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It Was Bankruptcy That Ultimately Saved Chrysler

Posted By admin || 27-May-2011

Chrysler Bankruptcy

If you've been watching the news and reading blogs lately, then you probably know that Chrysler, the President and legislators who supported the massive 2008 and 2009 bailouts of automakers, are all congratulating themselves on the repayment of loans made to Chrysler after 2009. But according to at least one blogger, those paybacks are not for the bailouts nor are they putting taxpayers in the black.

But the pro-bailout jig is a bit misplaced. First, despite the congratulatory statements, Chrysler had hardly paid back its debt to the American taxpayer. Notice the careful wording in the Marchionne statement: Every penny that had been loaned "less than two years ago" has been repaid. That conveniently leaves out some $3.5 billion loaned to Chrysler more than two years ago. That includes $1.9 billion provided to Chrysler on May 1, 2009, as well as another $1.9 provided to Chrysler in late 2008.

Some of this will be recouped when the government sells its remaining 6.6 percent interest in the automaker (hopefully soon). But even the Treasury Department acknowledges that the income will not put taxpayers in the black.

Not only that; but it was bankruptcy that made it possible for Chrysler to survive. The bailouts, as correctly pointed out by the blogger, did not help Chrysler avoid the demise many were betting on.  The bailouts in fact only delayed the painful cuts and decisions the automaker had to make with the help of bankruptcy.  In reality, the bailouts received by Chrysler before they filed bankruptcy could be compared to the loans some individual debtors receive from friends and family that when they are trying to avoid filing bankruptcy.

(source: )


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