Auto Task Force Saved Chrysler-Now Fiat Takes Control

Fiat takes the wheel at troubled Chrysler
The Associated Press

DETROIT — Italy’s Fiat is the new owner of most of Chrysler’s assets, closing a deal Wednesday that saves the troubled U.S. automaker from liquidation and places a new company in the hands of Fiat’s CEO.

The deal clears the way for a new, leaner Chrysler Group LLC to emerge from bankruptcy protection minus billions in debt, 789 underperforming dealerships and burdensome labour costs that nearly sank the storied automaker.

Fiat CEO Sergio Marchionne immediately was named CEO of the new company, which said in a statement that it would soon reopen Chrysler factories in the United States and Canada that were idled during the bankruptcy process, costing the automaker US$100 million per day.

The new company will focus on smaller vehicles, areas in which Chrysler was weak.

"Work is already under way on developing new environmentally friendly, fuel-efficient, high-quality vehicles that we intend to become Chrysler’s hallmark going forward," the new company said in a statement.

The Italian automaker won’t put any money into the deal but will give Chrysler billions of dollars worth of small car and engine technology.

"We intend to build on Chrysler’s culture of innovation and Fiat’s complementary technology and expertise to expand Chrysler’s product portfolio both in North America and overseas," Marchionne said in a statement.

The Chrysler restructuring involved billions of dollars in financial aid from the U.S., Canadian and Ontario governments as well as labour, pension and other cost concessions from the United Auto Workers and Canadian Auto Workers unions.

In Ottawa, Canadian Industry Minister Tony Clement welcomed the sale and emergence of Chrysler from bankruptcy restructuring "in a timely and efficient manner."

"The government of Canada is confident that we will see a competitive Chrysler Canada Inc. that will produce and sell Canadian-made cars and will continue to play an important role in the company’s North American operations," Clement said in a release.

"A restructured Chrysler is good news for the Canadian auto parts supply chain and for Canadian consumers. The company can now focus on producing top quality vehicles that consumers want.

"Moving forward, the government of Canada will continue to work toward strengthening our country’s auto industry, while exercising rigorous oversight over the use of taxpayer money."

The sale to Fiat SpA marks a victory for the Obama administration, which shepherded Chrysler into bankruptcy protection April 30 with the hope that the company would emerge in a matter of months with a new partner.

Marchionne immediately made management changes, including the appointment of vice-chairman and president Jim Press as deputy CEO and adviser to help with the management transition.

Press, formerly top U.S. executive for Toyota Motor Corp., joined Chrysler shortly after it was taken over in 2007 by private equity firm Cerberus Capital Management LP.

In a statement, Marchionne said the organization will be designed to give leaders broad control and increase the speed of decision making.

Chrysler CEO Bob Nardelli bid employees farewell in an email obtained by The Associated Press, while vice-chairman Tom LaSorda already has retired.

Marchionne, in an email to Chrysler employees Wednesday, expressed confidence that Fiat will be able to turn Chrysler around.

He wrote that he stepped into a similar situation five years ago at Fiat, which at the time was perceived as a failing, bureaucratic automaker that made low-quality cars.

Yet most of the people capable of remaking Fiat were there all the time, he wrote.

"We have remade Fiat into a profitable company that produces some of the most popular, reliable and environmentally friendly cars in the world," he wrote.

"We created a far more efficient company while investing heavily in our technologies and platforms. And, importantly, we created a culture where everyone is expected to lead. We can and will accomplish the same results here."

On Tuesday, Chrysler won its battle to erase its secured debt after the Supreme Court declined to rule on objections to the sale to Fiat from a trio of Indiana pension and construction funds.

The Indiana funds, which hold less than one per cent of Chrysler’s US$6.9 billion in secured debt, claimed the sale unfairly favours Chrysler’s unsecured stakeholders such as the union ahead of secured debtholders like themselves.

Supreme Court Justice Ruth Bader Ginsburg decided Monday to delay the sale while studying the appeals.

But on Tuesday, the court turned down the opponents’ last-ditch bid by declining a hearing on the appeals.

