Chrysler has hired prominent Jones Day law firm as its bankruptcy counsel, the Wall Street Journal reported on Friday. The firm was hired several weeks ago to help the struggling automaker prepare for a possible Chapter 11 bankruptcy filing.
The Journal notes that Jones Day co-head of restructuring Corinne Ball is handling the case. She has worked on other automotive bankruptcies such as that of auto supplier Dana Corporation and many cases involving the UAW. She has also represented General Motors (GM) on its acquisition of Korean automaker Daewoo.
Chrysler’s move implies that its financial failure as a company seems at this point – unavoidable, unless Congress delivers federal rescue funds persistently requested in recent weeks by the auto industry.
Detroit’s three auto makers have lobbied Congress for some $34 billion in immediate financing amid the deepest recession since the Great Depression. General Motors Corp. says it needs $4 billion by the end of the month. Ford Motor Co., which has a slightly better cash position after mortgaging nearly all its assets in 2006, is seeking a $9 billion line of credit it hopes it won’t have to tap.
Lawmakers however, remain, at least so far, skeptical of providing billions of dollars in government loans. Chrysler, which is majority-owned by private-equity firm Cerberus Capital Management LP, says it needs a $7 billion capital infusion before year end.
Moody’s chief economist, notes the Journal – told senators Thursday the total payout could rise to $125 billion to keep the auto industry out of bankruptcy for two years.
Update: AP‘s latest report on the story suggests that Chrysler’s move in hiring the bankruptcy law firm was as a result of lawmakers asking the automaker for a study, during congressional hearings in November, of whether bankruptcy would be a better option than government loans.
In a statement, co. spokeswoman Lori McTavish said:
“The results of this evaluation determined the impact to the overall domestic automotive industry would be devastating.”