Hank Paulson Burned As Another Electric Car Maker Goes Up In Flames

It would appear that (apart from Tesla, for now) that any thing related to electric cars is going up in flames. From Fisker's fubar (and blowing all that hard-earned government funding) and Chevy's Volt dysphoria to A-123 Systems (the Lithium-Ion battery-maker) and now Coda - which Yahoo Finance notes was among an emerging crop of California startups seeking to build emission-free electric cars three years ago.

After selling just 100 of its $37,250 five-passenger vehicles, Coda filed Chapter 11 today taking a few well-known investors with it. On the bright side, the government was not involved (from what we can tell), but on the even brighter side, none other than former US Treasury Secretary Hank Paulson was among those burned by the company going up in flames (as was Harbinger's Phil Falcone).

Despite the $300 million the company managed to raise, that quickly went and unable to raise an additional $150 million in new funding (we suspect blaming 'market conditions' for its mere $22million raise), Coda had no choice (and Fortress was more than happy to scoop it up and provide the DIP - the cars will make for fancy paperweights in a collateral liquidation). 'Green' is the new 'red' as it seems when it comes to electric cars, regardless of funding source - private or public - it goes up in flames. Read more >>

"Hell is coming to breakfast"

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Pension Benefit Guaranty Corporation to seize pension plans covering 4,780 workers

David Shepardson
Detroit News
The government's pension insurer said Monday it will assume responsibility for the underfunded pension plan of a bankrupt Northville auto supplier -- at least the fifth supplier to abandon its pension obligations this year.

The Pension Benefit Guaranty Corporation said it will seize the pension plans covering 4,780 workers and retirees of Hayes Lemmerz International Inc., the Michigan-based wheel manufacturer -- a move that will add nearly $100 million to the PBGC's growing deficit.

PBGC said it is moving now because Hayes Lemmerz failed to meet the minimum funding requirements, and the company cannot afford to fund the pension plan and to successfully exit bankruptcy.

The Hayes Lemmerz International Retirement Income Plan is 54 percent funded, with assets of $110.4 million to cover benefit liabilities of $204.8 million, according to PBGC estimates. The agency expects to be responsible for $93.7 million of the $94.4 million shortfall. The plan was frozen on Dec. 31, 2004.

The Detroit News reported this summer that PBGC was in talks with Hayes to seize its pension plans.

On May 11, Hayes filed for Chapter 11 protection. The company has said it intends to reorganize and emerge from bankruptcy this year to preserve its market share.

On Nov. 4, Hayes won court approval for a reorganization plan that will allow it to shed $480 million of its $720 million in debt.

The PBGC, a government-owned company, insures the basic pension benefits of about 44 million American workers and retirees in more than 29,000 private-sector defined benefit pension plans.

Earlier this year, PBGC assumed responsibility for Troy-based Delphi Corp's pension plans -- a move that saddled PBGC with $6.7 billion in costs for plans covering more than 70,000 people.

PBGC also assumed pension plans at suppliers Metaldyne Corp; Proliance International Inc., an auto parts maker based in New Haven, Conn.; and Portage-based Contech US LLC.

PBGC said earlier this month that its deficit had soared to $21.1 billion this year -- up from $10.4 billion last year. But it improved over its mid-year estimate of $33.5 billion.

Wealthy Individuals’ Bankruptcies Skyrocket

Bloomberg reports wealthy individuals’ Chapter 11 bankruptcy filings jumped 73 percent in the second quarter from a year earlier, according to the National Bankruptcy Research Center, a research firm in Burlingame, California.

More individuals or families with at least $1,010,650 in secured debt and $336,900 unsecured are using Chapter 11 of the U.S. bankruptcy code typically associated with business reorganizations. Falling U.S. home prices leaves them unable to refinance or sell their property when they drop below the value of their mortgage, said Chicago bankruptcy attorney Joseph Baldi.

Chapter 11 is more expensive and time-consuming for debtors and creditors than a Chapter 7 liquidation of assets. Wealthier people filing for bankruptcy typically have large homes, two car payments and children in private schools, said Leslie Linfield, executive director of the Institute for Financial Literacy in Portland, Maine, a credit-counseling and research group.

“You’re living on the edge, you’re juggling those financial balls,” Linfield said. “When one ball goes, they all fall down.”

Listings of homes for sale worth $1 million or more increased 27.3 percent in July from October, according to Zillow.com, a Web site that tracks real-estate transactions. The number of homes sold with a value between $1 million and $2 million fell 23 percent in July from a year earlier, according to the Chicago-based National Association of Realtors. There was a 21-month supply, up from 16 months last year.