Also on Tuesday, Judge Arthur Gonzales approved Chrysler’s motion to terminate 789 of its dealer franchises, or about 25 per cent of its dealer base.

Many of those dealers closed their doors for good on Tuesday, though some will continue to sell used cars or other brands.

Chrysler has maintained that the closures are a necessary part of its plan to cut costs.

Press told a Senate committee that the poor performance of many of the dealers slated to lose franchises costs the company $1.5 billion in lost sales each year, along with $150 million in advertising and marketing costs and $33 million in administrative costs.

The dealers had argued that they cover their own costs and little would be gained by terminating their franchises.

Chrysler lawyers said the automaker would extend until Monday its program to help the affected dealers send any unsold vehicles to stores that will remain open.

Chrysler’s swift passage through about five weeks of bankruptcy proceedings was helped by the involvement of the Obama administration’s auto task force, which provided billions in financing and helped negotiate a deal with the company’s stakeholders.

Under the agreement brokered in the days leading up to Chrysler’s Chapter 11 filing, Fiat will receive up to a 35 per cent stake in the automaker in exchange for sharing the technology Chrysler needs to create smaller, more fuel-efficient vehicles.

The United Auto Workers union will get a 55 per cent stake that will be used to fund its retiree health care obligations, while the U.S. and Canadian governments will receive a combined 10 per cent stake.

Chrysler sale to Fiat appealed To The Supreme Court

Indiana pension funds group asks Supreme Court to block deal

David Shepardson / Detroit News Washington Bureau

Washington -- Lawyers for a group of Indiana pension funds have filed a long-shot emergency appeal with the U.S. Supreme Court seeking to block a deal that would allow Chrysler LLC's emergence from bankruptcy, which could come as early as today.

The appeal came a day after a three-judge panel of the U.S. Court of Appeals in New York approved the sale of Chrysler's "good" assets from bankruptcy to form a new company, Chrysler Group LLC. That firm will be majority owned by a United Auto Workers' health care trust fund. Fiat SpA, which will own 20 percent, will be able to acquire another 15 percent of Chrysler by meeting three benchmarks and will not have to put up any money for its stake. Fiat's CEO Sergio Marchionne will be CEO of Chrysler as well.

In a 39-page appeal filed before midnight Saturday, lawyers for the pension funds wrote: "The negative economic consequences of permitting an unlawful sale to proceed may well over time dramatically outweigh Chrysler's short-term harm. The public is watching and needs to see that, particularly when the system is under stress, the rule of law will be honored and an independent judiciary will properly scrutinize the actions of the massively powerful executive branch."

The petition was referred to Justice Ruth Bader Ginsburg, who handles emergency appeals for the 2nd Circuit. She can rule on the matter herself or refer it to the entire Supreme Court. Five of the nine justices would need to vote to hear the appeal and extend a stay blocking Chrysler's sale. By late Sunday evening, the court had not yet ruled.

The Indiana funds hold $100 million of Chrysler's $6.9 billion in secured debt. The funds cover about 100,000 workers and retirees in Indiana.

The U.S. Appeals Court on Friday upheld a May 31 bankruptcy court ruling clearing the way for the sale of most of Chrysler's assets to a group including Fiat and the UAW's health care trust fund. The UAW fund will hold a 55 percent stake, while the U.S. and Canadian governments will hold 10 percent. Fiat has the right to withdraw from the deal if Chrysler hasn't exited bankruptcy by June 15.

The appeals court gave creditors until 4 p.m. today to convince the Supreme Court to hear the case. If not, Chrysler could close on its sale soon afterward.

Much of the Indiana pension funds' arguments against the sale rely on internal e-mails between Chrysler and members of the Obama auto task force, which showed the overarching role of the government in pushing Chrysler into bankruptcy and directing the carmaker's actions ahead of the filing.

Legal experts said the creditors have a high hurdle to vault, since the High Court accepts just a fraction of the cases it receives -- and even fewer emergency cases for review.

