Leaves behind $10.2 billion in losses to "Old Carco LLC."
If recent sales numbers are any indication, Chrysler Group LLC has some serious challenges ahead of it as its foreign master, Fiat, struggles to turn the U.S. carmaker into a profit-making entity.
At least Chrysler won’t have to report the $10.2 billion in losses reportedly run up by the operations it left behind as part of its bankruptcy.
When Chrysler emerged from Chapter 11, in June, it spun off an assortment of debts and bad assets, including seven unneeded plants, were left behind, effectively spun off into a separate “old” Chrysler, Old Carco LLC, that will be closed down in the not-too-distant future. According to a still-unaudited accounting filed with the federal bankruptcy court in New York City, that collection of bad assets rang up a whopping $10.2 billion in losses during June alone.
Much of that was a paper loss, however, $9.9 billion of that reflecting the precipitous plunge in value of those plants and assets – which are effectively now worthless – after you factor in $2 billion that was left behind for Old Carco to close down operations and pay what it can on its debts.
Among other things, notes Greg Gardiner, of the Detroit Free Press, that includes $141.6 million in wages and another $47.1 million in taxes.
While the travails of Old Carco may no longer matter to Chrysler, they are a matter of deep frustration to investors and debtholders who saw their losses run into the billions as a result of the automaker’s government-led reorganization. That includes a group of two Indiana pension funds, and a construction fund, which briefly halted the Chrysler reorganization when they got a U.S. Supreme Court Justice to consider the merits of their challenge.
The case was shortly rejected, the entire court refusing to weigh in, permitting Chrysler to move out of bankruptcy, in June. But the investors have collectively gone back to the Supreme Court, asking that some of the money given to the United Auto Workers Union’s Voluntary Employee Benefit Association, or VEBA, be recaptured and given to them to help offset $42 million in losses.
Critics contend that with the backing of the White House, federal bankruptcy judges abrogated centuries of legal precedent to enable both Chrysler and General Motors to race through Chapter 11 and shed billions in debt.