruptcy" by "forcing senior secured lenders to write down their loans to the automaker." Usually, senior secured lenders are paid in full before low-priority creditors receive anything. However, the UAW received a 55% stake in the new company this time which means that the Chrysler workers will essentially own the company.

With the increased risk of lending by senior secured lenders, who is going to lend the Chrysler when they need money again. It will have to be the federal government. Would you put your pension with a company that could force you to write it down?

A member close to the restructuring said that Fiat can walk away from the deal after June 15 and if they do, the company will have to be liquidated. Right now, I vote for liquidation. The Chrysler brands can be sold to companies who can make them more efficiently without the added overhead of expensive labor.

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