But the case would represent the first time the court could rule on the legality of the $700 billion Troubled Asset Relief Program, the Wall Street bailout fund that Congress approved last fall. The creditors have challenged the use of the funds for automakers.

The Treasury Department agreed to pay off secured creditors of Chrysler with $2 billion in cash for $6.9 billion in debt -- or about 29 cents on the dollar.

The Indiana funds purchased the debt at an average price of 43 cents on the dollar -- meaning they would lose roughly $13 million on their $42 million investment.

Dealers Fight Chrysler Franchise Cuts in Court

NEW YORK, June 4 -- Eldon Palmer was preparing for a grand opening of his upgraded Chrysler dealership -- a $3.2 million project he pursued at the automaker's urging -- when the letter came.

In formal language that seemed to belie their 52-year business relationship, Chrysler informed Palmer that his Indiana dealership, along with another he runs, would be among the 789 dropped as the automaker seeks to emerge from bankruptcy as a new leaner, healthier company.

"We were ready to roll," said Palmer, recounting the millions he has spent over the past two years expanding his Chrysler brands and putting them under one roof in a new facility. He had done so, Palmer added, at the request of Chrysler, which was trying to establish a more efficient dealership network.

One after another, Chrysler dealers slated for closure took the witness stand Thursday in a federal bankruptcy courthouse in Lower Manhattan. Some openly wept.

Chrysler, which plans to emerge from bankruptcy as a new company led by Italian automaker Fiat, is seeking court approval to terminate agreements with roughly a quarter of its dealerships. Thursday's hearing is to be followed by oral arguments Tuesday, after which U.S. Bankruptcy Judge Arthur J. Gonzalez will rule.

Chrysler executives have said that whittling down a bloated dealer network was necessary to be more competitive with foreign manufacturers. The executives said the company used business criteria such as sales productivity and customer service satisfaction to determine which dealers to cut. Chrysler also wants to bring its three product lines -- Chrysler, Dodge and Jeep -- under one dealership roof.

During cross-examination by a Chrysler attorney, Palmer acknowledged that his dealership met a mere 37 percent of its sales target for 2008. "It was embarrassing," Palmer said, in part blaming the poor showing on the condition of the building he purchased, which he has since renovated. "It is a beautiful facility now.

Larry Crain, a dealer in Little Rock, told a similar story, saying he invested in expanding his product offering at the encouragement of Chrysler. And like many others, Robert Melvin, a Nevada dealer, testified that he bought more cars from the company in recent months at the request of executives as Chrysler, faced with plunging sales, tottered on the brink of bankruptcy with insufficient cash flow.

He received a rejection letter last month. To his dismay, Melvin added, he received a shipment of more cars from Chrysler last week.

Despite the dealers' pleas, bankruptcy experts said the dealers have an uphill legal battle. In bankruptcy proceedings, companies have more leverage to ignore state franchise laws that protect dealers. And even if the dealers succeed in preserving their dealership agreements, the nature of the Chrysler case complicates the dealers' battle.

Chrysler is seeking to sell most of its assets to a new company led by Fiat, but the dealer contracts are with the "old" Chrysler that is being liquidated.

"It's a long shot," said Scott Van Meter, managing director of LECG, a consulting firm.

Furthermore, in an opinion approving the sale this week, Judge Gonzalez noted that the underlying argument of many opposing the transaction is the desire to have the government protect every stakeholder from economic loss -- not just those that the government perceives as being essential to the survival of a successful new Chrysler.

"For example, any dealership rejection that is approved will cause hardship to the particular dealership involved but may well be necessary if New Chrysler is to survive," Gonzalez wrote.

Chrysler-Fiat Will become A Global Powerhouse

J. Travis-Gm Chrysler News

As Fiat SpA CEO Sergio Marchionne is in the process of wrapping up the Fiat Chrysler deal, he is also working on purchasing GM Operations overseas, Saab, Opel(Saturn) and building a global network quickly.

If Fiat is going after GM-Opel operations, it may target some of GM's domestic brands like Saturn and Pontiac.Because the Opel vehicles and Saturn vehicles are on the same platform....?

