Could the Chrysler Bankruptcy Last Longer Than Advertised?

From Bloomberg:

Chrysler LLC’s bankruptcy might take as long as two years, not the two months President Barack Obama suggested as a target, an administration official said.

The 60 days projected by the President at an April 30 press conference announcing the automaker’s bankruptcy only applies to a sale of Chrysler’s best assets to a new entity, said the official, who can’t be identified because the matter is confidential. Afterward, creditors would fight over unwanted factories and other assets to recover money, lawyers said.

As a streamlined Chrysler is launched, the remaining entity will be saddled with debt and other liabilities, such as product-defect and asbestos-damage claims. Some claimants may be disappointed as creditors compete to squeeze payments out of the sale of discarded factories, such as the Detroit plant that makes the low-volume Dodge Viper sports car.

“The unsold assets and liabilities may take years to sort out due to the complexities of resolving thousands of commercial, tort, future asbestos, dealership and employee claims,” said Dewey & LeBoeuf LLP partner Martin Bienenstock, who has advised General Motors Corp. and Chrysler Financial on restructuring.

Tags: bailout, bankruptcy, chrysler

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Comment by David Ruggles on May 14, 2009 at 9:46pm: I still can't believe Judge Gonzales allowed the Section 363 sale so I am struck dumb on this whole subject.

Comment by Scott J McKim on May 15, 2009 at 10:35am: Dealers are grouping together with help from the various ADA's to fight the franchise terminations. In any normal BK, this action generates a delay in enforcing the terminations. If the June 9 deadline is extended at all, the 60 window is in jeopardy.

From my point of view, I think this whole thing is moving so quickly that any attempt to stall the process will be run over quickly. It seems that established BK law precedence is being ignored and GM is taking notes.

Comment by David Ruggles on May 15, 2009 at 11:08am: Scott is exactly right. The "wild card" here is the fact that the government is also the DIP financing. There's no precedent for that. I have thought from the beginning that the Chrysler situation was the "guinea pig" for GM.

Comment by Alex Kwanten on May 15, 2009 at 11:17am: When creditors fight for keeps over an automotive bankruptcy and the random assets associated with it, it can take alot longer than anybody would think. It isn’t directly analogous, but The Moon Motor Car Company of St. Louis collapsed in 1930 after a botched hostile takeover (it would’ve gone into liquidation anyway by 1931, but the fight over control between executives literally came to blows). 355 Creditors were still claiming a total of $26,000 worth of stuff when the bankruptcy case was finally concluded – in 1965.