"But now we can't say anything to them or put stricter trade agreements in place, because China will just simply call in the notes on all the loans they gave us."
Actually that is pretty unlikely. As soon as China starts cashing in, everyone will. This will cause a firesale, and the worth of the bonds they hold will plummet by the time they get their money. It is in their best interests to hold the debt, and keep buying it.
If you owe China a million dollars, China owns you. If you owe China a trillion dollars, you own China.
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Chrysler: Should We Have Let It Die?
Why liquidating the automaker might have been a smart thing to do.
Jun 10, 2009 | Updated: 1:58 p.m. ET Jun 10, 2009
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The government was successful when it warned that if the Supreme Court delayed the Chapter 11 process of Chrysler more than a few days, the No.3 US car company might be forced into liquidation. It is not clear that liquidation would have been a bad result.
Fiat, which will be part of the group taking over the best of Chrysler's assets and will become the de facto operating partner wrote to the court that "If the sale transaction is not completed soon, there can be no assurance that a replacement transaction could be structured and agreed that would preserve any aspect of Chrysler as a going concern." The Justice Department said in its filing that delaying the Chapter 11 process would not be in the best interests of either debtors or the public interest. It is not entirely clear why that was true.
The arguments for keeping Chrysler on its present path through Chapter 11 have been based, at least in part, on the premise that the car company's best assets are not worth very much. That is entirely untrue. The company sold more than 79,000 vehicles last month. That was down 47% from the previous year. Chrysler sold over 60,000 trucks for the month.
Chrysler still has roughly 10% of the domestic market. VW, the largest car company in Europe has coveted more market share in the US. The Koreans have been aggressively working on raising American sales. Hyundai certainly has the capital to buy a piece of Chrysler. It would have to keep open many dealers, keep and perhaps improve factories, and would certainly continue to employ thousands of Chrysler workers.
A liquidation of Chrysler may well have been bad for some creditors who might have gotten less than the $.29 per dollar of secured debt that they will receive under the current arrangement. Liquidation may not favor the UAW's interests. That does not mean selling the company off in parts would have been an unmitigated disaster.
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