Chrysler expected to sell assets to Fiat

NEW YORK – Chrysler LLC is expected to file a motion Saturday to sell substantially all of its assets to Italian automaker Fiat Group SpA, but the ailing automaker must still deal with creditors who refused to come to a deal to erase the company's debt.

Attorneys for Chrysler say eight plants will not be affected by the sale, including five that the automaker revealed it will shutter by the end of next year.

While Chrysler faced its first hearing Friday in Manhattan bankruptcy court, court documents showed the Big Three automaker planned to close plants in Michigan, Missouri, Ohio and Wisconsin that employ about 4,800 people. Chrysler said they will be offered jobs at other plants.

The company also announced President and Vice Chairman Tom LaSorda is retiring effective immediately.

Judge Arthur Gonzalez approved a series of motions at Friday's hearing, launching a chain of events designed to ensure Chrysler's bankruptcy process is the quick and "surgical" one the company and the U.S. government have promised.

But what could prove to be the case's biggest challenge still lies ahead. Chrysler must eventually deal with creditors who defied government pressure to wipe out the automaker's debt and might have helped the company avoid a bankruptcy filing in the first place.

Another hearing was scheduled for Monday, where Chrysler attorneys will ask Gonzalez to let the company start using $4.5 billion in loans from the U.S. and Canadian governments to keep operating under bankruptcy protection.

Chrysler, the nation's third-largest car manufacturer, filed for bankruptcy protection Thursday. The company plans to emerge in as little as 30 days as a leaner, more nimble company, with Fiat potentially becoming the majority owner.

In return, the federal government agreed to give Chrysler up to $8 billion in additional financing, on top of the $4 billion the company already has received.

Chrysler attorney Corinne Ball said that lawyers on Monday would ask to set a date for the first hearing on the sale of its assets to the "new Chrysler." In bankruptcy, assets are sold in a two-part process during which the court asks for competing bids. None are expected in Chrysler's case, since documents show the company already tried to form alliances with dozens of companies, including Nissan-Renault, Toyota, Honda, Volkswagen and even rival General Motors Corp.

Heidi Sorvino, bankruptcy partner at Smith, Gambrell & Russell LLP, said a sale could be completed in 30 to 60 days.

"I think the sale will happen quickly," she said. "The actual proceeding is going to take a long time."

Until the deal with Fiat closes, the automaker plans to idle all of its plants in the U.S. Chrysler's Canadian assembly plants also halted production Friday because of parts shortages stemming from the U.S. shutdown.

In court documents, Chrysler said it won't keep its Sterling Heights, Mich., plant that makes Chrysler Sebrings and Dodge Avengers, and the Conner Avenue plant in Detroit that makes Dodge Vipers. The St. Louis North plant that makes Dodge Ram pickups would also close.

Chrysler's Twinsburg, Ohio, parts stamping plant and Kenosha, Wis., engine plant will also be shuttered.

Two other plants that will be left out of the Fiat sale are the St. Louis South plant and an assembly plant in Newark, Del., that were idled last year. Another facility, Chrysler's Detroit Axle plant, is already scheduled to be replaced by a new factory near Port Huron, Mich.

The "new Chrysler" would lease the eight plants, then shutter them by December 2010.

"While some facilities may close, substantially all Chrysler employees will be offered employment with the new company," Chrysler spokeswoman Dianna Gutierrez said. "Employees currently located at a facility identified for disposition will be offered a position at one of the facilities sold to the new company."

Gonzalez approved Chrysler's motion to allow the automaker to pay $48.8 million in employee and contract worker pre-bankruptcy wages, benefits and businesses expenses. The motion also references an estimated $86 million in employee vacation benefits that it may not ultimately have to pay.

The judge also approved Chrysler's motions that will let it continue to honor its warranties and continue its current banking practices.

It's uncertain when Gonzalez will face objections from the creditors that hold $6.9 billion of the automaker's debt.

Four banks holding 70 percent of the debt agreed to a deal that would give the lenders 29 cents on the dollar. But a collection of hedge funds refused to budge, saying the deal was unfair because they deserve to recover more than other creditors like the United Auto Workers.

President Barack Obama on Thursday chastised the funds for seeking an "unjustified taxpayer-funded bailout" after Chrysler and his auto task force cleared the company's other hurdles, including the Fiat deal and a cost-cutting pact that the UAW ratified this week.

Chrysler's bankruptcy filing is the latest step in a drastic reordering of the American auto industry, which has been crushed by higher fuel prices, the recession and customer tastes that are moving away from the gas-guzzling SUVs that were once big money makers.

