Tuesday, June 9, 2009

The Thundering Sound of Rattling Sabres

Over at SCOTUSBlog, they report on increased sabre rattling from Chrysler, the Solicitor General, and Fiat on the need for resolution of the Chrysler transaction by June 15th.

As they point out, this is in response to the Indiana Pensioners' brief this morning, which pointed out that Fiat's CEO stated that Fiat will "never" walk away from its deal with Chrysler.

While some seem to believe that the CEO made a strategic mistake, I think it was the smart move. His statement provides comfort to suppliers and employees that, whatever happens in the process, he plans to go forward with the deal (and thus the company will continue to operate). His comment, while encouraging the Indiana Pensioners to tell the Supreme Court that urgency isn't as great as the Debtor has claimed, also makes it clear to those Pensioners that their negotiating position doesn't improve with a delay (if Fiat didn't say this, the Indiana Pensioners might believe that they could force a better out of court resolution while the Court debates certiorari - which could preclude other negotiations).

This reminds me of a closing dinner we had after a very contentious transaction (restructuring and cash raise). We gave the client's general counsel a toy sabre for him to rattle (he had done a good job of being threatening during the negotiations).

Fiat has every incentive to stay with the deal (they get 20% to 35% of Chrysler for knowledge - and they get access to the American markets through an established dealer network) and no reason to walk away.

Arguably, rushing the Supreme Court will work to the Debtor's disadvantage since it could lead the Court towards granting certiorari (if they are on the fence, they could feel the necessity to make a decision - and default to hearing the case).

I guess the lawyers need to try to keep up appearances, but I'm really not sure who they think they're bluffing.

It's got to be nerve wracking for Chrysler's employees and suppliers, but it's interesting for us disinterested parties.

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