Chrysler to file for bankruptcy

Discussion in 'General Motoring' started by Jim Higgins, Apr 30, 2009.

  1. Jim Higgins

    Jim Higgins Guest

    Chrysler to file for bankruptcy

    Some lenders refuse offer to reduce debt, leading to Chapter 11
    bankruptcy filing. But Chrysler will remain in business and complete
    deal with Fiat.
    By Chris Isidore, senior writer
    Last Updated: April 30, 2009: 12:08 PM ET

    NEW YORK ( -- Chrysler LLC is going to file for bankruptcy
    "almost immediately," a senior Obama administration official said
    Thursday. But a deal has been reached to combine the company with Fiat
    that will allow Chrysler to stay in business.

    The bankruptcy filing,which will be made in federal court in New York,
    comes after some of the company's smaller lenders refused a Treasury
    Department demand to reduce the amount of money the troubled automaker
    owed them.

    A senior administration official said there will be no immediate job
    cuts or plant closings due to the bankruptcy filing, although he said
    that Fiat will be examining the cost structure of Chrysler to find
    additional savings. Fiat has promises to use Chrysler's existing plants
    to build the small cars it now sells in Europe for the U.S. market.

    An unspecified number of Chrysler's 3,300 dealerships which now sell the
    Chrysler, Dodge and Jeep brands will be closed under the bankruptcy,
    although the administration official said that many of those closings
    will take place after the company emerges from bankruptcy.

    Administration officials said the Treasury Department will provide
    Chrysler with $3 billion to $3.5 billion in additional loans to fund
    operations during bankruptcy.The government anticipates that it will
    provide an additional $4.5 billion of financing to allow Chrysler to
    exit bankruptcy, hopefully within 30 to 60 days.

    Chrysler had asked the government earlier this year for $6 billion in
    new federal loans to help it stay in business. That's on top of the $4
    billion in loans it has already received.

    Chrysler officials had no comment on the bankruptcy report. The company
    faces a Thursday deadline from the Treasury Department to reach deals
    with creditors who had loaned the company about $7 billion.
    Last-minute deals ensured Chrysler's survival

    But the filing will not mean the halt of operations or liquidation for
    the troubled 85-year old automaker. Instead, the administration expects
    to use the bankruptcy process to join Chrysler with Italian automaker Fiat.

    In addition, the United Auto Workers union announced late Wednesday
    night that its membership at Chrysler had overwhelmingly ratified a
    concession contract reached between the company and union leadership on
    Sunday night.

    President Obama said during a press conference Wednesday night that he
    was more confident than he had been 30 days ago that Chrysler would be
    able to emerge from the process as a healthy, competitive company.

    The administration said Wednesday evening that talks with the smaller
    lenders broke down when they refused to meet a deadline set by the
    Treasury Department to accept pennies on the dollars they had loaned the

    Major banks such as Citigroup (C, Fortune 500) and JPMorgan Chase (JPM,
    Fortune 500) agreed to reduce their portion of $7 billion in secured
    loans to a more manageable $2.25 billion, according to the
    administration official. But some smaller lenders, including hedge
    funds, refused to accept the deal.

    But an administration official said "the agreement of all other key
    stakeholders ensured that no hedge fund could have a veto over
    Chrysler's future success."

    Chrysler and the rest of the auto industry have been hit by a sharp
    plunge in sales due to the global recession and tighter credit.
    Chrysler's U.S. sales during the first three months of this year were
    down 46% from year ago levels. That followed an industry-worst 30% slide
    in sales last year.

    Being privately held, Chrysler has not released its financial results
    for recent years. But the company needed a $4 billion federal loan in
    the closing days of the Bush administration to avoid running out of
    cash, while rival General Motors (GM, Fortune 500) received the first of
    what turned out to be $15.4 billion in federal loans so far.

    Those federal bailouts staved off an uncontrolled bankruptcy at Chrysler
    that could have caused a rash of failures across the auto supplier
    industry and disrupted production at other automakers. Chrysler owes its
    suppliers about $7 billion, according to the latest figures available
    from the company. Some of those suppliers could still be hurt by the
    bankruptcy filing.

    Chrysler is only a fraction of its former self. It has about 39,000 U.S.
    employees, only about 40% of the total it had at the beginning of the
    decade. It has fallen behind not only Toyota Motor (TM) in sales, but it
    is close to being overtaken by Honda (HMC) for the No. 4 spot for U.S.

    The company also has about 3,300 dealers who between them have 140,000
    employees. It also has 65,000 U.S. retirees as well as their family
    members who depend upon the company for pension benefits and heath care

    Cars that wrecked Chrysler [slideshow]
    Jim Higgins, Apr 30, 2009
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  2. Jim Higgins

    MoPar Man Guest

    This is the reason for Fiat's involvement. To keep 20% of Chrysler out
    of the hands of hedge funds. Practically nothing more.
    The monster that wrecked Chrysler:
    MoPar Man, May 1, 2009
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  3. Jim Higgins

    Jim Higgins Guest

    Daimler-truth indeed.
    Jim Higgins, May 1, 2009
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