The government already has sunk about $25 billion in aid into Chrysler and GM.

GM faces its own day of reckoning on June 1, a date the administration has set for it to come up with its own restructuring plan. GM has announced thousands of job cuts, plans to idle factories for weeks this summer and has even offered the federal government a majority stake in the company as it races to meet the deadline.

Like at Chrysler, debt may be the stumbling block. GM has asked its unsecured bondholders to exchange $27 billion of debt for a 10 percent stake in the automaker. The creditors balked, saying that would leave them with just pennies on the dollar and that they deserve a majority stake if they give up their claims.

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Chrysler is in court today for bankruptcy hearing

DETROIT – Chrysler's first hearing in a New York courtroom Friday morning may offer the first clue as to whether a quick, "surgical" bankruptcy is possible. The nation's third-largest automaker filed for Chapter 11 bankruptcy protection Thursday with an ambitious plan to emerge in as little as 30 days as a leaner, more nimble company.

After months on government life support, Chrysler is pinning its future on a top-to-bottom reorganization and plans to build cleaner cars through an alliance with Italian automaker Fiat. In return, the federal government agreed to give Chrysler up to $8 billion in additional aid and to back its warranties.

On Friday morning, bankruptcy court Judge Arthur Gonzalez is scheduled to hear the case's first motions, which typically will allow the company to continue paying workers and basic utility costs as it restructures.

Eventually, Gonzalez will have to sort out the key issue that made bankruptcy necessary: the creditors that hold $6.9 billion of the Chrysler's debt.

Four of the largest banks holding 70 percent of the debt agreed this week to a deal that would give them $2 billion. But a collection of hedge funds refused to budge, saying the deal was unfair and would only return a small fraction of their holdings.

President Barack Obama on Thursday chastised the funds for seeking an "unjustified taxpayer-funded bailout" after Chrysler and his auto task force cleared the company's other hurdles. Along with the Fiat deal, Chrysler adopted a cost-cutting pact with the UAW this week.

"They were hoping that everybody else would make sacrifices and they would have to make none," Obama said. "I don't stand with those who held out when everybody else is making sacrifices."

One lender, OppenheimerFunds Inc., said it rejected the government offer because it "unfairly asked our fund shareholders to make financial sacrifices greater than the sacrifices being made by unsecured creditors."

The White House said Chrysler could come out of bankruptcy in 30 to 60 days. Under normal circumstances, it would be difficult to complete such a large bankruptcy so quickly.

But John Pottow, a University of Michigan professor who specializes in bankruptcy, said the government's level of involvement is much greater than in a typical corporate bankruptcy.

"If you have the president of the United States who wants something to happen, I think anything's possible in bankruptcy protection," he said.

In the meantime, Chrysler said it will close all of its plants starting Monday and they will remain closed until the company comes out of bankruptcy. At least three Detroit-area factories sent workers home Thursday after suppliers stopped shipping parts over fears they would not be paid.

"A lot of us are scared," said Steve Grabowski, 33, who has worked at a Warren, Mich., parts stamping plant for seven years and was sent home Thursday. "We knew something like this was going to happen, but we didn't think it would be so soon."

Chrysler CEO Robert Nardelli announced he would step down when the bankruptcy is complete and take a post as an adviser with Cerberus Capital Management LP, which will give up its 80 percent ownership of Chrysler under the automaker's plan. Vice Chairman Tom LaSorda, who once ran the company when it was owned by the German automaker Daimler, said he would retire.

Chrysler's bankruptcy filing is the latest step in a drastic reordering of the American auto industry, which has been crushed by higher fuel prices, the recession and customer tastes that are moving away from the gas-guzzling SUVs that were once big money makers.

The administration has sunk about $25 billion in aid into Chrysler and rival General Motors Corp.

GM faces its own day of reckoning on June 1, a date the administration has set for it to come up with its own restructuring plan. GM has announced thousands of job cuts, plans to idle factories for weeks this summer and has even offered the federal government a majority stake in the company as it races to meet the deadline.

Like at Chrysler, debt may be the stumbling block. GM has asked its unsecured bondholders to exchange $27 billion of debt for a 10 percent stake in the automaker. The creditors balked, saying that would leave them with just pennies on the dollar and that they deserve a majority stake if they give up their claims.

When Chrysler emerges from bankruptcy, the United Auto Workers union will own 55 percent of the automaker and the U.S. government will own 8 percent. The Canadian and Ontario governments, which are also contributing financing, would share a 2 percent stake.

