Summary
The Chrysler example has shown that bondholders have little chance to gain anything in bankruptcy. GM bondholders would do well to learn from the Chrysler bondholder's experience. Bankruptcy (CH 11) is Washington's prescription for fixing the auto companies' aliments, without question. They key issue becomes one of finding a long term strategy for what has become a highly competitive global business.
Analysis
Chrysler's minority bondholders took their chances. But, when the court exposed them to public record, many people, from average citizens to Obama himself put so much pressure on them that they caved. GM bondholders should take notice. Unquestionably, the Obama administration believes that Chapter 11 filings are the only way to fix the problems with the auto companies. The problem is that Chapter 11 is only a short term fix for a very challenging long term business. Global competition is extremely tough. It is not yet clear that Washington has an idea what must be done to make the US auto makers strong enough to compete in the long run.
