“As part of their agreement, every dime of new taxpayer money will be repaid before Fiat can take a majority ownership stake in Chrysler,” Obama said. The president called the company an “icon” of American auto industry, but said it had been too slow to adapt to future needs for efficiency. He said the bankruptcy would be “surgical” and hopefully conclude in 30 to 60 days.
"We simply cannot keep this company or any company afloat on an endless supply of tax dollars," Obama said. Obama applauded the United Auto Workers union and several big investment banks that agreed to sacrifices for the bankruptcy filing. But, he chastised a group of investment and hedge funds that “demanded twice the return” others were getting from the arrangement.
"They were hoping that everybody else would make sacrifices, and they would have to make none," Obama said. "Some demanded twice the return that other lenders were getting. I don't stand with them." Whether all of the agreements survive a short bankruptcy process remains to be seen, said Tom Lehman, a bankruptcy attorney with Tew Cardenas in Miami.
Lehman said a prepackaged bankruptcy with signed agreements could be over quickly, but he said he doubts that will happen. “Once they go into bankruptcy court, promises can be broken,” he said. “In bankruptcy court, it’s all about breaking promises and making new ones to get the end result.”
Lehman, whose brother William owns a car dealership in Miami, said he hopes dealerships don’t get crushed in the Chrysler and General Motors restructurings. “The Chrysler bankruptcy will be unique because the government will be very involved,” he said. “In most cases, the government is not a very active player in a bankruptcy, but here the government will make sure something emerges.”
The National Association of Auto Dealers released a statement, warning that the Chrysler bankruptcy should not be used to reduce dealership numbers too drastically. "A rapid reduction in dealer numbers would not only do absolutely nothing to improve Chrysler's viability in the short term, but it would actually work against Chrysler's stated objective to increase revenue and cut costs," the statement said.
Fort Lauderdale-based AutoNation, which has 19 stores with the Chrysler brand, saw its stock rise 32 cents to $18.18 in afternoon trading. It closed at $18.10 on Wednesday, a new 52-week high. Ford and General Motors shares were up about 4 percent and 5 percent, respectively, in afternoon trading.
Obama held out hope for a general economic recovery and rebirth of the auto industry. “If you are considering buying a car, I hope it will be American,” he said. “If you decide to buy a Chrysler, your warranty will be safe because it is backed by the U.S. government.”