The new Chrysler-Fiat line up of vehicle brands could be quit impressive:
Alfa Romeo,Fiat,Ferrari,Maserati,Jeep,Chrysler,Dodge,Saab,Opel(Saturn),Joint ventures with Kia,Mitsubishi,TaTa and Nissan.

By time the smoke clears Chrysler-Fiat will be larger than GM and only second in the World to Toyota! Which they could easily surpass Toyota if the auto markets pick up around the world.

I would guess Sergio believes in go big or go home.....

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.

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.

Auto Task Force-Obama To Announce-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.

Chrysler Canada News-CAW

Chrysler must slash labour costs to receive gov't funding: industry minister

TORONTO — Chrysler Canada must slash its labour costs to a level competitive with non-unionized plants in Canada, and the pattern established in an earlier deal reached between General Motors Canada and its union isn't good enough, says federal Industry Minister Tony Clement.

Chrysler has said it needs to reduce its hourly labour costs by $19 an hour to be competitive with Toyota and Honda plants in Canada, but the Canadian Auto Workers union has so far insisted that it will stick to the pattern set in its March labour agreement with GM - which reduces that company's costs by about $7 an hour.

But Clement said the CAW will have to give up more to protect Canadian jobs.

"The CAW has to recognize that in order for Chrysler to survive in this country, that Chrysler has to be competitive with the rest of the Canadian market," Clement said at a news conference in Toronto on Thursday.

"If everyone is saying - and they are saying - that Chrysler, in order to be competitive, has to go beyond the pattern in terms of cost reductions and cost competitiveness, I believe the CAW has to have regard for that," he added.

Chrysler has been given until April 30 to negotiate a partnership with Italian automaker Fiat and to reach deals with its workers, bondholders and other stakeholders in order to receive long-term bailout loans from governments in Canada and the U.S.

The company spent several days in intensive labour negotiations with the CAW at the end of March, but those broke off after governments rejected its original restructuring plans.

This week, Fiat CEO Sergio Marchionne said he will walk away from the proposed partnership - widely considered to be Chrysler's last chance to avoid bankruptcy and possibly liquidation - if Chrysler can't reduce its labour costs to a level competitive with German and Japanese assembly plants in both Canada and the United States.

The CAW and Chrysler will head back to the bargaining table Monday, and two people briefed on the United Auto Workers' negotiations told The Associated Press on Thursday the U.S. union has placed talks with General Motors (NYSE:GM) on the back burner as it tries to forge a concession agreement with Chrysler.

Clement said Thursday that if Chrysler is unable to reach a deal with the CAW - and therefore cement its alliance with Fiat - the Canadian government will not provide the company with the emergency loans it has been asking for.

"With April 30 looming very closely on the horizon, the CAW has to do its part," Clement said.

"I know this is difficult. I know this affects real workers and towns and cities across Ontario. This is not an easy thing, but the alternative is, there is no deal in place and if there's no deal in place there will not be long-term funding arrangements with the government of Canada."

The federal and Ontario governments have already lent $250 million to Chrysler Canada at the end of March so it could meet payroll and other immediate obligations. Clement said the government would also have the right to call that loan if a deal isn't reached.

"If you're asking whether I'm willing to funnel Canadian government money and taxpayer money when we do not have an acceptable plan on a go-forward basis, I cannot do that. I don't think that would be responsible," Clement said.

Clement has also said the earlier agreement reached between the CAW and GM doesn't meet the conditions of long-term government loans and has asked the two parties to cut labour costs further.

However, GM CEO Fritz Henderson said the deal does make the company cost competitive and the CAW has refused to re-enter negotiations.

Chrysler said it is working hard to meet the governments' conditions by the April 30 deadline.

"All parties have complete understanding that Chrysler must achieve the necessary concessions and restructuring targets that have been established," the company said in an emailed statement.

"As it moves through this process, the company believes it is important to keep all options open but Chrysler's goal is to reach a conclusion by April 30 that the government deems viable, given the guidelines that have been set."

