Chrysler Bankruptcy Could Take Two Years

That would be something... Instead of the 60 days period announced by President Barack Obama, Chrysler's bankruptcy could take up to two years, Bloomberg reported today citing an administration official familiar with the matter. Basically, Obama said the aforementioned timeframe would be enough for Chrysler to transfer its best assets to a new company that could survive the crisis but, according to the aforementioned source, this period might be extended to up to two years.

The reason? Just after the 60-day period expires, creditors would start the fight to get their own slice of money, with lawsuits over closed production facilities and all kind of abandoned assets. This could take up to two years, an official told Bloomberg.

“The secured lenders will stand in line behind the government when they try to recover more than the $2 billion they’ve been given in the buyout,” said Richard Hahn, co- chairman of the bankruptcy practice at Debevoise & Plimpton LLP, a New York law firm.

But the money recovery process might be a bit more complicated that it looks like at the first glance because the government would be the first interested to get its money back. Furthermore, recent reports hinted that Chrysler might be unable to repay its debts to the state. A top company adviser revealed that Chrysler doesn't have the resources to pay the loans it has received from the Canadian and US governments while Corinne Ball, Chrysler's lead bankruptcy attorney, confirmed the company needs every single penny to stay alive.

And speaking of plants to be closed following Chrysler's bankruptcy filing, the American automaker will shut down no less than six factories by the end of 2010.