Under the deal, Chrysler would gain access to Fiat's expertise in small, fuel-efficient vehicles. The U.S. automaker eventually wants to build cars that could get up to 40 mpg, far more economical than its current fleet focused on minivans, Jeep SUVs and the Dodge Ram pickup.

In exchange, Fiat would initially get 20 percent of the company, but its share could rise to 35 percent if certain benchmarks are met, and Fiat said Thursday it could get an additional 16 percent by 2016 if Chrysler's U.S. government loans are fully repaid. Fiat would also gain access to the North American market through Chrysler factories and dealerships.

Fiat CEO Sergio Marchionne said he planned to spend time meeting Chrysler's employees and touring its plants over the next few weeks.

He said Fiat was preparing for Chrysler to "re-emerge quickly as a reliable and competitive automaker." Fiat also plans to reintroduce brands like Alfa Romeo in North American markets.

The Fiat deal and bankruptcy cap a disastrous time for Chrysler.

Chrysler lost $8 billion last year and its sales through March were down 46 percent compared with the year-earlier period, leading some auto industry analysts to question whether Chrysler can survive even in bankruptcy.

But company executives told reporters Thursday that Chrysler vehicles with Fiat's fuel-efficient technology should reach showrooms in 18 months.

Vice Chairman Jim Press said Chrysler has cut expenses to operate profitably at a lower sales volume, and he said it would be able to take advantage of Fiat's distribution network to sell more vehicles globally.

Chrysler's LaSorda said in court papers that the automaker started to think about potential alliances as early as fall 2006, when Chrysler was still owned by DaimlerChrysler AG.

In the spring of 2007, LaSorda began negotiations with Nissan-Renault that went through several iterations, and Chrysler also started talks with GM in June 2008. The two companies even studied how much could be saved through a combination, but by November the worsening U.S. economy forced GM to focus on its own liquidity problems.

LaSorda named a number of other carmakers that Chrysler approached, including Toyota Motor Corp., Volkswagen AG, India's Tata Motors, the Hyundai-Kia Automotive Group, Russia's GAZ, Mitsubishi and Honda Motor Co., as well as a number of Chinese automakers. He said it had also approached some suppliers and parts manufacturers.

Despite the turmoil with Chrysler and GM's looming deadline, Obama urged consumers to keep buying cars.

"If you are considering buying a car, I hope it will be an American car," he said.

Stephen Manning reported from Washington. Associated Press writers David N. Goodman in Warren, Mich., Kimberly S. Johnson in Detroit and Vinnee Tong in New York contributed to this report.

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Chrysler News-Most manufacturing operations will be idled

Letter from Bob Nardelli-12:30pm 4/30/09
Nardelli announces Fiat allliance, bankruptcy filing

Dear Chrysler Employees:

This is a historic day for Chrysler. As a result of the comprehensive restructuring plan agreed to by many of our stakeholders, I am very pleased to report that Chrysler LLC and Fiat S.p.A. have reached an agreement in principle to establish a global strategic alliance. This agreement creates a new, competitive, global car company that will take over a majority of Chrysler’s operations. With the completion of this alliance, Chrysler will be repositioned for long-term success, validating the great efforts and sacrifices that you have made to help us get to this momentous point.

In addition to the alliance news today, I announced to Chrysler’s Board of Management and our senior leadership as well as the U.S. Treasury that I plan to leave the company and return to Cerberus Capital Management as an advisor. With the U.S. government approval of our viability plan and the completion of an agreement in principle for the alliance, this is an appropriate time to let others take the lead in transformation of Chrysler with Fiat. I will work closely with all of our stakeholders to complete the restructuring and see that this new company swiftly emerges with a successful closing of the alliance.

This alliance will enable Chrysler to move forward as part of a new company with significant strategic advantages, including access to high quality, fuel-efficient small and compact vehicles, as well as platforms, powertrain technologies and components that will be produced at Chrysler manufacturing sites. Together, Chrysler and Fiat will bring a range of exciting, new fuel-efficient vehicles to North American consumers, helping stimulate growth in this segment. The alliance also will allow Chrysler and Fiat to fully optimize our respective manufacturing footprints and global supplier base. Each company will gain access to new markets, including distribution of Chrysler vehicles to areas outside of North America, and potential distribution of Fiat vehicles through Chrysler’s dealerships in North America.

