In the spring of 2009, the senior secured debt of Chrysler LLC, America’s number
three auto manufacturer, was trading at about 15 cents on the dollar, putting a
value of about $1 billion on the lagging car company. As part of the company’s
bankruptcy and restructuring, the U.S. government agreed to pay $2 billion to
the holders of this debt to buy them out. A few days ago, Fiat – which entered
into an alliance with Chrysler as part of the restructuring – agreed to buy an
additional 16 percent of Chrysler for $1.27 billion, which equates to a total
enterprise value for Chrysler of $22.4 billion. How remarkable that a company
given up for dead just two years ago could now be worth more than $22 billion!
That statistic speaks volumes about the ability of markets to behave
irrationally – the shares of auto related companies like Dana have shown
similarly exponential growth over the past two years – but it also says much
about the exceptional job that Chrysler’s new CEO, Sergio Marchionne, and his
team have done, outperforming by virtually every relevant metric.
