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Chrysler response to Indiana pensions’ suit

by David Zatz on

Chrysler LLC has responded to the petition of White & Case, representing Indiana pension funds, to stop the quick sale of Chrysler’s main assets. Chrysler noted that if the petition was granted, the delay in the bankruptcy process would cause Chrysler to be liquidated, resulting in 4,000 lost jobs in Indiana and the loss of 9,000 pensions in the state.

The three pension funds, combined, have a total investment in Chrysler of $17 million; the total loss would, according to Chrysler representatives, be just $2 million. If Chrysler was liquidated, though, the loss would be greater, as creditors gained up to 18¢ on the dollar (the pending transaction would give creditors 29¢ on the dollar; many creditors purchased the debt for much less than its face value, so their losses would not necessarily be high.)

Partly because of the fiscal risk the Indiana Treasurer is taking, and perhaps due to the inflammatory political language of the petition, Chrysler’s release said that “The Treasurer’s actions lead one to wonder if his motives are financial or political.”

Chrysler wrote that it currently pays over $150 million per year to its employees in Indiana, plus $20 million in state taxes; there are 75 dealerships employing around 3,750 in the state.

Treasurer Mourdock oversees three funds. In each, Chrysler debt is less than 1% of the total value ($32 million of $7.8 billion). In another, the debt is $1.3 million of $250 million.  In a third, the debt is $8.8 million of $2.5 billion. 

The Indiana pension funds did not pay full price for their Chrysler debt, purchasing it for less than half its face value – $17 million was paid, while the debt had a $42.3 face value.

David Zatz founded Allpar in 1998 (based on a site he had begun in 1993-94), after years of writing reviews for retail trades. He has been quoted by the New York Times, the Daily Telegraph, the Detroit News, and USA Today. Before making Allpar a full-time career, he was a consultant in organizational psychology. You can reach him by using our contact form (much preferred) or by calling (313) 766-2304


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