Chrysler Bankruptcy
November 11th, 2009 | by admin |
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Chrysler Bankruptcy
After months of living on government loans, Chrysler finally succumbed to bankruptcy, pinning its future on a top-to-bottom reorganization and plans to build cleaner cars through an alliance with Italian automaker Fiat. The nation’s third-largest car manufacturer filed for Chapter 11 bankruptcy protection in New York after a group of creditors defied government pressure to wipe out Chrysler’s debt. The company plans to emerge in as little as 30 days as a leaner, more nimble company, probably with Fiat as the majority owner. In return, the federal government agreed to give Chrysler up to $8 billion in additional aid and to back its warranties.
Chrysler said it will close all its plants and they will stay 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. 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. Lee Iacocca, the retired chairman and CEO who led Chrysler through a government bailout in the late 1970s, said it was a sad day. The government has sunk about $25 billion in aid into Chrysler and rival General Motors Corp.
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 get access to the North American market through Chrysler factories and dealerships.
The White House said Chrysler could come out of “surgical” bankruptcy in 30 to 60 days. Under normal circumstances, it would be difficult to complete such a large bankruptcy so quickly. The Fiat deal and bankruptcy cap a disastrous time for Chrysler. The Auburn Hills, Mich.-based company lost $8 billion last year and its sales through March were down 46 percent compared with the same period last year, 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.
For more useful information on bankruptcy, please visit Debt Relief Adviser.
Wire Closet Organizers
Chrysler Bankruptcy
After months of living on government loans, Chrysler finally succumbed to bankruptcy, pinning its future on a top-to-bottom reorganization and plans to build cleaner cars through an alliance with Italian automaker Fiat. The nation’s third-largest car manufacturer filed for Chapter 11 bankruptcy protection in New York after a group of creditors defied government pressure to wipe out Chrysler’s debt. The company plans to emerge in as little as 30 days as a leaner, more nimble company, probably with Fiat as the majority owner. In return, the federal government agreed to give Chrysler up to $8 billion in additional aid and to back its warranties.
Chrysler said it will close all its plants and they will stay 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. 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. Lee Iacocca, the retired chairman and CEO who led Chrysler through a government bailout in the late 1970s, said it was a sad day. The government has sunk about $25 billion in aid into Chrysler and rival General Motors Corp.
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 get access to the North American market through Chrysler factories and dealerships.
The White House said Chrysler could come out of “surgical” bankruptcy in 30 to 60 days. Under normal circumstances, it would be difficult to complete such a large bankruptcy so quickly. The Fiat deal and bankruptcy cap a disastrous time for Chrysler. The Auburn Hills, Mich.-based company lost $8 billion last year and its sales through March were down 46 percent compared with the same period last year, 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.
For more useful information on bankruptcy, please visit Debt Relief Adviser.
Wire Closet Organizers
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