Clement was in Toronto to unveil a $145-million program called Automotive Partnership Canada, which he said will jump-start the development of higher tech, more environmentally friendly cars.

The program, which was initially announced in the Conservative government's 2008 budget, is also designed to help the struggling auto sector conserve jobs and rebuild.

Clement said the investment will be used to stimulate research and development in alternative fuels, next-generation manufacturing, advanced power trains and lighter or more sustainable materials.

Fiat CEO: Concessions or no alliance with Chrysler

The latest Chrysler News-

Santiago Esparza / The Detroit News

Fiat Group SpA CEO Sergio Marchionne is ready to walk away from a proposed alliance with beleaguered Chrysler LLC if the automaker's union workers do not agree to concessions that would put their pay on the same scale as workers at U.S. plants owned by foreign car companies.

In a story posted today on The Toronto Globe and Mail's Web site, Marchionne said not getting concessions from the UAW and CAW are a breaking point for talks.

"Absolutely we are prepared to walk," he said in the story. "There is no doubt in my mind. We cannot commit to this organization unless we see light at the end of the tunnel." ....More

White House questions viability of GM, Chrysler

WASHINGTON — President Barack Obama said Monday that neither General Motors nor Chrysler has proposed sweeping enough changes to justify further large federal bailouts, and demanded "painful concessions" from creditors, unions and others as their price for survival.

Obama also raised the possibility of a controlled bankruptcy to help either or both "restructure quickly and emerge stronger" — uttering the term that industry and union officials have warned repeatedly could lead to the collapse of an entire domestic industry.

With his words, Obama underscored the extent to which the government is now dictating terms to two of the country's iconic corporations — forcing the departure of Rick Wagoner as CEO of General Motors, and bluntly warning it may pull the plug on either or both companies.

The Bush administration late last year approved $17 billion in federal funds to help GM and Chrysler survive. It also demanded both companies submit restructuring plans that the Obama administration would review.

Even as he pronounced their effort unsatisfactory, the president said the administration will offer General Motors "adequate working capital" over the next 60 days to produce a reorganization plan acceptable to the administration.

He said Chrysler's situation is more perilous, and the government will give the company 30 days to overcome hurdles to a merger with Fiat, the Italian automaker. If they are successful "we will consider lending up to $6 billion to help their plan succeed," he said.

Obama spoke at the White House with the Big 3 standing at yet another crossroads. As the president noted, the industry has shed over 400,000 jobs in the past year as the recession took hold. Officials announced last week bailout funds would be made available to companies that supply the automakers, an attempt to keep them afloat.

Obama said he is committed to the survival of an auto industry — on terms that will allow it to compete internationally.

"But we also cannot continue to excuse poor decisions," he said. "And we cannot make the survival of our auto industry dependent on an unending flow of tax dollars."

Chrysler and Fiat must merge or Face Liquidation

From The Ap
Chrysler and Fiat must merge to get more help for the Auto Task Force

Frustrated administration officials, speaking on condition of anonymity ahead of Obama's announcement, said Chrysler has been given a 30-day window to complete a proposed partnership with Italian automaker Fiat SpA. The government will offer up to $6 billion to the companies if they can negotiate a deal before time runs out. If a Chrysler-Fiat union cannot be completed, Washington plans to walk away, leaving Chrysler destined for a complete sell-off....More

Obama and Auto Task Force Say there will be Major Restructuring coming to GM and Chrysler

Obama on autos: Aid ahead but at a price

GM, Chrysler updating plans for revival

WASHINGTON -- Heading toward Monday's announcement of his plans to help Detroit's auto industry, President Barack Obama said Thursday that the carmakers would need to make painful changes to get more federal help.

I think it is appropriate for us to say, 'are there ways for us to provide help to the U.S. auto industry to get through this very difficult time?' " he said during an online question-and-answer session. "But the price is you've got to finally restructure to deal with these long-standing problems.
"That means that everybody's going to have to give a little bit -- shareholders, workers, creditors, suppliers, dealers -- everybody is going to have to recognize that the current model, economic model of the U.S. auto industry is unsustainable."


