Chrysler’s filing for bankruptcy protection from creditors is good news for those of us who want leaders to solve problems and a warning for people who want to obstruct for principal or greed. It’s a fascinating story.
    Creditors are owed money by Chrysler. Creditors with the highest priority have debt secured by assets. Next are creditors owed money on a contract, such as UAW workers and suppliers.  Last are unsecured creditors such as non-contractual suppliers and employees. The priorities mean investors whose pension hedge fund paid $700,000 for $1 million of Chrysler secured bonds last fall have the right to sell assets and eliminate the job of an employee who has worked there for 30 years. That’s as unfair as someone cutting in front of me to take the last dessert at a church supper.
    Bankruptcy under Chapter 11 changes those priorities because democracy rolls in.  Judges form committees of all creditors including banks, suppliers, union workers, pension fund and contracted executives.  If creditors accept payment plans that keep the company operating and protect jobs, judges usually approve them.  Chrysler management filed a plan for Chapter 11 bankruptcy to get creditor agreements and keep operating. 
    The plan needs approval of the creditors by a simple majority of fifty-one percent.  The Chrysler-UAW pension fund vote equals the hedge fund vote.
Creditors also vote the dollar amount Chrysler owes them. Approval requires a super-majority of sixty-seven percent of the money owed. The Chrysler-UAW pension fund votes $20 Billion while the hedge fund votes $1 million.
    The Obama administration manages our taxpayer money as major shareholders of Chrysler, and Obama invited secured creditors to negotiate on a plan developed by Chrysler management. They negotiated under the leadership of the auto czar Congress created. In an attempt to avoid drawn out bankruptcy protection, Obama told the czar to get agreement from the UAW pension fund. The UAW Pension fund agreed to accept stock worth half their debt.
    Obama also required agreements from 100 percent of the secured creditors and their $6.9 billion debt. About ninety percent of secured creditors and seventy percent of secured debt supported a $2.0 billion offer. A small percentage of secured bank and investment creditors with less than ten percent of the debt objected, demanding $2.5 billion. Obama split the difference with a final offer of $2.25 billion and set a deadline to accept the offer. The obstructionist group ignored it. On April 30 Obama stopped the negotiations and Chrysler management sought bankruptcy based on the $2.0 billion plan supported by both creditor majorities. That means the dissidents must participate in the democratic process where they will likely get out-voted and receive less than Obama offered.
    Obama sent a clear message to creditors and everyone in this country.  He brought together opposing creditors to develop a responsible plan, just as he wants to bring together opposing representatives interested in health care, energy, and tax fairness to develop responsible plans.  
    Those who opt out and try to block those processes may lose a lot.
He believes American voters are fed up with name-calling and obstruction. He believes American voters care about agreements and progress. His popularity proves he’s right. And he’s tough enough to get agreements.