Obama Said to Plan for Chrysler Bankruptcy, Alliance (Update3)

Obama Said to Plan for Chrysler Bankruptcy, Alliance (Update3)
http://www.bloomberg.com/apps/news?pid=20601087&sid=a97rZxZqE4S8&refer=home

April 29 (Bloomberg) -- President Barack Obama aims to announce
tomorrow that Chrysler LLC will be placed into Chapter 11 bankruptcy,
leading to an alliance with Italian automaker Fiat SpA, people involved
in the matter said.

Administration officials are still resolving outstanding issues, and the
plan isn’t finished, said one of the people, who declined to be named
because discussions are private.

As part of negotiations, the U.S. Treasury raised its offer to
Chrysler’s lenders to $2.25 billion in cash to forgive $6.9 billion in
secured debt, two other people familiar with the matter said. The
previous offer had been for $2 billion in cash.

Any bankruptcy filing may come as soon as tomorrow, people familiar with
that matter said. Chrysler’s best assets would be sold to a new entity
that would have an ownership structure similar to that envisioned in an
out-of-court deal between the Auburn Hills, Michigan-based automaker and
Fiat, based in Turin, Italy, the people said.

The Italian company would become a 20 percent owner of Chrysler, and a
union retiree health-care trust fund would hold 55 percent, with the
rest of the company staying in the government’s hands initially, the
people said.

Fiat and the new board of directors of the company would pick a chief
executive officer and chairman, said current CEO Robert Nardelli in a
memo to workers on Feb. 17. Fiat’s chief, Sergio Marchionne, said in an
April 15 interview that he would be willing to run Chrysler if asked.

Progress Made

Chrysler has made progress in its out-of-court restructuring, including
reaching labor deals with the United Auto Workers union and Canadian
Auto Workers on new contracts. Nardelli said today in a memo to
employees that the company is waiting to hear whether its 46 lenders
will agree to take cash to wipe out $6.9 billion in secured debt.

The possibility exists that a bankruptcy filing won’t be needed, one
person said. Calls and e-mails to Chrysler spokeswomen, Lori McTavish
and Shawn Morgan, seeking comments weren’t immediately returned. Jenni
Engebretsen, a Treasury spokeswoman, didn’t immediately return an e-mail
seeking comment.

One issue remaining is the U.S. government’s effort to combine Chrysler
Financial and GMAC LLC, the lending units affiliated with Chrysler and
General Motors Corp.

The government seeks to ensure that Chrysler has a well- capitalized
credit arm, as required by Obama’s automotive task force, said people
familiar with the situation.

Guarantee Concern

Sheila Bair, chairman of the Federal Deposit Insurance Corp., has
expressed concern that such a combination would involve her agency
guaranteeing its debt, according to two people familiar with her views.

Bair is reluctant to be drawn into bailing out auto-finance companies to
the potential detriment of the FDIC’s deposit insurance fund, according
to the people, who asked not to be identified because the discussions
are private.

Andrew Gray, an FDIC spokesman, Amber Gowen, a Chrysler Financial
spokeswoman, and Gina Proia, a spokeswoman for GMAC, declined to comment.

Fiat will produce its first model with Chrysler in 2011 if the accord
between the companies is approved, Marchionne said March 27.

Chrysler is considering producing models in the U.S. based on Fiat’s 500
small car, Punto and Panda, Steve Landry, executive vice president of
sales, said Jan. 23. Fiat-based models will need engineering changes to
comply with U.S. emissions rules, and Chrysler may use more powerful
engines to match consumer preferences.

Viability Plan

In its Feb. 17 viability plan, Chrysler forecast $6.9 billion of cost
savings and additional revenue with Fiat through 2016, with a boost to
earnings of at least $1 billion starting in 2012. Fiat and Chrysler will
develop seven new small cars, according to the plan.

Fiat has been trying to bring back its main brands in the U.S. after 14
years and had held talks with the three automakers in the country last
year on possible cooperation on production of Alfa Romeo cars.
Marchionne also held talks with governments including Ontario for
possible production in North America, before officially postponing the
plan in October to 2011.

Marchionne restored profit at Fiat in 2005 after introducing new models
and sharing more components among cars and through cooperation projects
with competitors. Fiat has several partnerships including cooperation
with PSA Peugeot SA on commercial vehicles, joint platforms with Ford
Motor Co. and cooperation with Tata Motors Ltd.

 

This is interesting. It's the first I'm hearing of that. Again, note
that Cerebus looms large in that picture.

What a load of horse shit that's going to be.

Again, more horse shit.

Let's build a micro-car because consumers are demanding extreme fuel
efficiency, and let's put a large engine in the car because US consumers
are loath to own cars with weak, anemic engines.

When you look in the dictionary under schizophrenia, you will find this
deal between Chrysler and Fiat.

Let's make a car smaller than the Caliber, give it an engine as large as
in the Calibre, and sell it for more than the Calibre. And let's get
this amazing micro-car technology from Fiat because Fiat has the patent
on sub-compact cars and because we don't know how to make a car smaller
than the Caliber. And then we'll watch as US consumers shun our new
sub-compact because they've seen the crash test videos of it bouncing
around.

Who exactly is telling Chrysler that they need something smaller than
the Caliber, and that only Fiat can design it for them? The same people
who told them not to give the Challenger a FWD option?

Daimler ran Chrysler into the ground by forcing Chrysler to design it's
current vehicles based on the Tonka-Toy/Fisher-Price school of
automotive design. And then when they were finished, they fired all the
Chrysler designers and engineers. Then they handed Chrysler to Cerebus
and said "here, you take this shit off our hands".