His task force is expected to unveil a framework Monday that sets new terms for General Motors Corp. and Chrysler LLC to get more federal help beyond the $17.4 billion in loans they already have.


While noting the credit crisis and a sales slump that may reach new lows in March, Obama also revived criticisms of the industry he made in a 2007 speech to the Detroit Economic Club. He chastised the car companies for mismanagement, and said they could not rely on gas-guzzling SUVs as their sole source of profits.


"If they're not willing to make the changes," he said, "then I'm not willing to have taxpayer money chase after bad money."

Meanwhile, GM and Chrysler are preparing updates to their turnaround plans in the face of ever-worsening U.S. sales.

On Thursday, two forecasters pegged March's auto sales at annual rates below 10 million vehicles, the worst-case scenarios envisioned by the automakers.

Lowering their sales and production forecasts would raise the chances of even-deeper cuts, following GM's announcement Thursday that about 7,500 UAW workers agreed to buyouts and early retirements.

Here's a look at where their turnaround plans stand:

Workers
Chrysler, GM

• The UAW tentatively has agreed to end the so-called jobs bank, which pays laid-off workers most of their regular pay. The union also has made other unannounced concessions. Talks continue on replacing some cash payments the companies were to make for what the union's retiree health care trust is owed with company stock....More

Auto Task Force Set to Back More Loans -- With Strings

Latest Report on the Auto Task Force From The Wall Street Journal

By NEIL KING JR. and JOHN D. STOLL
President Barack Obama last month handed his auto-industry team a seemingly impossible task: to engineer the most complicated industrial restructuring ever attempted by the federal government, and to do it fast.

With almost no experience in the car business, the team's dozen core members have undergone a crash course in the myriad woes plaguing the U.S. auto industry. Within days, just over a month after setting to work, they'll begin announcing decisions.

Interviews with task-force members indicate that the administration doesn't want to let General Motors Corp. and Chrysler LLC slip into bankruptcy protection, a course advocated by some critics of the industry. Instead, the task force is expected to say that it sees viable futures for both GM and Chrysler, but only if there are sacrifices from their managements, unions and GM's bondholders. The team will also lay out a firm timeline for action.

The government is prepared to lend the companies more money. The two companies have requested $22 billion more -- including $9 billion for the second quarter. But the task force may not disburse new aid immediately, choosing instead to preserve that as leverage.

Hanging in the balance are the jobs of 140,000 GM and Chrysler employees, more than 10,000 dealerships across the country, and a large swath of the industrial base in the Midwest.

On Wednesday, the task force met with officials from Chrysler and Italy's Fiat SpA and indicated it is still interested in seeing the two companies form an alliance, as the companies have proposed, according to two people who attended the meeting.

It's clear the team is not yet ready to put forward a comprehensive fix. "It's a steep learning curve that they've been climbing, and there is still a lot to do," said Michigan Rep. Gary Peters, whose district in suburban Detroit houses hundreds of auto suppliers, a few days after meeting with the task force. "That's why I suspect they'll come out with some preliminary statements, and then get back to work."

In session after session in a warren of offices at the Treasury Department, the team has sat through tutorials on dealer financing, studied basic data and debated the future of U.S. car sales. They have spent days trying to understand the complexities of the hundreds of companies that supply the car companies with axles, seats and other parts......More

Nardelli Tells Auto Task Force Chrysler Needs More Money

Chrysler CEO Bob Nardelli called Tuesday for a second round of funding for the company's financial arm that would enable sales to customers who otherwise can't qualify for loans.

In an interview with CNBC, Nardelli also said Fiat would assume 35% of Chrysler's debt if the U.S. Treasury Department approves its proposed alliance with the Italian automaker.

Chrysler is operating with $4 billion in loans, and it's seeking $5 billion more.

