What Chrysler needs after bankruptcy

Lawyers with boxes of documents involved with Chrysler's bankruptcy proceedings line up outside the United States Bankruptcy Court for the Southern District of New York in New York City.

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Kai Ryssdal: Flash back to yesterday with me for a minute, would you? Recall that the offer General Motors made to the lenders to whom it owes $27 billion was to swap that debt for 10 percent of the company. Bondholders said no dice. So this morning GM went back to the well -- 10 percent, with an option to buy another 15 percent, if the lenders don't object to a bankruptcy filing. One group of big bondholders took that deal this morning. The rest of them have 'til Saturday to decide. An agreement wouldn't necessarily put off a bankruptcy, it would though make GM's trip through Chapter 11 a whole lot easier.

Meanwhile the major U.S. carmaker that's already in bankruptcy might be getting out a lot sooner than anybody, including yours truly, ever thought. Just a month after it filed, Chrysler is wrapping up its bankruptcy proceedings in New York. But Marketplace's Amy Scott reminds us, now comes the hard part.


AMY SCOTT: Outside the U.S. courthouse in Manhattan today, reporters awaited Chrysler's impending exit from bankruptcy.
Chrysler will have shed billions of dollars in debt and labor costs. And it will emerge with a new partner -- the Italian automaker Fiat. But it could be two years before Fiat's smaller cars hit the U.S. market. Analyst Laurie Harbour-Felax says that's what Chrysler needs.

LAURIE HARBOUR-FELAX: Where they really lack is on the car side. And that's really what Fiat is supposed to replace. And that can't happen soon enough, because people are buying cars today. And they're buying smaller cars.

There's also the recession. Credit is tight, and people are reluctant to buy cars at all. Industry consultant Maryann Keller says to survive, Chrysler will need cash. But after some of its lenders took a back seat to the United Auto Workers in bankruptcy Keller says, financing may be hard to come by.

MARYANN KELLER: Ordinarily, some of that money would come from the capital markets and the private sector. In the case of Chrysler, with UAW ownership representing a little bit more than half of the business, that's not going to happen.

One former Chrysler executive told me it can't get much worse than what the company's already been through. But other news today spelled more trouble for all the Detroit Three. Two parts-suppliers filed for bankruptcy, including Ford's biggest supplier Visteon. That's bound to hurt the one automaker that hasn't needed a bailout.

In New York, I'm Amy Scott for Marketplace.

About the author

Amy Scott is Marketplace’s education correspondent covering the K-12 and higher education beats, as well as general business and economic stories.

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