Interesting:

-------------------------
Chrysler taking its time selecting small car partner
http://www.autoblog.com/2006/06/09/chrysler-taking-its-time-selecting-small-car-partner/
Jun 9th 2006

------------------------
Chrysler working "intensely" on Hornet-like small car
http://www.autobloggreen.com/2008/06/12/chrysler-working-intensely-on-hornet-like-small-car/
Jun 12th 2008

Panicked about what to build instead, they have searched through the
company's closets and drawers looking for the plans for a small car that
might get them out of the hole they've been digging. Apparently this is
all they could find, the Dodge Hornet concept from the 2006 Geneva auto
show. And although they are "...working intensely on the Hornet
study..." it may still take a couple of years before it sees a driveway.
We think Chrysler's designers may be conferring with their Chinese
counterparts in an attempt to make the Hornet more "unique".

Ok, maybe it's not that bad. The box shape certainly worked for the
Scion XB 1.0, yielding a lot of space inside a small package. The
internet forum at the website that the company set up for the concept
even had a few people show up and rave about the styling for a week or
two. Of course, the new product won't look like the Hornet exactly. When
asked, Thomas Hausch, the company's vice president for international
purchasing, couldn't even say whether it would even wear the Dodge
insignia. He did, though, intimate that there would be a Chrysler
smaller than the 2-liter Sebring coming. Hit the jump to see a video of
the Hornet buzzing along.
------------------------

I wonder how Chrysler would have fared if Kerkorian had taken ownership
instead of Cerebus.

I can only dream of where Chrysler would be now had it never been taken
over by Daimler.

But you know what? In the cosmology of the multiverse (a universe of
universes) there is, somewhere, another planet earth and on that planet
earth there is a Chrysler that said no to the Daimler take-over.

 

I always get a kick out of those weasel word phrasings of controlled
leaks. If people were truly saying things that aren't supposed to be
leaked, you'd here leaders complaining and wanting to know who was
leaking this private information. It gets leaked intentionally by those
in charge because that's the information they want the public to have.

 

Though I find your "Tonka-Toy/Fisher-Price school of automotive design"
description somewhat extreme but I am still puzzled by this planned deal.

Well-designed small cars do perform well in crash tests but the bigger issue
is not only the fact that US consumers may not like the relatively very
small cars and their commensurate engines, Fiat has no US experience.

Maybe the good news does not get into the mainstream news, but I am only
aware of losses/difficulties for European companies when they buy their way
into the USA, or even just starting up in a big way. Brooks Bros (Marks &
Spencer), Bancorp (National Westminster Bank, now part of RBS group),
Chrysler (Daimler Benz), Fresh and Easy (Tesco -- no figures published, no
info on expected break-even)...

So how will Fiat make a success of it when they don't have any presence in
the US? At least Mercedes produced and sold in the US.

DAS

To send an e-mail directly replace "spam" with "schmetterling"
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Maybe on paper.

Name a well-designed sub-compact that performs well in a crash test.

Any small car that performs well in a crash test will also be an
expensive small car that will be passed over by consumers in favor of a
larger car for the same price.

Note that Mercedes does not sell their A and B class cars in the US
either.

Fiat having 20% of Chrysler will be the same as when Daimler had 20% of
Chrysler for the past 2 years. Daimler acted as if they had no
influence over Chrysler, like the 20% ownership didn't exist. They
excercised no control. Fiat is injecting none of their own money into
this deal. This deal with Fiat is just window dressing. It's all show
and no substance.

In fact, Fiat's involvement with this deal is as follows:

If Daimler's 20% was handed over to the hedge funds, they might end up
with enough control to dismantle the company. So Fiat was brought in to
absorb that 20% to keep it out of their hands. This at least allows the
company to operate without the threat of selling assets.

Chrysler will emerge from bankruptcy, and I'm guessing that by the end
of the year that the following will cease production:

- Charger or Challenger (probably Charger)
- PT Cruiser
- Aspen
- 4 out of 7 Jeep models
- Viper
- Nitro or Durango (probably Durango)

And during the rest of 2009 and well into Q1 2010 Fiat will sit on their
hands while they argue about where the money will come from to re-tool
one of Chrysler's plants to start building this fictional, magical
Fiat-inspired sub-compact.

Chrysler has been dithering about a small car platform since 2006, and
they will continue to dither for at least the remainder of this year.
No auto company makes money on their small cars (at least not in North
America). On a per-car basis it's the larger and luxury cars that have
the highest profit per unit.

What was the joke about sub-compact cars made by the big 3 in years
past?

"We lose money on every one we sell, but we make it up on volume."

Well guess what. There ain't gonna be any volume any more.

 

On 05/01/09 08:54 am MoPar Man wrote:

On the radio this a.m. somebody -- not sure whether it was the owner of
a dealership or the commentator -- said that the Sebring sedan has been
unpopular and likely will be discontinued.

If looks were the criterion, I'd kill off the 300 and the Magnum
yesterday. But they may be mechanically sound and if so could be restyled.

Perce

 

That's the point. Similar truth in (at least western) Europe.

They do make money on small cars, but a lot more on bigger ones. No doubt
because of this more and more car production has been shifted to lower-cost
eastern Europe.

Fools rush in where angels fear to tread.

My similar comments in Jim Higgins's later thread "Would You Buy a Car from
Chrysler?"

DAS

To send an e-mail directly replace "spam" with "schmetterling"