But in the CNBC interview, Nardelli emphasized the effectiveness of a separate $1.5-billion loan the Treasury made to Chrysler Financial in January. Chrysler used that loan to subsidize zero-percent loans on new vehicles...More

Chrysler CEO encouraged by task force progress

Chrysler LLC Chief Executive Bob Nardelli said Tuesday that he's encouraged by the focus of President Barack Obama's auto industry task force on job preservation, but he added that all options for Chrysler are still being considered.

Nardelli said during an appearance on cable network CNBC that the task force hasn't told him that a bankruptcy protection filing at Chrysler is out of the question.

"No they haven't said that," Nardelli said. "What they have said is that they're very intent on preserving, you know, 40,000 or 50,000 direct jobs."

Nardelli said it's crucial that Chrysler get some kind of an indication by March 31 as to if its request for $5 billion in federal aid will be granted, adding that the denial of the aid would be "devastating" for the automaker.

Steven Rattner, a top adviser to the task force, said in an interview with The Associated Press on Monday that the task force was trying to successfully restructure the auto makers during a difficult economic downturn....More

The Auto Task Force Visited GM and Dodge Truck

After the big visit by the Auto Task Force Yesterday, everyone is waiting for some response from the Presidential us auto task force.

Here is an article from Mlive on the Auto Task Force Visit.


Obama's auto task force scrutinizes GM, Chrysler operations
by Rick Haglund | Detroit Bureau

DETROIT -- Top members of President Barack Obama's automotive task force scrutinized operations of General Motors Corp. and Chrysler LLC as a March 31 deadline looms for the two automakers to prove viability.

At least four task force members were in Detroit on Monday, meeting privately with the automakers' executives and leaders of the United Auto Workers union.

"They're taking a deeper look at the auto companies and doing a lot of due diligence," said Stephanie Brinley, an auto analyst in the Southfield office of consultant AutoPacific. "The attempt is there. That's certainly a step in the right direction."

GM and Chrysler are being kept alive by $17.4 billion in federal loans. GM is asking for as much as $16.6 billion more, including $2 billion by March 31. Chrysler says it needs $5 billion by March 31 to stay in business.

The task force's visit was led by Steven Rattner, Obama's chief auto adviser, and Ron Bloom, a former investment banker who has served as an adviser to the United Steelworkers union.

They visited GM's technical center and a Chrysler truck plant in Warren. Task force members also drove several advanced propulsion vehicles, including the Chevrolet Volt electric extended-range car.

No details were released about any of the meetings with automaker executives.

"We believe today's visit provided a constructive glimpse of GM people, their passion for their work and the technology solutions that are behind the pages of our viability plan," GM said in a statement.

The visit comes as Republicans in Congress are ratcheting up opposition to more financial support for the ailing automakers.....More Mlive

Will The Auto Task Force Help Detroit?

Well the March 31, 2009 Deadline is quickly approaching for Chrysler and General Motors. This is the dealine for the viability plans to be in place for the two automakers.

Today 03/09/09 President Obama's Auto task Force is visiting Detroit, they will be at The GM Tech Center and Warren Truck the Plant That builds the New Dodge Ram.

Most of us here in Michigan are wondering if the Auto Task Force is leaning toward helping the Big Three, well GM and Chrysler for now or is this just a show?
We shall soon see!

Obama auto task force to come to Detroit next week

Article about Auto Task Force From The Detroit Free Press
WASHINGTON -- Leaders of President Barack Obama’s auto task force will travel to Detroit next week to meet with industry and labor officials worried about an imminent collapse of several companies absent federal aid.

An administration official said final details of the trip were still being worked out, but the task force visitors will include advisers Steven Rattner and Ron Bloom.


The task force has been conducting a string of meetings over the past two weeks to gather information and assess the depth of the problems facing the industry. General Motors Corp. and Chrysler LLC have said they need a total of $7 billion before the end of the month to avoid bankruptcy, and several suppliers are also on the brink.


Fiat Chief Executive Sergio Marchionne met with Rattner, Bloom and other members of the task force for two and a half hours today to discuss Fiat’s proposed alliance with Chrysler. Fiat has said it would take a 35% stake in Chrysler in return for sharing vehicle designs that could be used for several new Chrysler models.

