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Starting Monday, Chrysler will idle most of its plants as the company restructures under a Chapter 11 bankruptcy filing. This will include 8 U.S. assembly plants, as well as facilities in Canada and Mexico. Other pre-assembly facilities will also face temporary closure including five North American engine plants, six stamping plants and seven transmission plants.
The temporary shut-down will effect 26,000 UAW workers and 10,000 Canadian Auto Workers.
Chrysler is using the bankruptcy proceedings to its advantage, as the production stoppage will allow it to deplete the ever-increasing stockpile of vehicles.
The temporary shut-down is expected to take from 30 to 60 days, however, there is potential for it to extend beyond that.
[Source: Automotive News]
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.
UAW oWn3S Chrysler... literally
Less than a day after the UAW, Chrysler and Fiat agreed upon the terms of a contract that would keep the struggling U.S. automaker afloat, details of the agreement have surfaced in which the union will take a controlling share in Chrysler.
At first it seemed almost too good to be true that all sides had reached an agreement without the need for decreased wages. Instead the agreement stipulated that Chrysler would significantly reduce its participation in the employee retirement program.
The agreement came just days after a similar agreement had been reach between Chrysler Canada and the Canadian Auto Workers union – an agreement that was ratified the same day Chrysler and the UAW put together the current proposal.
Now word has leaked that in exchange for Chrysler’s reduced payments to the company’s retirement plan, the company had to essentially hand itself over to the union. In total, the UAW will get a 55 percent stake in the planed Chrysler-Fiat partnership, with Fiat initially taking a 20 percent share, with up to 35 percent ownership possible if certain conditions are met.
The agreement now has to go before Chrysler’s 26,000 workers, with voting on Wednesday in order to ratify the agreement ahead of the government’s end-of-month bankruptcy deadline. If the deal is reached and Fiat signs on, the Federal Treasury will provide Chrysler (or should we say the UAW) with $6 billion to keep the automaker afloat.
Meanwhile, one other major player (which has been incredibly quiet during this ordeal) has agreed to remove itself from the situation. Daimler will shed its 20 percent stake in Chrysler and rethink ever working with a U.S. automaker again.
[Source: Automotive News]
Chrysler Canada Headquarters in Windsor, Ontario
While President Obama outlined his plan yesterday for General Motors and Chrysler, the Canadian government was forced into some more immediate action.
Chrysler Canada, which is currently threatening to remove all of it’s manufacturing facilities from the country if the Canadian Auto Workers (CAW) union cannot make concessions, made an emergency request to the Canadian government for an advancement on a government loan.
The Canadian government has agreed to loan Chrysler Canada $4 billion to help restructure the company if they meet certain requirements. One billion of that was set to be advanced, however, Chrysler Canada is in such dire straights that it made a request yesterday for a $250 million immediate advance, without which it could not make payroll.
“Very clearly, if the money had not been forwarded today, they would not have been able to meet payroll today or tomorrow,” said Industry Minister Tony Clement. Without the funds Chrysler Canada would have had to file for bankruptcy.
[Source: The Globe and Mail]
*** UPDATE *** Moments after Chrysler released an announcement that a partnership with Fiat was a done-deal, the American auto manufacturer released another statement with slightly revised wording stating that it had just a “framework” of a deal in place. *** UPDATE ***
Hours after President Barak Obama gave Chrysler a deadline of 30 days in which to solidify a partnership with Fiat, a deal has indeed been made.
“We are pleased that Chrysler, Fiat and Cerberus have reached agreement on a framework of a global alliance, supported by the U.S. Treasury,” said Chrysler Chairman and CEO Bob Nardelli in a press release issued by Chrysler. “Chrysler has consistently said that the alliance with Fiat enhances its business model that expands its global competitiveness. We appreciate the willingness of the Task Force, along with industry and financial experts, to consult closely with us in order to achieve this significant step”
The new partnership will see Fiat provide Chrysler with technology, products and several vehicle platforms for global distribution.
“Fiat strengthens Chrysler’s ability to create and preserve U.S. jobs; gives U.S. consumers more choices for environmentally advanced vehicles; gives its dealers more of the products they need to be successful; helps stabilize the supplier base; and allows Chrysler to pay back government loans sooner,” continued Nardelli.
“I want to personally assure all of our customers, dealers, suppliers and employees that Chrysler will operate ‘business as usual’ over the next 30 days. While we recognize that we still have substantial hurdles to resolve, Chrysler is committed to working closely with Fiat, the Administration, U.S. Treasury and the Task Force to secure the support of necessary stakeholders.”
The final details of the Chrysler and Fiat partnership (whether it be a merger or ownership) must still be worked out over the next 30 days, after which Chrysler is still seeking $6 billion to get the new Chrysler on its feet.
General Motors gets 60 days, Chrysler gets 30
Just ahead of the Obama Administration’s press conference today, some of the most important details are already out.
General Motors is to be given 60 more days to complete its restructuring plan, while Chrysler is being given just 30 days to finalize a partnership with Fiat.
This news comes as both fumbling U.S. automakers are set to fail to meet the March 31st restructuring deadline that the Bush administration gave as a qualification for the initial bailout funds.
Both automakers will be given additional funds to ride out the recession until the given deadlines. Chrysler requires $2 billion by tomorrow in order to avoid cash flow issues, while GM is looking at an additional $2 billion to keep itself afloat through April.
Both deadlines comes after the Obama administration’s Auto Task Force determined that the current restructuring efforts by both General Motors and Chrysler would not make either company viable even if the economy improved.
If the two American car manufacturers cannot meet the deadlines laid out by the Obama administration, the cash flow will be halted and the companies will be forced into bankruptcy.
[Source: Automotive News]
According to the reliable folks over at GMInsideNews, on Monday the Obama Administration will announce a bankruptcy deadline for both General Motors and Chrysler.
It has been rumored that the government will release more details about its aid for the U.S. auto industry on Monday, but now it appears the announcement will include this strong-arm measure by the feds. The “brankruptcy deadline” will be a specific date by which both companies will have to have their finances in order. For General Motors this means a date by which it will have its ongoing issues with the United Auto Workers and bondholders resolved. If the companies cannot comply with the request of the Auto Task Force it will force both U.S. auto giants into a “pre-packaged” Chapter 11 bankruptcy filing.