Before there was a Motors Liquidation Co, post-bankruptcy GM's hived-off shelter for useless assets, there was Old Carco LLC. That's the company Chrysler built to house its useless assets, and unsurprisingly, it doesn't have good news for unsecured creditors. Old Carco was left with liabilities of $20.5 billion, but has less than half of that to pay off everyone it owes.
The latest accounting says there is $2.345 billion to pay things off. With a shortfall that drastic, even the U.S. Treasury and the Canadian governments are waiting for their money, with a $3.34 billion loan and $29 million in interest going not being repaid. The Treasury sent Old Carco a notice of default last month, which strikes us as a waste of a stamp and paper.
And since Old Carco isn't allowed to borrow any more money, there is almost no chance that creditors will be made whole. At this point, as the company tries to unload leftover factories and property, it looks like the best anyone's going to get is pennies on the dollar -- or just fractions of that -- and that could be for the folks first in line. Old Carco is dead, long live Chrysler...
General Motors and Chrysler have been in meetings with the U.S. Treasury this week to discuss how and when the Detroit automakers can again become viable. Both companies are asking for additional billions to fund their perspective turnarounds, but Chrysler is also defending a proposed partnership with Fiat. Fiat's pending 35% ownership stake would provide Chrysler with small and mid-size cars and more fuel efficient powertrains, but no cash. Some in Congress have questioned whether or not to give money to a company that would have such a large foreign ownership stake. Fiat CEO Sergio Marchionne gave the government task force a great reason to welcome the Italian automaker's stake: Fiat can help Chrysler repay loans. Does that mean Fiat will use its own cash on hand to help Chrysler keep the lights on? We don't know, but a Fiat partnership could give Chrysler far more than a sugar daddy in the Mediterranean. Giving Chrysler small and medium platforms that the company doesn't already have and likely can't afford to develop on its own will save billions of dollars in development costs, which will ultimately help Chrysler become more competitive on the cheap. Without high quality, fuel-efficient vehicles, Chrysler doesn't have much of a chance of ever repaying the U.S. government.
The industry is waiting to see how the partnership between Chrysler and Fiat will work out. With the automakers of the world conglomerating into larger auto groups, there are plenty of precedents. But while only time will tell how the relationship will develop, we might have our first glimpse yet. The names for two upcoming Alfa Romeo models have been released: the successor to the five-door 147 hatchback, joining the three-door MiTo, will be called the Milano, while the replacement for the sharply-styled 159 will, as previously reported, revive the Giulia nameplate. Tellingly, though, the information didn't come from the Italian side – it was leaked from Detroit. The two models were mentioned in Chrysler's proposal to the Treasury Department of the U.S. federal government. Sources peg the Milano to hit European market in the spring of 2010 and the larger Giulia to debut late in the following year, and chances are that the pair will make it Stateside as well, otherwise Chrysler's gonna have some 'splaining to do.
While there have been rumors and suggested candidates floated for the so-called federal "car czar" post, it now no longer looks like that position will be filled. That's because President Barack Obama has apparently gone cold on the idea. Instead, new reports suggest that he will look to a select group of senior economic advisers for guidance. In lieu of appointing a single authority to help guide the restructuring of the Detroit Three, a senior adviser is suggesting that Obama instead plans to look to Treasury Secretary, Timothy F. Geithner; National Economic Council chairman Lawrence H. Summers, and Ron Bloom, a labor union and corporate restructuring expert. The three men will work with a presidential auto industry oversight panel, with Obama "reserving for himself any decision on the viability of GM and Chrysler."
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