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Posts Tagged ‘bankruptcy’

Coda Files Bankruptcy

Electric vehicle maker sold less than 100 vehicles.

by on May.01, 2013

After selling less than 100 cars since the vehicle's introduction, Coda filed Chapter 11 bankruptcy.

Coda Holdings Inc., parent of the electric-car maker backed by billionaire Philip Facone, filed for bankruptcy and will seek to sell its assets to a group led by a Fortress Investment Group.

Coda Holdings shut down its automotive unit last year after failing to make good on its promise to sell 10,000 vehicles. The company sold less than 100 vehicles while employing 40 people. It will focus on its energy storage business, said Phil Murtaugh, chief executive officer of the Los Angeles-based company in a statement.

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The company introduced its five-passenger electric car in California a year ago with a range of 125 miles on a single charge. The $37,250 vehicle was based off a years-old vehicle design and was panned for its bland styling. Additionally, it suffered through a recall due to faulty airbags.


Decision Day in Court for Fiat Takeover of Chrysler

Hearing set for tomorrow on whether a sale proceeds as judge refuses stay. Precedent set will likely determine GM’s fate.

by on May.26, 2009

Chrysler LLC Vice Chairman Jim Press and then Senator Barack Obama

The political momentum and legal logic of the Chrysler case argues for going forward.

Judge Arthur Gonzales sitting in the U.S. Bankruptcy Court for the Southern District of New York will determine starting tomorrow morning if the sale of virtually all of the good assets of bankrupt Chrysler LLC to Fiat SpA will proceed. If he doesn’t approve, the company will liquidate, taking with it any hope of preserving U.S. manufacturing jobs at the once proud Michigan automaker.

Chrysler’s largest creditors, 98% of them, support the plan. The United Auto Workers Union and the Canadian Auto Workers Union have made once unthinkable concessions to support the plan. And the judge, thus far, has moved the case along the lines that members the U.S. Treasury’s Auto Task Force outlined in a background briefing to media on the morning that President Obama made the restructuring announcement and Chrysler LLC filed for court protection. Pundits who said it couldn’t be done swiftly have, thus far, been proven wrong.

Political momentum and legal logic for Chrysler and GM

With Treasury and President Obama supporting the latest version of a restructuring plan that Chrysler has put together, it is my bet that a new Chrysler Group will emerge from court protection soon. Then the really hard work begins. It is by no means certain that Chrysler and its Dodge and Jeep brands can generate enough sales to remain viable in the toughest global car market since the Great Depression. And the Fiat small cars and engines that are its $10 billion contribution to the plan are years away from production reality.

Some creditors and dealers remain the only significant objectors to the Chrysler sale. However, the political momentum and legal logic of the Chrysler case argues for going forward. Yes, it is a bet, and yes we might just be prolonging the agony, but dissolution right now appears to be a worse choice.  

The same political push and legal logic are also directly applicable to a pending GM bankruptcy filing, which could come at any time.  GM’s debt-for-equity swap for $27 billion worth of bonds expires this midnight, and its bondholders taking the same “no-way” approach that Chrysler’s did.   (more…)

Treasury Adds Capital to GMAC Financial Services

GMAC financing is key to Federal auto bailout plans.

by on May.22, 2009

While Chrysler and Cerberus are separated, the hedge fund still owns part of its new finance company.

While Chrysler and Cerberus are now separated, the hedge fund still owns part of its new finance company, which is being propped up by the government.

The U.S. Department of the Treasury has strengthened the weak balance sheet of GMAC Financial Services by adding $7.5 billion in capital to the ailing finance company and bank.

The troubled lender had a first-quarter loss of $675 million, up from $599 million a year ago.

GMAC sold $7.5 billion of mandatorily convertible preferred (MCP) membership interests and warrants to the U.S. Treasury. The U.S. Treasury immediately exercised the warrants and GMAC issued an additional $375 million of MCP. The investment included $4 billion of MCP related to GMAC’s agreement with Chrysler LLC to provide automotive financing to Chrysler, and $3.5 billion of MCP toward the Supervisory Capital Assessment Program (S-CAP) requirement.

This reduces the new capital required to $5.6 billion after GMAC failed a Treasury audit earlier this month. After analyzing GMAC’s books, Treasury determined that it would need an additional $11.5 billion in capital in order to ensure survival as the Great Recession continues on. By failing the so-called stress test GMAC was put under the Supervisory Capital Assessment Program (S-CAP).

The latest loans are only part of the actions the U.S. government is taking to prop up GMAC, which is vital to its auto bailout plans. The company has been designated as the wholesale and retail lender for GM and Chrysler when it emerges from protection of the U.S. Bankruptcy court in New York. GM will almost certainly file for similar protection by June.

