It's Official: Chrysler Files Chapter 11

Sometimes it’s fruitless to read the articles until the real deal hits the tape. No amount of frenzied negotiation by the government could cement a deal between Chrysler and the holders of its bank debt, some of whom seemed to believe they were getting the shaft relative to the unions. So Chrysler is going to court and will have this whole messy business wrapped up in a jiffy, 30-60 days according to the President, which seems hard to believe.

Despite its loss of market share over the years, Chrysler still employs over 50,000, many of whom will certainly lose their jobs. Additionally, dealerships will be forced to close, as the automaker has fewer brands to sell. Although a newly restructured company is necessary and healthy, the interim will be painful, particularly since the rest of the economy stinks. What are all those former employees and out of business dealerships supposed to do now? Go make or sell GM’s crappy cars?

In any event, there are two bright spots out of all of this. First of all, the clowns at Cerberus will have their entire equity investment wiped out, proving that no amount of financial wizardry or political clout can save a really stupid investment. Maybe they’ll think twice before piling a bunch of debt onto a company in a highly cyclical industry six years into a boom. Hopefully, they won’t ever get the opportunity again. Second of all, Bob Nardelli, Cerberus’ choice to lead Chrysler directly into bankruptcy, finally proved definitively that he was the most overrated CEO hire in the history of the US corporation. What kind of a tool leaves a company (Home Depot, where he worked prior to his gig at Chrysler) in a huff because he refuses to take a pay cut off of his ridiculous $200 million pay package, despite the company’s lackluster performance during his leadership? This was Mr. Nardelli’s shot to prove that he was worth all that money and Home Depot made a mistake by forcing him out. Turns out, he was just grossly overpaid.