Assessing the Chrysler Bankruptcy

46 Pages Posted: 30 Jun 2009 Last revised: 13 Jan 2015

Mark J. Roe

Harvard Law School

David A. Skeel Jr.

University of Pennsylvania Law School; European Corporate Governance Institute (ECGI)

Date Written: 2010

Abstract

Chrysler entered and exited bankruptcy in 42 days, making it one of the fastest major industrial bankruptcies in memory. It entered as a company widely thought to be ripe for liquidation if left on its own, obtained massive funding from the United States Treasury, and exited via a pseudo sale of its main assets to a new government-funded entity. The unevenness of the compensation to prior creditors raised considerable concerns in capital markets, which we evaluate here. We conclude that the Chrysler bankruptcy cannot be understood as complying with good bankruptcy practice, that it resurrected discredited practices long thought interred in the 19th and early 20th century equity receiverships, and that its potential, if followed, for disrupting financial markets surrounding troubled companies in difficult economic times is more than small.

Keywords: corporate reorganization, bankruptcy, chapter 11

JEL Classification: G18, G30, G34, G38, J52, K11, K12, K22, L21, L62

Suggested Citation

Roe, Mark J. and Skeel, David A., Assessing the Chrysler Bankruptcy (2010). Michigan Law Review, Vol. 108, pp. 727-772, 2010; Harvard Law and Economics Discussion Paper No. 645; U of Penn, Inst for Law & Econ Research Paper No. 09-22; U of Penn Law School, Public Law Research Paper No. 09-17; Harvard Public Law Working Paper No. 09-42. Available at SSRN: https://ssrn.com/abstract=1426530 or http://dx.doi.org/10.2139/ssrn.1426530

Mark J. Roe (Contact Author)

Harvard Law School ( email )

Griswold 502
Cambridge, MA 02138
United States
617-495-8099 (Phone)
617-495-4299 (Fax)

David A. Skeel Jr.

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-573-9859 (Phone)
215-573-2025 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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