Chrysler is in administration because Hedge Funds refused trio do a deal on the debt they were owed. As President Obama said:
While many stakeholders made sacrifices and worked constructively, I have to tell you some did not. In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout. They were hoping that everybody else would make sacrifices, and they would have to make none. Some demanded twice the return that other lenders were getting. I don’t stand with them. I stand with Chrysler’s employees and their families and communities. I stand with Chrysler’s management, its dealers, and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars. I don’t stand with those who held out when everybody else is making sacrifices.
Quite so.
This is why hedge funds harm the rest of the world. They believe their claim on capital makes them different from the rest of the world. Wrong, wrong and wrong again. It does not.
A little humility helps. Hedge funds might have to learn it if they are to have any place in the world of the future.
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time to smell the coffee Richard. Chrysler is in administration because it failed to control its costs and sell its product profitably enough.
Sure
And it was the hedge fund that wanted the tax payer bail out
I smelt the coffee
Are you sure you have?
Richard
The problem here was that the Government got involved in the first place by lending billions when no one else dared to lend to this company in the situation that it count itself in. the only reason the hedge funds even got involved is because the original lenders no longer had any faith in Chrysler and sold the loans for a loss to the hedge funds.
Back in December Chrysler asked for $14 billion in emergency funding to stay alive. That’s over $241 thousand an employee (58,000 employees). This total does not include the debt that Chrysler already had borrowed and could not pay back.
When you take a mortgage on a house and cannot pay it back, the bank takes the house back in a foreclosure. The Government tried to push Chrysler’s lenders out of this right in the deal that they proposed. The lenders did not agree and Chrysler has now filed for bankruptcy which it should probably have done last year, saving billions in taxpayer dollars.
“When you take a mortgage on a house and cannot pay it back, the bank takes the house back in a foreclosure.”
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Exactly what are the lenders going to get? Apparently, even 14 billion wasn’t enough to make chrysler profitable. Isn’t the only thing that are going to make the cars worth anything is if American’s buy them, because I am not sure anyone else will. Don’t Chrysler cars cost too much and are too big for most of the world?
.
So the lenders are going to rely on the American consumer, instead of tax payer.
.
I hope the lenders know what they are doing?
“Exactly what are the lenders going to get?”
– At the moment that is up to the bankruptcy judge. They might try to sell the company in whole or in pieces. There is the option of trying to keep the factories operating or declare that the business is over and as a result sell off the buildings, real estate and inventory. Of course, they can try to keep the business running, in which case the lenders might get a share in the company which the Government did not offer to them as part of the pre-bankruptcy deal.
Whatever the amount, the law has traditionally favored paying the lenders first. As for American Consumers, in addition to buying cars, they might be offered the possibility of purchasing shares in the company again, making the company public again.