Friday AM May 1st, 2009
by: Ed Mayberry, May 1, 2009 1:05:13 am
President Barack Obama says he supports Chrysler's decision to seek bankruptcy protection. He says the filing will put the struggling company back on its feet and that the process for recovery will be relatively fast — perhaps within a couple of months. A Chapter 11 bankruptcy filing will allow a judge to decide how much the company's creditors would get while the company continues to operate. Anne Lawton is an associate professor of law in Chrysler's home state of Michigan, at Michigan State University.
"If you've got somebody who's running into financial trouble, whether it's a person or a company, the problem you have is that it's a race to courthouse, to see who can get the assets first, right? And what bankruptcy does is stop all that. So it tries to distribute the money in a certain order, and as fairly as possible, you know, based on what Congress has said in the Bankruptcy Code who gets paid first. As a debtor, Chrysler could make motions and ask for critical vendor status for some suppliers, which is basically a great position for them in terms of being able to get paid."
Professor Lawton says the troubles that the Big Three have been experiencing has been hard on Michigan.
"This is a big part of, you know, the economy here and so it's really hurt the economy. And I think a lot of people are really freaked out, because they're wondering what's going to happen if two big auto companies go into bankruptcy, for example. What does that mean for them? And of course then there's been all the job cuts, right? A time of great uncertainty, and it's kind of sad, too, because I grew up here in Michigan, and you know, the auto industry — the Big Three — that was the way that a lot of people sort of made it into the Middle Class. It had great health benefits, great pay. And you know, a lot of that's, that's going away now."
Chrysler says it will temporarily stop most of its vehicle production until its deal with Fiat is complete. Chrysler will continue to honor its warranties during that time.
Ed Mayberry, KUHF Houston Public Radio News.