The Federal Deposit Insurance Corporation is now involved in assisting GMAC, by guaranteeing as much as $7.4 billion in new debt to be issued by GMAC as part of S-CAP.    (more…)

GM Unlikely To Reach Deal with Bondholders before the Dept for Equity Swap Deadline

Bankruptcy closer to reality for a second U.S. automaker.

by on May.19, 2009

President Barack Obama and President Barack Obama shakes hands with GM President Fritz Henderson, AP Photo/Charles Dharapak

The dispute over GM exporting jobs is shaping up to become a major political headache for the Obama Administration, with its claims to be promoting policies that will create American jobs.

General Motors Corporation late today filed a prospectus supplement with the Securities and Exchange Commission about its exchange offers for $27 billion of its unsecured public notes and the related consent solicitations that began on April 27, 2009.

In plain English, the filed supplement says that as of today GM has not reached agreements with its bondholders about a debt-for-equity swap — and it is unlikely to do so before the midnight May 26, 2009 expiration date.

Since the swap is a key element in its revised “viability plan” bankruptcy appears certain. The bondholder deal is necessary to obtain the agreement of the U.S. Treasury Department for further financing. It is also needed for the United Auto Workers Union and the VEBA-settlement class representative to accept GM stock for cash payments due. Bondholders, as they did in the case of the now bankrupt Chrysler LLC, are not cooperating. And the UAW is taking a hard line over other aspects of the plan.

Ron Gettelfinger, president of the UAW, spent the afternoon at the U.S. Treasury Department in Washington, D.C. While not commenting directly on what the issues concerning the union are, Gettelfinger went public over the weekend with at least one of them by releasing a letter to members of Congress that complained about the doubling of imports by GM from non-union and restricted-trade countries in Asia. The union wants job guarantees as part of the fragile, controversial deal Treasury is trying to put together to save GM.

Alan Reuther, UAW Legislative Director, wrote Congress that “As the discussions continue concerning the restructuring of General Motors, the UAW wishes to restate our strong opposition to the company’s plan to close 16 manufacturing facilities in the United States, while at the same time dramatically increasing the number of vehicles it will be importing from Mexico, Korea, Japan and China for sale in this country. We urge Members of Congress to join with the UAW in urging the Obama administration to insist, as part of any further government assistance, that GM should be required to maintain the maximum number of jobs in the U.S., instead of outsourcing more production to these other countries.”    (more…)

“Quick Rinse” Bankruptcy for GM is a Pipe Dream

Michigan law firm says that there are too many issues in bankruptcy court for a quick process.

by on Apr.17, 2009

There will be a long line of creditors clogging the courts in a GM bankruptcy.

There will be a long line of thousands of creditors clogging the courts in a GM bankruptcy.

Conventional wisdom has General Motors Corporation filing for Chapter 11 bankruptcy in late spring or early summer, emerging from court supervision as a smaller but viable company in as little as two weeks, or two to four months at the outside.

Both of these scenarios are exceedingly optimistic, according to bankruptcy lawyers at the firm of Plunkett Cooney, which potentially could earn huge fees from a GM bankruptcy.

“Bankruptcy may indeed be the last, best option to restructure General Motors because of the multitude of challenges the company faces and its deeply entrenched stakeholders,” said Doug Bernstein, head of Plunkett Cooney’s Banking, Bankruptcy and Creditors’ Rights practice group.

“But it’s unrealistic to expect that the process will go smoothly and quickly. The company is massive, its operations are complex, and it has thousands of potential claimants and interested parties. The bankruptcy court will require time to make sure everyone’s due process rights are respected, even if they have to make painful sacrifices.”

“Time is not GM’s friend in or out of court,” he added. “But the rights and potentially the livelihoods of employees, dealers, pensioners, suppliers and investors are at stake. It will take time for stakeholder groups to form, lawyers to prepare pleadings, a judge to review them and then make decisions. Rushing the process raises the risks that corners will be cut, due process brushed aside and mistakes made. You don’t want to get sidetracked by litigation or see GM’s ‘quick rinse’ become a ‘rinse and repeat’ bankruptcy.”

Bernstein noted that in the first two weeks of the Delphi Corporation bankruptcy, nearly 300 individual pleadings were filed with the court. Each one had to be prepared, filed and settled, or argued and adjudicated. What his analysis ignores is the possiblity that the Obama adminstration could set up special procedures or have resources diverted from multiple legal jurisdictions to change the pace of proceedings. (more…)