As you know, Chrysler initiated discussions with Fiat more than a year ago to develop plans for a global product alliance. Chrysler and many of its stakeholders worked tirelessly to agree upon concessions that will result in a significantly lower cost base and enable fulfillment of a broader strategic alliance. Despite substantial progress on many fronts, we were not able to obtain the necessary concessions from all of our lenders. As a result, under the direction of the U.S. Treasury, Chrysler LLC and 24 of its wholly owned U.S. subsidiaries today filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for the Southern District of New York.

Even though total agreement on concessions was not possible, I am truly grateful for all that has been sacrificed, on the part of many of Chrysler’s stakeholders to reach an agreement in principle with Fiat. My number one priority has been to preserve Chrysler and the livelihoods of thousands of people who depend on its success. While I am excited about the creation of the global alliance, I am personally disappointed that today Chrysler has filed for Chapter 11. This was not my first choice.

It’s very important to make clear that, because of the amount of work we’ve already done prior to filing for Chapter 11, this will be a very different kind of process than you may have seen with other companies. With this “structured bankruptcy” filing, we will submit a motion under Section 363 of the Bankruptcy Code requesting the court to swiftly approve the agreement with Fiat and the sale of Chrysler’s principal assets to the new company we are forming with Fiat. The benefit of this type of filing is speed. It will allow a leaner new company to emerge in a matter of 30 to 60 days, well positioned for long-term viability. It’s also very important to note that Chrysler’s Canadian, Mexican and other international operations are not part of any bankruptcy filing.

The substantial majority of Chrysler’s assets, operations, plants and people will be transferred to the new company, while assets and liabilities that are not consistent with our business plan will remain with the old company for disposition. Under the supervision of the court, and with the cooperation of the U.S. Treasury, the new company will quickly emerge from bankruptcy as a restructured and financially healthy organization. The old company and its remaining assets will proceed through a Chapter 11 process during which these assets may be sold or otherwise liquidated. Chrysler is in the process of identifying and finalizing the list of assets that will be disposed of through this process. Once this is complete and we are asked to share it with the court, we also will share it with you.

Chrysler also will file “First Day” motions with the court, seeking relief to honor obligations to pay employees, suppliers and dealers as an essential component of preserving the value of our business in the time period pending the sale. We expect to receive approval for these motions within the next few days, and we will provide you with regular updates.

During the restructuring process, the government will provide sufficient debtor-in-possession (DIP) financing to allow continuation of “business as usual.” The company will seamlessly honor warranty claims, pay suppliers and keep our dealer body operating to continue to serve our valued customers.

Throughout this time, Chrysler and our dealers will continue to sell and service all vehicles and honor warranties. We will continue to supply parts to our dealers to ensure that vehicles can be serviced without delay. We are committed to serving our customers throughout this process and to producing quality vehicles over the long term under the Jeep®, Dodge, and Chrysler brands, as well as parts under the Mopar® brand. As part of the restructuring and with the backing of the U.S. Treasury, we have reached an agreement in principle with GMAC to become the preferred lender for Chrysler dealer and consumer business. This is very good news as GMAC will be able to offer the best long-term finance options for Chrysler dealers and customers with standard rate installment products.

As a part of the restructuring, most manufacturing operations will be temporarily idled effective Monday, May 4, 2009. Normal production schedules will resume when the transaction is completed, which is anticipated within the next 30 to 60 days. Hourly employees will receive unemployment benefits, as well as supplemental pay that will amount to most of their base wages.

Keep in mind that during the period when facilities are idled, all company-sponsored healthcare and other insurance coverage will continue. All qualified employee pension and 401(k) funds are protected by federal law from Chrysler’s creditors; these funds cannot be used by the company to meet any other obligations. Upon approval of the transaction, the new company is expected to continue relationships with most employees, dealers and suppliers.

There is no question that this process involves deep sacrifices from many Chrysler stakeholders, including the UAW and CAW, employees, dealers and suppliers. We also want to recognize the Administration, U.S. Treasury, The President’s Auto Task Force, as well as Members of Congress and representatives at the state and community level and Canadian Federal and Ontario Provincial governments for their energy and efforts in helping to move our company forward. With the strong support of the Cerberus and Daimler, these stakeholders came together to make concessions that today give us a clear view of a promising future. To be sure, there will be many changes as we move forward to implement our plans. But today, from many great parts, we begin to build a vibrant new company with less debt, a stronger balance sheet, richer product portfolio, supported by a well-positioned finance company.

We understand that you will have many questions throughout this transition process. Further information will be available on a continuing basis at scoop.chrysler.com, www.chryslerrestructuring.com, or by calling our toll-free restructuring information line at 1-877-271-1568 (United States and Canada) or 1-503-597-7708 (International). These sources will be updated regularly to address your ongoing questions.

