I have been saving this article for a while. The author clearly lays out the argument for why chapter 11 is necessary in a capitalistic economy and why the auto companies need to go there if that is the right answer.
I think this ties in very well with the comments that I have made regarding the negotiations between the Auto Task Force and Chrysler's banks. The banks must be wondering how did they ever get into this mess. Of course, they made these loans in the heady days of lending to hedge funds and private equity firms, which was only a couple of years ago.
As Chrysler hurtles toward a bankruptcy filing given the April 30 deadline to complete a restructuring, it is good to keep this article in mind. It is highly unlikely that there will be an agreement by all the stakeholders by April 30. Even if there is an agreement amongst all the largest stakeholders, the agreement will probably have to be implemented pursuant to a bankruptcy plan of reorganization. There are just too many moving parts that have to be coordinated, and any one of them could easily fall out of bed even if there is an agreement on a term sheet.
Cheers, Mike
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