Chrysler is the first major automaker since Studebaker in 1933 to try to reorganize in bankruptcy and emerge as a viable company. The process can be complicated. Here is a quick look at how it is likely to play out.
Q. Is Chrysler going out of business?
A. No. Chrysler is reorganizing under Chapter 11 of the United States Bankruptcy Code. The law allows companies to shed assets, restructure debt, cancel contracts and close operations that normally would have to continue running. Once they secure financing to emerge from bankruptcy, these companies are reconstituted as new legal entities.
Should Chrysler fail to successfully reorganize, it might turn to a Chapter 7 bankruptcy, which would mean a liquidation.
Q. How long will this take?
A. The Obama administration spoke of a “surgical bankruptcy” that it said could be completed in 30 to 60 days. It plans to use Section 363 of the bankruptcy code to sell assets, rid the company of liabilities and restructure its debt, creating a new Chrysler.
In reality, most bankruptcies take much longer. United Airlines spent more than three years under bankruptcy protection. Delphi, the auto parts supplier, has been in Chapter 11 since 2005. The bankruptcy by LTV, a steel maker, took seven years to resolve.
http://www.nytimes.com/2009/05/01/business/01primer.html?_r=1&th&emc=th
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