The fallout from Chrysler’s bankruptcy
TEXT OF INTERVIEW
Kai Ryssdal: Those three pages that it took for Chrysler to get into chapter 11 leave more questions than they do answers. One of the big ones is when will Chrysler get out of bankruptcy. Both President Obama and Chrysler executives seem to think it can be done in a month. Maybe two. Micheline Maynard covers Detroit for The New York Times. Micki, good to talk with you.
Micheline Maynard: Thank you, Kai.
Ryssdal: How realistic is it that the government thinks this is going to be over with in 30-60 days?
MAYNARD: Well, Kai, it’s not going to go as fast as the government is saying because we got a look at the Chrysler bankruptcy papers today. And in there they say the lawyers plan to present a bankruptcy reorganization plan on August 28, which is — by my count — about four months from now. And normally the creditors get a chance to respond. So we’re at least looking at the fall.
Ryssdal: Let me ask you about those creditors. The bondholders that John Dimsdale was talking about in his piece a moment ago. Are they going to be better off having taken a hard line here?
MAYNARD: Some of these creditors are secured creditors. And that means that Chrysler’s plants and equipment and other operations are actually pledged as collateral for these bonds. So they can get in front of the judge and say, “Hi, I’d like to have to the Kokomo transmission plant please.” Obviously they’re not going to want to take that home. But I think they believe they can get a better deal in front of a judge than they could dealing with the Treasury.
Ryssdal: What about Chrysler’s workers? Are people going to lose their jobs, see their pay cut, those sorts of things?
MAYNARD: You know, I’ve never covered a bankruptcy case where there weren’t some job cuts, and where there weren’t some pay cuts. So Chrysler is saying no and the government is saying no. But generally once you go through one of these cases you do end up paying people less and employing fewer of them.
Ryssdal: Once this is all said and done, the union is going to be the majority stakeholder in this company, the United Autoworkers Union. How equipped are they to actually run a company?
MAYNARD: They’re probably not going to be actually running the company. What’s going to happen is their health-care fund, which is called Aveba, will have 55 percent of the equity in Chrysler, but it will be run by a board of directors. Now three of the directors will come from Fiat, with which Chrysler is doing an alliance, five of them will be named by the government. The UAW will get one of those seats. And so the UAW will have input, but it won’t be running the company day to day.
Ryssdal: You know, the White House has been saying for weeks that what’s it is trying to do in these negotiations is prevent the end of the world, this bankruptcy filing. And now today the president really embraced it. Is it probably the best thing now for Chrysler that it is in bankruptcy?
MAYNARD: Well, you know, this is the culmination of years and years of overhang for Chrysler. And all the Detroit companies are in the same situation. They have so many dealers, so many liabilities, things like asbestos law suits from over the years. And really going into bankruptcy, if you really want to get rid of that stuff it’s the only way to do it. Even though Chrysler’s problems accelerated because of the credit crunch, the housing slump, etc., this is something that has been in the making literally for decades.
Ryssdal: And what about finally, Micki, General Motors. They’ve got another month. What does this mean for them?
MAYNARD: You know, this is going to give the government a look at what it’s like to run a bankruptcy case with a major automaker. As someone said to me this is a good way to get free information. I said, well, it’s costing the government $8 billion to get this information. But it could be a preview of the larger General Motors case that is to come. And if this turns ugly, we might see more efforts to restructure General Motors out of court. Conversely, if it goes pretty smoothly, the path could be laid for GM to end up in Chapter 11 as well.
Ryssdal: Micheline Maynard is a senior business correspondent for The New York Times. She covers Detroit. Micki, thanks a bunch.
MAYNARD: It’s always my pleasure, Kai.
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