DETROIT – Chrysler is struggling to get its banks to accept stock instead of getting $5 billion in cash, the Associated Press reports. Chrysler is also having problems getting its bondholders and the UAW to accept stock instead of the cash that they’re owed. But the banks own Chrysler assets like factories and equipment. So if they company goes bankrupt, they�??d be able to sell those assets and get cash, which means the banks would be better off to see the company go bankrupt.
Meanwhile, at General Motors, a number of GM bondholders took out insurance policies on their bonds, what are called credit default swaps. They bought those swaps from insurance company AIG, the same AIG that just got $160 billion from the U.S. government. If GM goes bankrupt, AIG will have to pay those bondholders 100 percent of what they’re owed in cash. Those bondholders will actually profit if GM goes into bankruptcy. Congressman Thaddeus McCotter from Michigan is demanding that the Obama Administration prevent this from happening.
Saab says it has 20 potential buyers and plans to complete a sale by June. According to the AP, the company went into bankruptcy in February and was just given an extension in bankruptcy court after creditors agreed to continue the reconstruction process. The company still could collapse because GM and the Swedish government are unlikely to provide Saab with enough money to become a free-standing business.
To view this video podcast, or read the transcript, click on AutoLineDetroit.TV
a>>
