Farmers will plant the most acres in a generation this year, led by the biggest corn crop since World War II, taking advantage of the highest agricultural prices in at least four decades.Indiana Treasurer Richard Mourdock was on the hot seat.
His challenge, which got the attention of the U.S. Supreme Court, briefly delayed the sale of Chrysler LLC’s most valuable assets to a new company to be led by Fiat SpA.
Chrysler and some industry observers contended that each day the delay lasted, the more Chrysler’s value would erode and the more auto jobs would be lost, including in Indiana.
But in an interview Tuesday afternoon before the U.S. Supreme Court cleared the Chrysler sale, Mourdock said he was simply trying to protect Indiana’s retirees and taxpayers. He said he was also trying to protect U.S. credit markets from an unfair attack by the federal government.
Over the past several days, Mourdock was deluged with interview requests, angry messages and statements of support.
“I hate the position I’m in,” Mourdock said Tuesday. “I despise it.”
The Ann Arbor, Mich.-based Center for Automotive Research estimated that Indiana alone could lose more than 100,000 jobs by 2011 if the Chrysler and General Motors Corp. bankruptcies are prolonged.
Mourdock was protesting a decision by Bankruptcy Judge Arthur Gonzalez – and agreed to by 92 percent of Chrysler’s bondholders – to pay them 29 cents on the dollar for the face value of their bonds. For two Indiana pension funds and an infrastructure fund, the decision means a loss of about $6 million on an investment made last summer.
Mourdock said it was unfair that Indiana’s secured bondholders take a $6 million “haircut” on their investment while unsecured creditors such as the United Auto Workers would end up with majority ownership in the new Chrysler. If the Supreme Court upheld the arrangement, Mourdock said, investors could lose confidence in the U.S. legal system and take their money overseas.
“If that happens, it’s going to cost our capital markets tens of billions of dollars,” he said.
Mourdock was expecting to spend up to $2 million in legal fees on the fight.
Most expert observers didn’t expect Mourdock to succeed in his challenge. But they also said if he did it would make it easier for a small group of bondholders to slow the GM bankruptcy.
Mourdock conceded that Chrysler’s prospects might be harmed if he were to succeed before the Supreme Court. But he said it might not end in disastrous liquidation, either.
“Frankly, that’s not my role to answer that question,” Mourdock said earlier. “It’s my role to look out for the retirees.”
To Mourdock, the legal argument was obvious: The federal government is forcing Chrysler and the courts to agree to a sham transaction to justify giving the UAW and others more than the bondholders. That the bankruptcy will result in a new company is fiction, Mourdock said.
The treasurer made some good arguments, but they fell in a legal gray area, said Dennis Long, a bankruptcy expert at Indiana University.
Chrysler, the bankruptcy court and the government all said that what would emerge from the proceeding would indeed be a new company that will need the autoworkers, the government and Fiat in order to succeed and create value to pay the bondholders. “It all depends on whose narrative you choose to follow,” Long said.
