WSJ Reports That Chrysler Hires Bankruptcy Firm Jones Day
By Chris Haak
With the congressional hearings on auto industry assistance still in progress, I happened to walk past a TV today that had CNBC on, and the crawl at the bottom of the screen said, “WSJ: Chrysler hires bankruptcy firm Jones Day.”
Determined to find more information about this significant piece of news – and whether it meant that Chrysler was just hedging its bets in case it did not receive a bridge loan from the Federal government, or was using it as a bargaining tactic with Congress, or whether it really was about to declare bankruptcy – I immediately hit the web to find more information on this. This news is so fresh that an instant search on the Wall Street Journal’s website brought no hits, although the news has now been posted (subscription may be required) to their website.
According to the WSJ, Chrysler hired Jones Day several weeks ago in preparation for a possible bankruptcy filing. The Journal said that several people familiar with the matter have confirmed the story to them. The WSJ also reports that attorney Corinne Ball is handling the case. Ms. Ball has worked on other automotive bankruptcies, such as those of Dana Corp., GM’s purchase of Daewoo, as well as several cases involving the UAW.
Jones Day is a respected law firm founded in 1893 and counts more than 250 of the Fortune 500 companies among its clients. Although the firm’s “about us” materials on its website make no mention of a bankruptcy specialization, they do note that the firm was named in 2008 as the nation’s best Labor & Employment practice by The American Lawyer magazine.
According to the magazine, the labor & employment practice accolade comes from the fact that Jones Day provided major assistance to GM in negotiating its landmark 2007 agreement with the UAW that will shift $51 billion in retiree healthcare obligations to the union for a series of payments to the new VEBA totaling $35 billion. Jones Day partner Andrew Kramer, who had also negotiated Goodyear’s VEBA agreement and transfer of liabilities with the steelworkers union, applied a similar pattern to the much larger GM-UAW deal.
So, Chrysler has bankruptcy lawyers on standby in case this thing in Congress doesn’t go too well over the next few days. (Actually, rumor is that Chrysler may have some Jones Day attorneys already at the meetings, according to this blog post).
Will the very real threat of bankruptcy pressure Congress into action? From some of the comments that I’ve heard over the past two days, some of our elected representatives seem nearly inclined to let Chrysler fend for itself and worry about GM and Ford, but a Chrysler bankruptcy will certainly be a disaster for GM and Ford as well. This news also makes one wonder whether GM has bankruptcy lawyers on standby, as GM’s time is nearly up without $4 billion (and remember, Chrysler’s number is $7 billion by the end of December).
UPDATE, 10:14 p.m.: Chrysler LLC released a statement on the hiring of Jones Day, stating that it hired the firm in response to a Congressional request from November to study why bankruptcy was not a better alternative to restructuring. According to Chrysler, the result of this analysis, including work done by Jones Day, was that a bankruptcy by any of the Big Three would have a devastating effect on the domestic auto industry.
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