We are profoundly grateful for the support of the thousands of people across the United States and worldwide who have contributed to our effort to restructure for long-term viability. We take enormous pride in the contributions we have made to our industry, are honored by the trust our customers have placed with us for more than 80 years and look forward to continuing to serve them for many years to come.

Again, I thank you for your years of service and commitment to Chrysler LLC and look forward to working with you through the restructuring to build a stronger new company for the twenty-first century.

Bob

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Chrysler News-Chrysler to file for bankruptcy

Chrysler to file for bankruptcy

WASHINGTON – Chrysler will file for bankruptcy after talks with a small group of creditors crumbled just a day before a government deadline for the automaker to come up with a restructuring plan, two administration officials said Thursday.

The Obama administration had long hoped to stave off bankruptcy for Chrysler LLC, but it became clear that a holdout group wouldn't budge on proposals to reduce Chrysler's $6.9 billion in secured debt, according to the officials, who spoke on condition of anonymity because the filing plans are not public. Clearing those debts was a needed step for Chrysler restructure by the Thursday night deadline.

Bankruptcy doesn't mean the nation's third largest automaker will shut down. And the privately-held Chrysler is expected to sign a partnership agreement with the Italian company Fiat as early as Thursday as part of its restructuring plan. A Chapter 11 bankruptcy filing would allow a judge to decide how much the company's creditors would get.

President Barack Obama is expected to discuss the nation's auto sector at noon Eastern.

The Treasury Department's auto task force has been racing in the past week to clear the major hurdles that prevented Chrysler from coming up with a viable plan to survive the economic crisis ravaging nation's automakers.

Along with the Fiat deal, the United Auto Workers ratified a cost-cutting pact Wednesday night. Treasury reached a deal earlier this week with four banks that hold the majority of Chrsyler's debt in return for $2 billion in cash.

But the administration said about 40 hedge funds that hold roughly 30 percent of that debt also needed to sign on for the deal to go through. Those creditors said the proposal was unfair and were holding out for a better deal.

"While the administration was willing to give the holdout creditors a final opportunity to do the right thing, the agreement of all other key stakeholders ensured that no hedge fund could have a veto over Chrysler's future success," said one of the administration officials.

A third person briefed on Wednesday night's events said the Treasury Department and the four banks tried to persuade the hedge funds to take a sweetened deal of $2.25 billion in cash. But in the end, this person said most thought they could recover more if Chrysler went into bankruptcy and some of its assets were sold to satisfy creditors. This person asked not to be identified because details of the negotiations have not been made public.

When it files for bankruptcy, Chrysler would continue operating and Fiat would still sign on as a partner on Thursday, the people said. The government already has promised to back Chrysler's warranties in an effort to allay customers' fears that the automaker wouldn't be around to honor them.

President Barack Obama's auto task force in March rejected Chrysler's restructuring plan and gave it 30 days to make another effort, including a tie-up with Fiat. The company has borrowed $4 billion from the federal government and needs billions more to keep operating. President Obama said Wednesday night while the lender talks were still ongoing that he was "very hopeful" that deals can be worked out to keep Chrysler LLC a viable automaker, and more hopeful than he was a month ago that the company will stay in business.

The UAW agreement, which would take effect May 4, meets Treasury requirements for continued loans to Chrysler Corp., and includes commitments from Fiat to manufacture a new small car in one of Chrysler's U.S. facilities and to share key technology with Chrysler.

Meanwhile, the Fiat partnership means Chrysler CEO Robert Nardelli could be out of a job. In an April e-mail to employees, he said that if the deal is completed, Chrysler would be run by a new board appointed by the government and Fiat. The new board, Nardelli wrote, would pick a CEO "with Fiat's concurrence."

Sergio Marchionne, CEO of the Italian automaker, told reporters earlier this month that he could run Chrysler. Obama said Wednesday that Fiat's management "has actually done a good job transforming their industry."

Krisher reported from Detroit. Associated Press Writers Ben Feller in Washington, Colleen Barry in Milan, Italy, Kimberly S. Johnson in Detroit and David Eggert in Lansing, Michigan, contributed to this report.

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Chrysler Fiat News-Obama praises autoworkers, says Chrysler deal uncertain

President Barack Obama said today he did not know whether a deal preventing a collapse of Chrysler LLC would be done before Thursday's deadline, and praised American autoworkers for their sacrifices to the industry's survival.

Speaking at a town hall meeting in Missouri marking his 100th day in office, Obama said his auto task force sent Chrysler and General Motors Corp. back to redo their business plans because their initial sustainability plans were not realistic. GM has until June 1 to deliver its new plan.

