Restructuring Chrysler through Bankruptcy

View Document Back to Search Results
Media Type
Document
Media Date
March 20, 2020
Additional Information
In late 2008, due to the confluence of the financial crisis and years of structural decline, Chrysler was nearing bankruptcy (Klier and Rubenstein 2012, 35-37). Treasury provided Chrysler’s owner, Chrysler Holding, with a $4 billion bridge loan and Chrysler’s related finance company, Chrysler Financial, with a $1.5 billion financing program under the Troubled Asset Relief Program (TARP) (U.S. Treasury Department Office of Financial Stability 2018) (Canis et al. 2009, 9) (Nye 2019 Bridge Loans) (Treasury 2009). The government-led restructuring through bankruptcy involved the commitment of roughly $5 billion in debtor-in-possession loans from the U.S. Treasury and the Canadian government, under which the U.S. Treasury ultimately lent $1.89 billion, using TARP funds, and Canada lent about $1 billion, proportional to its share of the NAFTA auto industry (Canadian Press Release 2009). It also involved concessions from stakeholders, corporate governance arrangements for the “New Chrysler,” and a merger with Italian automaker Fiat Automobiles SpA (DIP Financing Agreement 2009, PDF Page 95, 317, 322). Treasury financed the purchase by the New Chrysler of substantially all of the Old Chrysler’s assets with a $7.14 billion loan. The bankruptcy case was controversial and nearly reached the Supreme Court, but the restructuring ultimately rescued Chrysler (Fred 2010, 38). In the Chrysler rescue, Treasury lost about $2.93 billion on an investment of about $10.47 billion (SIGTARP 2016, 103).
Crisis
Global Financial Crisis (2007-2009)
Intervention
Non-bank Restructuring
Content Type
Working Paper
Publisher(s)
Yale University: School of Management: Yale Program on Financial Stability (YPFS)
Author(s)/Creator(s)
Alexander Nye
Language(s)
English
Case Series
2020 YPFS Preliminary Discussion Drafts
Related YPFS Publications
2008-2009 Automotive Bridge Loans for Chrysler and GM
Country(ies) or Region(s)
Canada United States