Alexander Nye

Publisher

Yale University: School of Management: Yale Program on Financial Stability (YPFS)

Media Date

3-20-2020

Media Type

Document

Content Type

Working Paper

Country/Region

Canada; United States

Language

English

Crisis

Global Financial Crisis (2007-2009)

Case Series

2020 YPFS Preliminary Discussion Drafts

Intervention

Non-bank Restructuring

Additional Information

In late 2008, due to the confluence of the financial crisis and years of structural decline, Chrysler was nearing bankruptcy (Klier and Rubenstein 2012, 35-37). Treasury provided Chrysler's owner, Chrysler Holding, with a $4 billion bridge loan and Chrysler's related finance company, Chrysler Financial, with a $1.5 billion financing program under the Troubled Asset Relief Program (TARP) (U.S. Treasury Department Office of Financial Stability 2018) (Canis et al. 2009, 9) (Nye 2019 Bridge Loans) (Treasury 2009). The government-led restructuring through bankruptcy involved the commitment of roughly $5 billion in debtor-in-possession loans from the U.S. Treasury and the Canadian government, under which the U.S. Treasury ultimately lent $1.89 billion, using TARP funds, and Canada lent about $1 billion, proportional to its share of the NAFTA auto industry (Canadian Press Release 2009). It also involved concessions from stakeholders, corporate governance arrangements for the"New Chrysler," and a merger with Italian automaker Fiat Automobiles SpA (DIP Financing Agreement 2009, PDF Page 95, 317, 322). Treasury financed the purchase by the New Chrysler of substantially all of the Old Chrysler's assets with a $7.14 billion loan. The bankruptcy case was controversial and nearly reached the Supreme Court, but the restructuring ultimately rescued Chrysler (Fred 2010, 38). In the Chrysler rescue, Treasury lost about $2.93 billion on an investment of about $10.47 billion (SIGTARP 2016, 103).

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