At a mid-day press conference President Barak Obama made the official announcement that Chrysler will in fact file for Chapter 11 bankruptcy protection. Included in the announcement was the news that Chrysler has also reached an agreement with Fiat.
“I can report that the necessary steps have been taken to give one of America’s most storied automakers a new lease on life,” Obama said.
Praising Chrysler’s storied history and saying that the company helped make the 20th Century an American Century, he also chastised the numerous poor decisions made by all parties involved. Chrysler has, “for too long, moved too slowly, building less popular cars, that are less reliable and less fuel efficient,” Obama said.
The President praised Chrysler management, the UAW and the company’s major lender JP Morgan for their “unprecedented sacrifices,” and blasted the small group of holdout hedge funds that have refused to budge and accept the Federal government’s offer. That offer would see the U.S. government pay out lenders $2 billion in cash for $6.8 billion in debt.
The official Chapter 11 paperwork is expected to be filed as early as today and in the restructuring process the Federal government will provide additional loans to Chrysler. Those loans are not open-ended, however, and will have to be repaid in full before Fiat can take a majority stake in the U.S. automaker.
In the mean time Chrysler operations are expected to continue as normal with one major change. The finance arm of General Motors, GMAC, will finance car loads at the dealership level.