Transcripts

Chrysler Shifts Into Bankruptcy Mode

SUZANNE PRATT: Day one in bankruptcy court for Chrysler and the nation's number three auto maker is wasting no time. Lawyers for the car maker said they'll file a motion to sell the company to Fiat and close five more plants. They also asked for access to $4.5 billion in operating capital. Chrysler is moving fast, hoping for a surgical bankruptcy, but debt holders are preparing their push for a better deal. And as Darren Gersh reports, all this may be a preview of a much bigger battle over the future of General Motors.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: In the restructuring plan GM sent to the Treasury, it estimated even a quick bankruptcy would lead to a sharp 35 percent initial sales decline. After two months, GM figured sales would rebound, but still be off 10 percent. Now GM will be able to test those estimates using Chrysler as a model. Standard & Poor's Gregg Lemos-Stein says GM will be taking notes on how the competition fares in bankruptcy.

GREGG LEMOS-STEIN, CREDIT ANALYST, STANDARD & POOR'S: In many ways this action by Chrysler and by the government is a litmus test to see whether this concept of a controlled bankruptcy really can work and I'm sure the people who are working on the GM organization are looking closely at how Chrysler sales trend over the next month or two while it's in bankruptcy.

GERSH: GM will also be watching the action in bankruptcy court to see who comes out ahead -- Chrysler's debt holders or workers. Legally, debt holders are entitled to more protection in bankruptcy court, but the Obama administration has worked hard to protect union health care benefits. Since GM has many of same huge legacy costs, University of Maryland Professor Peter Morici sees Chrysler as the early battlefield.

PETER MORICI, BUSINESS PROF., UNIVERSITY OF MARYLAND: At the end of the day, the bondholders are going to get some shares. The unions are going to get some shares. The question is how many shares go to the bondholders and how many shares go to the union. A good picture of how that will work out will be established by the Chrysler bankruptcy.

GERSH: There is one striking difference between GM and Chrysler. Chrysler needs a partner to survive, which means Fiat will add another major player to an already crowded court proceeding.

MORICI: Over at General Motors it's a very different situation. They have all the pieces of a competitive company there and they do not need to acquire a new partner. So that makes it somewhat less complex.

GERSH: Somewhat. Chrysler is pushing hard for quick in and out trip to court. But in the next few days we may know whether a surgical bankruptcy is possible for any auto maker. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.