Chrysler's Bankruptcy Case Study
Summary
America's third-largest car manufacturer, Chrysler, has declared itself bankrupt after some of its smaller lenders refused a Treasury Department demand to reduce the amount of money the troubled automaker owed them, casting a cloud of uncertainty over tens of thousands of jobs at factories, suppliers and dealers.
The negotiations ended with the 83-year-old Detroit carmaker putting its future in the hands of the courts, albeit an 11th-hour deal with Italy's largest carmaker, Fiat, to pool technology in building new vehicles.
Both the administration and Chrysler expressed hope that the bankruptcy stage would be effective and completed within 30 to 60 days, clearing the company's liabilities and allowing it to emerge in healthy shape. But legal experts questioned whether this will be achievable and factory workers expressed fear for their jobs.
Chrysler employs 54,000 people, but tens of thousands more work for parts companies and in motor dealerships that depend on the firm for business. About 115,000 retired Chrysler workers depend on the company for healthcare and benefits.
Problem
Chrysler is reorganizing under Chapter 11 of the United States Bankruptcy Code allowing the company to sell assets, rid the company of liabilities and restructure its debt, creating a new Chrysler. Should Chrysler fail to successfully reorganize, it might turn to a Chapter 7 bankruptcy, which would mean liquidation.
Objectives for Problem Solution
The company should aim to meet the public’s desire for a car. They need to adapt to the demand for smaller, more fuel-efficient cars. And to be able to avoid the stigma attached to bankruptcy from deterring car buyers, aside from improving their car’s quality to their utmost capacity, it would prove to be a good idea to associate their products’ name with Fiat - Italy’s number one car manufacturer.
Alternative Course of Action
Instead of filing for bankruptcy, former Chrysler owner Cerberus Capital Management could
America's third-largest car manufacturer, Chrysler, has declared itself bankrupt after some of its smaller lenders refused a Treasury Department demand to reduce the amount of money the troubled automaker owed them, casting a cloud of uncertainty over tens of thousands of jobs at factories, suppliers and dealers.
The negotiations ended with the 83-year-old Detroit carmaker putting its future in the hands of the courts, albeit an 11th-hour deal with Italy's largest carmaker, Fiat, to pool technology in building new vehicles.
Both the administration and Chrysler expressed hope that the bankruptcy stage would be effective and completed within 30 to 60 days, clearing the company's liabilities and allowing it to emerge in healthy shape. But legal experts questioned whether this will be achievable and factory workers expressed fear for their jobs.
Chrysler employs 54,000 people, but tens of thousands more work for parts companies and in motor dealerships that depend on the firm for business. About 115,000 retired Chrysler workers depend on the company for healthcare and benefits.
Problem
Chrysler is reorganizing under Chapter 11 of the United States Bankruptcy Code allowing the company to sell assets, rid the company of liabilities and restructure its debt, creating a new Chrysler. Should Chrysler fail to successfully reorganize, it might turn to a Chapter 7 bankruptcy, which would mean liquidation.
Objectives for Problem Solution
The company should aim to meet the public’s desire for a car. They need to adapt to the demand for smaller, more fuel-efficient cars. And to be able to avoid the stigma attached to bankruptcy from deterring car buyers, aside from improving their car’s quality to their utmost capacity, it would prove to be a good idea to associate their products’ name with Fiat - Italy’s number one car manufacturer.
Alternative Course of Action
Instead of filing for bankruptcy, former Chrysler owner Cerberus Capital Management could