Buy The Domain Name AutoTaskForce.Com-Website

Chrysler News-Cerberus defends not pumping more funds into Chrysler

Stephen Feinberg-Founder of Cerberus Capital Management LLC


Private-equity fund responds to New York Times editorial

Chrissie Thompson
Automotive News
March 2, 2009 - 12:43 pm ET

Cerberus Capital Management LP wants more federal loans for Chrysler LLC in order to avoid "excessive risk-taking" that contributed to Wall Street's demise, Cerberus' COO said today in The New York Times.

Mark Neporent, COO of the private-equity fund that owns 80.1 percent of Chrysler, made the comments in a letter responding to a critical Times editorial last week.

The Times had said Chrysler's restructuring plan submitted Feb. 17 to the Treasury Department was "little more than an assurance that it has already cut costs and accomplished most of what it had to do." The newspaper questioned why Cerberus is not putting more money into Chrysler, as "private-equity funds like Cerberus are supposed to do."

Cerberus intends to protect its investors through rules that limit how much capital it can commit to an individual company, Neporent said in his letter.

"Why should these retirees, universities and charities, simply because they are represented by a private investment manager, be required to take additional risks or make additional investments, when GM or Ford shareholders are not?" he wrote.

Neporent said Cerberus had appointed a "world-class management team" that "has executed many of the hard operational fixes that other American car companies are only now addressing." He reiterated Cerberus' willingness to surrender its equity stake in Chrysler Automotive, convert debt to equity and put $2 billion in other Chrysler interests on a lower priority behind the government's loans.

The Times' editorial had called the 100,000-unit production cut Chrysler offered in its Treasury restructuring plan "paltry." The automaker would then have "capacity to make almost 1 million vehicles more than it will sell this year -- on the questionable assumption that demand, and its market share, will bounce back next year," the editorial said.

The Times suggested the government had good reasons to say no to Chrysler's request for $5 billion in federal loans in addition to the $4 billion it has already received.

"It seems the secretive private-equity fund is willing to gamble on Chrysler's survival with the taxpayer's dime, but not its own," the editorial said. "Saying no might even make Cerberus reconsider and put up some cash of its own."

Cerberus took control of Chrysler in August 2007, appointing former Home Depot CEO Bob Nardelli to the automaker's top position. Nardelli, who had a reputation as a tough cost-cutter, hired former Home Depot executive John Campi as purchasing chief. Campi has since resigned, but not before withholding bailout cash from now-liquidated Plastech Engineered Products Inc. and litigating with other suppliers.

Other changes have included the arrival of Toyota's Jim Press to run Chrysler's dealer and marketing operations and Nardelli's $1.5 billion overhaul of 400 fit-and-finish problems in Chrysler vehicles.

Presidential Task Force on the Auto Industry-GM, Chrysler need to build sought-after cars

Article from The Detroit Free Press

If the Presidential Task Force on the Auto Industry wants to ensure the U.S. auto industry's success, it should make sure every plan that GM and Chrysler present answers one simple question:

Why are people going to buy this car?"

Get a good answer to that, and declare mission accomplished.

The task force must, of course, deal with a host of other issues. It will oversee concessions from labor, bondholders and car dealers. It has to help the automakers craft a plan to broaden product lines and simultaneously reduce their production capacity to profitable levels.

Those are remedial measures, however. They stanch the arterial bleeding, but do not save the patient.

Survival flows from long-term profitability, and that can only come from a model line rich with vehicles that people desire.

The calculus of desire is an immensely complicated equation, as anyone who's ever been on a date knows.

In the case of a vehicle, certain things are givens: safety, fuel economy, reliability. They are the equivalent of showing up for a date at the right time and place: You have to get them right, but that's just the start.

Does she make you laugh? Does he like the same music and movies you do? Does the way she thinks surprise and interest you? Does he listen when you talk? Do you keep looking because you keep finding new things to like?

Those, and more, are the elements of attraction, whether it's a dinner that lasts three hours or a car you commit to paying for over the next five years....More