As for Chrysler: “We don’t know yet whether the deal is going to get done.”


Chrysler and the administration reached an agreement with large Chrysler debt holders to swap $6.9 billion in secured debt for $2 billion in cash. But 40-odd investment firms and hedge funds have to agree in unison to the swap, or the government will take Chrysler to bankruptcy court to force it into place.

Chrysler must also complete a deal with Fiat S.p.A., which appears close at hand.....More

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Chrysler News-U.S. Reaches Deal With Chrysler Banks, Person Says

By John Hughes

April 28 (Bloomberg) -- The U.S. has reached agreement with banks on terms to reduce debt of Chrysler LLC, according to a person with knowledge of the negotiations.

The banks’ representatives agreed to forgo $6.9 billion in debt in return for $2 billion in cash, said the person, who declined to be identified discussing the private talks. The deal is one of the steps Chrysler needed to avoid a bankruptcy after April 30.

Bankruptcy remains a possibility for Chrysler, the person said. All 46 banks involved need to ratify the terms, and it isn’t likely that all would, the person said. In that case, a quick, surgical type of bankruptcy may be needed to bring any dissenting banks into an agreement, the person said.

Chrysler, operating with $4 billion in U.S. loans, faces an April 30 deadline to restructure its costs or risk losing government support.

Shawn Morgan, a Chrysler spokeswoman, declined to comment.

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Chrysler News-U.S. Tries to Broker Sale Of Chrysler's Loan Arm

The Treasury Department is racing to engineer the sale of Chrysler's financing arm in a move the administration deems vital to saving the troubled automaker, but other federal agencies have not given their support, sources familiar with the matter said.

The Obama administration wants the nation's largest auto-financing company, GMAC, to buy Chrysler Financial, which is the primary source of lending for Chrysler dealerships and car buyers, industry officials said. But GMAC needs a new round of backing to buy its longtime rival, sources said.

Treasury officials have not yet obtained the agreement of the Federal Deposit Insurance Corp. and the Federal Reserve, sources said. The FDIC, created to backstop the banking industry, is balking out of concern that its resources would be drained in support of an auto manufacturer. And the Fed, which regulates banks, would need to grant a waiver from a long-standing rule that separates banking and commerce.

The dilemma over Chrysler Financial highlights the debate over the how far the government should stretch its financial rescue programs to help failing automakers. Despite reservations, regulators already anointed GMAC a bank holding company in December so it could access the federal bailout for financial companies and help preserve General Motors. Now regulators are being asked to preserve another storied American automaker.

Even if a deal is reached for Chrysler Financial, the fate of the car manufacturer remains uncertain. The Obama administration's auto industry task force and Chrysler's lenders remained in a standoff yesterday. If an agreement with the lenders cannot be reached to forgive most of their $6.9 billion in loans to the company, Chrysler is set to file for bankruptcy by Thursday, sources said. The sources spoke on condition of anonymity because of the sensitivity of the discussions....More

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Massive Cuts at GM - shed 23,000 jobs, kill Pontiac brand

WASHINGTON – General Motors Corp. will cut an additional 7,000 to 8,000 factory jobs in the United States, kill the Pontiac brand and shed 2,600 dealers by 2010 under a revised business plan developed under the Obama administration's eye.

The plan, along with an offer to bondholders to exchange $27 billion in GM debt for about 10% of a reconstituted GM and a small amount of cash, makes clear that the automaker's fate over the next few weeks rests with President Barack Obama. His auto task force set the terms of the bond deal and the goal of having 90% of the debt exchanged, and the U.S. government would become GM's majority shareholder if the plan succeeds.


GM Chief Executive Officer Fritz Henderson warned today that should the exchange not meet the task force's target, GM would file for bankruptcy on or before June 1. To succeed, GM will need thousands of GM debtholders to agree -- from individuals to some of the largest investors in the world -- by May 26.


"It's not impossible, but it’s a tough task," Henderson said, adding: "If we were to materially fall short, we would fall into a bankruptcy process."


As part of the debt offer, GM said, the administration would consider converting 50% of its loans to the company into GM stock. Combined with a similar request to the UAW for converting half of the $20 billion owed to a retiree health-care trust to shares, the plan envisions the government owning at least 50% of a reconstituted GM and the union holding about 39%.


Obama's auto task force said in a statement today that GM’s offer was an “important step,” but noted that its concessions hinge on bondholders and the UAW agreeing as well.


