Chrysler Will Fight to Bitter End

Chrysler will likely file for Chapter 11 bankruptcy today as its deadline for restructuring looms. The news dominates headlines in today's business press and takes shape as the answer to the long-speculated question: What the hell will happen to Chrysler? Despite efforts on the part of the Obama administration to sweeten its cash offering by $250 million to secured debt holders, who own an aggregate $6.9 billion of debt, no compromise could be made as of late Wednesday night. Officials are offering $2.25 billion cash in exchange for the debt.

The New York Times, in its B1 coverage, says that the four big banks that own 70 percent of Chrysler's secured debt have agreed to the Treasury's cash-for-debt plan and are "trying to line up the other lenders in favor of the new terms." Those lenders are 46 investment funds, and if they don't budge before 11:59 tonight, Chrysler is headed for bankruptcy court. However, if a deal is reached, Chrysler would still have a chance of restructuring out of bankruptcy court—and efforts will continue throughout the day.

According to the Wall Street Journal, which leads with the story, "a trip through the courts will open a new chapter of uncertainty as the company's lenders and its thousands of affiliated dealers could mount a series of legal challenges to the administration's efforts to pull off a swift reorganization." Still, officials think they can push Chrysler through the process within weeks, barring major setback, and in the end the company will be well-positioned for a takeover by Fiat SpA.

In other major news, the verdict is in, and Ken Lewis is out—at least as chairman. The measure to split the duties of CEO and chairman at Bank of America (BAC) was voted on Tuesday morning by shareholders, but the count was inconclusive until later in the day, when it was announced that 50.34 percent of shareholders nominated to oust Lewis of at least one of his titles. He remains both CEO and board director. Taking over as chairman will be Walter Massey, director and president emeritus at Morehouse College in Atlanta and a BofA board director since 1998.

The outcome is historic. "The vote marked the first time that a company in Standard & Poor's 500-stock index has been forced by shareholders to strip a CEO of chairman duties," writes the WSJ. But will this actually change anything? Critics say, "not likely." "Mr. Massey, is Mr. Lewis's longtime ally and viewed by many as someone who will side with him on key decisions," the paper added.

Reuters' coverage of the ouster ranks as the most critical of Lewis, with quotes that emphasize the inevitably his CEO title going out the window next and the immediate negative impact the vote will have on his absolute power. "It's kind of the first step toward the end for Lewis," said one portfolio manager. "We knew that it was going to be close, but this is an unambiguous vote of no confidence," added a finance professor. The article, like the WSJ's, also describes the heavily attended annual shareholder meeting, at which the vote was taken, where Lewis was forced to defend himself from attacks about the Merrill Lynch (MER) takeover and his dealing of the economic crisis as a whole.

Bloomberg reports ahead of a Commerce Department report due at today at 8:30 a.m. that consumer spending probably slowed 0.1 percent in March following a two-month surge and that the number of people collecting unemployment insurance likely rose to a record level. Continuously falling home values and rising unemployment indicate the biggest part of the economy "may falter again in the second quarter and prolong the recession," the article says. However, over on the front page of the NYT, consumer spending is the only bright spot in what is otherwise a "bleak update on the gross domestic product." Overall, "spending turned up in the first quarter, rising at a 2.2 percent annual rate, for the first time since last summer" and was mostly concentrated in durable goods, such as kitchen appliances and cars.

GDP contracted at an inflation-adjusted annual rate of 6.1 percent in the first quarter, only slightly less than the 6.3 percent decline posted the previous quarter. But the Treasury has decided to hold off on buying up more government bonds and other debt in an attempt to "pump more credit into banks," says the Journal. Observers say this is a sign that the worst may be over, and investors responded by sending the Dow Jones Industrial Average up 2.1 percent to 8158.73, the highest it's closed since Feb. 9.