Chrysler to file for bankruptcy

Chrysler to file for bankruptcy
http://tinyurl.com/d24d9u

Some lenders refuse offer to reduce debt, leading to Chapter 11
bankruptcy filing. But Chrysler will remain in business and complete
deal with Fiat.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: April 30, 2009: 12:08 PM ET

NEW YORK (CNNMoney.com) -- Chrysler LLC is going to file for bankruptcy
"almost immediately," a senior Obama administration official said
Thursday. But a deal has been reached to combine the company with Fiat
that will allow Chrysler to stay in business.

The bankruptcy filing,which will be made in federal court in New York,
comes after some of the company's smaller lenders refused a Treasury
Department demand to reduce the amount of money the troubled automaker
owed them.

A senior administration official said there will be no immediate job
cuts or plant closings due to the bankruptcy filing, although he said
that Fiat will be examining the cost structure of Chrysler to find
additional savings. Fiat has promises to use Chrysler's existing plants
to build the small cars it now sells in Europe for the U.S. market.

An unspecified number of Chrysler's 3,300 dealerships which now sell the
Chrysler, Dodge and Jeep brands will be closed under the bankruptcy,
although the administration official said that many of those closings
will take place after the company emerges from bankruptcy.

Administration officials said the Treasury Department will provide
Chrysler with $3 billion to $3.5 billion in additional loans to fund
operations during bankruptcy.The government anticipates that it will
provide an additional $4.5 billion of financing to allow Chrysler to
exit bankruptcy, hopefully within 30 to 60 days.

Chrysler had asked the government earlier this year for $6 billion in
new federal loans to help it stay in business. That's on top of the $4
billion in loans it has already received.

Chrysler officials had no comment on the bankruptcy report. The company
faces a Thursday deadline from the Treasury Department to reach deals
with creditors who had loaned the company about $7 billion.
Last-minute deals ensured Chrysler's survival

But the filing will not mean the halt of operations or liquidation for
the troubled 85-year old automaker. Instead, the administration expects
to use the bankruptcy process to join Chrysler with Italian automaker Fiat.

In addition, the United Auto Workers union announced late Wednesday
night that its membership at Chrysler had overwhelmingly ratified a
concession contract reached between the company and union leadership on
Sunday night.

President Obama said during a press conference Wednesday night that he
was more confident than he had been 30 days ago that Chrysler would be
able to emerge from the process as a healthy, competitive company.

The administration said Wednesday evening that talks with the smaller
lenders broke down when they refused to meet a deadline set by the
Treasury Department to accept pennies on the dollars they had loaned the
company.

Major banks such as Citigroup (C, Fortune 500) and JPMorgan Chase (JPM,
Fortune 500) agreed to reduce their portion of $7 billion in secured
loans to a more manageable $2.25 billion, according to the
administration official. But some smaller lenders, including hedge
funds, refused to accept the deal.

But an administration official said "the agreement of all other key
stakeholders ensured that no hedge fund could have a veto over
Chrysler's future success."

Chrysler and the rest of the auto industry have been hit by a sharp
plunge in sales due to the global recession and tighter credit.
Chrysler's U.S. sales during the first three months of this year were
down 46% from year ago levels. That followed an industry-worst 30% slide
in sales last year.

Being privately held, Chrysler has not released its financial results
for recent years. But the company needed a $4 billion federal loan in
the closing days of the Bush administration to avoid running out of
cash, while rival General Motors (GM, Fortune 500) received the first of
what turned out to be $15.4 billion in federal loans so far.

Those federal bailouts staved off an uncontrolled bankruptcy at Chrysler
that could have caused a rash of failures across the auto supplier
industry and disrupted production at other automakers. Chrysler owes its
suppliers about $7 billion, according to the latest figures available
from the company. Some of those suppliers could still be hurt by the
bankruptcy filing.

Chrysler is only a fraction of its former self. It has about 39,000 U.S.
employees, only about 40% of the total it had at the beginning of the
decade. It has fallen behind not only Toyota Motor (TM) in sales, but it
is close to being overtaken by Honda (HMC) for the No. 4 spot for U.S.
sales.

The company also has about 3,300 dealers who between them have 140,000
employees. It also has 65,000 U.S. retirees as well as their family
members who depend upon the company for pension benefits and heath care
coverage.

Cars that wrecked Chrysler [slideshow]
http://tinyurl.com/dz3lpb

 

This is the reason for Fiat's involvement. To keep 20% of Chrysler out
of the hands of hedge funds. Practically nothing more.

The monster that wrecked Chrysler:

http://tinyurl.com/d7t7fx

 

Daimler-truth indeed.