Managerial Economics 2nd Edition by William Boyes

Exercise 17

In 2009, the U.S. government took over Chrysler. It gave about 25 percent of the equity to the UAW and kept the rest. It eliminated the claims of the bondholders. The corporate form provides bondholders first claim on assets if the firm goes under; stockholders receive what is left after everyone else is paid off. What does the government's actionsmean?What effect is the action likely to have on other firms that might be struggling?