“We will continue to work with GM's management as it refines and finalizes this plan and with all of GM's stakeholders to help GM restructure consistent with the president’s commitment to a strong, vibrant American auto industry,” the task force said.


The new plan Henderson unveiled would get GM to profits in a U.S. market of 10 million vehicles -- a far lower rate than GM imagined just a couple of months ago. Should the debt swap succeed, GM will cut its debt by $44 billion and its structural costs by 25% by 2010.

"The objective here is not to survive, the objective is to develop an operating plan that allows us to win," Henderson said.


The new job cuts bring the total number of hourly jobs eliminated under GM’s plan to 21,000 by 2010 and 23,000 by 2011. GM said additional cuts among salaried workers would be expected, but did not give a specific target. As it had indicated earlier this month, GM now plans to close 13 plants by 2010 and an additional five plants by 2012.

Henderson said the Pontiac brand would be closed by 2010, calling it an “extremely personal decision.” In addition to speeding up decisions on Saturn, Saab and Hummer, GM will be left with four brands – Chevrolet, Buick, GMC and Cadillac.


He said while talks continue on Saab and Hummer, there was no deal on the table yet for Saturn that would allow GM to keep building those models beyond this year.


GM said it now expects it will need $27 billion in total from the Treasury to withstand the recession, including the $15.4 billion it's already received. That includes $2.6 billion it will need this quarter and an additional $9 billion after that, some of which includes the cost of deeper job cuts and plant closings.

Henderson said dealers targeted for closing would begin hearing from GM in a matter of weeks. Dealers have been apprehensive about a GM bankruptcy, but it's not clear how quickly GM could close outlets given a bevy of state laws protecting dealers.

Through the cuts in brands and models, GM will shed 14 models through 2010, although the Chevrolet Volt electric car remains on track for a 2010 launch

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The UAW and Chrysler;Concessions or Bankrupt

Latest Article From Time.


Despite the pressure of Chrysler's April 30 deadline to pull off a rescue package — or face potential bankruptcy — the United Auto Workers has been in no rush to make concessions. "As I see it, the United Auto Workers union has a choice. They can [shed] some jobs or they can take a pay cut," says a financial consultant based in Detroit. "Naturally when you're faced with two bad choices, there is a natural tendency to procrastinate."

The carmaker's management is struggling to assemble a rescue package that in addition to any UAW givebacks will have to include closing more plants and getting big help from Italian carmaker Fiat, which would contribute its own small-car designs and technology. Failure would saddle major banks with $7 billion in new losses, leave Chrysler's former owner, Daimler AG on the hook for more than $1 billion in additional pension costs and wipe out the health care for thousands of Chrysler retirees.

The foot dragging on Chrysler is affecting GM, too. In a Friday conference call with the media, GM chairman Fritz Henderson lamented that GM's own union negotiations are being slowed because the UAW won't move forward until the Chrysler/Fiat negotiations are resolved. That makes sense: Whatever terms Chrysler gets will be a precedent for GM, too. GM faces a June 1 deadline from the U.S. government to produce sufficient cuts to ensure viability.

It's understandable why the UAW isn't rushing to embrace a new agreement. According to Harley Shaiken, a labor expert at the University of California at Berkley and occasional consultant to the UAW, the union and its Canadian counterpart are grappling with demands for big cuts in their wages and benefits — on the order of 25% to 30% — by Chrysler and Fiat. The demanded rollbacks could reduce wages and benefits, presently pegged at $29 per hour, by $6 to $8 per hour. "There is no doubt these are very serious cuts and they're being made under very tight deadlines and under very serious pressure," Shaiken says. "That will be a bitter pill on either side of the border," he says. Neither Chrysler nor Fiat has made its demands public.

Many of the current negotiations trace back to the terms of the original government loans. As a condition of Chrysler's loan agreement, the UAW must accept a 50% reduction in payments to its retiree health care trust and match the Japanese transplants' hourly labor costs, says Chrysler spokeswoman Dianna Gutierrez. "The Canadian government has taken a similar position as it relates to the CAW," she notes.

Union representatives in the U.S., however, complain the current demands go beyond those spelled out in the December loan agreement. The union has already committed to eliminating productivity bonuses due this year and next, to changes in the way overtime pay is computed, and to the elimination of the traditional cost-of-living allowances as well as to cuts in the special supplemental unemployment benefits for employees with less than 20 years seniority. Sources close to the negotiations tell TIME that the union has not yet agreed to the changes in funding Chrysler's health-care trust, which was established in 2007.

With the negotiations in a crucial phase, UAW President Ron Gettelfinger declined to discuss Chrysler. "He's not talking to anyone," a UAW spokeswoman said.

Yet the UAW knows where things are headed. "I don't think this is going to have a very happy ending," says one UAW official, who asked not to be identified. But he noted it was inevitable the union will have to accept additional cuts. One of the union's fears, though, is that the negotiations turn into a sort of arbitrage that sets active Chrysler workers against retirees — a split the UAW has always sought to avoid. "People are angry. Where do you draw the line and say to hell with it and just let them go into bankruptcy?" says one disgruntled UAW member.

Some creditors seem to think the company's assets could be worth more if they were divided up in bankruptcy court — an option opposed by Michigan's Democratic governor and congressional representatives, who are putting pressure on the Obama administration to keep the company from being broken up in bankruptcy.

In the meantime, Chrysler is melting away. In response to pressure from Obama administration, Chrysler has proposed more plant shutdowns. Set to be closed, according to sources familiar with the discussions inside the company, are assembly plants in St. Louis, Mo., and Brampton, Ontario; engine plants in Detroit, Trenton, Mich., and Kenosha, Wis.; and another plant in Mexico that builds big engines. Chrysler's assembly plant in Sterling Heights, Mich., also has been identified by some analysts as a possible candidate for closure. If executed, the shutdowns would further downsize a company that is already far smaller than it was only two years ago. Since the beginning of 2007, Chrysler's employment in the U.S. has dropped from 68,000 to around 38,000 today.

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Fiat CEO: Cut Wages or No Chrysler Deal

Fiat CEO: Cut Wages or No Chrysler Deal

The Obama administration's attempt to shepherd a shotgun marriage between Chrysler and Fiat appears to be in serious trouble. Fiat CEO Sergio Marchionne is demanding major concessions from labor unions before agreeing to any deal — and is offering next to nothing in return.

Fiat is prepared to scrap the deal and look elsewhere for an international partner if the unions do not agree to match the lower labour costs of Japanese and German plants in the United States and Canada, Mr. Marchionne said in an exclusive interview with The Globe and Mail at the Italian auto maker's headquarters in Turin. “Absolutely we are prepared to walk. There is no doubt in my mind,” he said. “We cannot commit to this organization unless we see light at the end of the tunnel.”

Mr. Marchionne, 56, said Chrysler workers on both sides of the border have to end their sense of entitlement if the wrecked auto maker is to have any chance of repairing itself. “The minute you talk to me about historical entitlement in an organization that is technically bankrupt, it's a nonsensical discussion,” he said. “There is no wealth to be distributed.”

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Chrysler Demands A $19 Per Hour Wage Cut

Chrysler CAW workers are in protest and rightfully so.

Friday CAW workers were told they must make an impossible decision to save Chrysler Canada a $19 per hour Wage cut!

Chrysler Canada workers burned CEO Nardelli's Letter to employees and told Chrysler no way could they cut hourly wages by $19 per hour.

Chrysler claims it will pull operations out of Canada if the Union does not meet it's demands.

The new soon to be Chrysler CEO Sergio Marchionne makes the same case for the UAW.

Fiat has stated that If it does not take significant hour wage concessions it will walk away from the Chrysler deal and let Chrysler go bankrupt. Once Chrysler goes bankrupt it can buy up what it wants. More than likely that would only be two assembly plants and the dealer network.

Which this the most likely scenario for US Chrysler autoworkers.
The UAW will go down to the second tier rate that was negotiated in 2007 of $14.50 for assembly workers and $17.50 for Skilled Trades workers.

That is a $15 per hour wage cut and that is huge!

The next two weeks are going to be unbearable for Chrysler Workers.

Someone save the middle class.......

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GM, Chrysler in line for more federal aid from The Auto Task Force

Chrysler in line for $500M more; GM weighs fate of Pontiac, GMC

Robert Snell and David Shepardson / The Detroit News
Washington -- The Obama auto task force is preparing to loan General Motors Corp. about $5 billion in additional federal short-term aid, and Chrysler LLC $500 million, an Obama administration official familiar with the matter said Thursday.

The disclosure assigns a dollar amount to the pledge of continued short-term support issued late last month by the administration, after it rejected GM's and Chrysler's restructuring plans and requests for up to $21.6 billion in additional assistance. The official said the decision was expected to be announced next week -- though the precise amounts were still the subject of talks between the government and the automakers.

The White House said Thursday night no decision had been made about how much either automaker will receive. "No decisions have been made on how much working capital GM and Chrysler will be getting," said spokeswoman Amy Brundage...More

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