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.

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

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.

Auto Task Force-GM to 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.

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.”

From Canada's Globe

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

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.

UAW focusing on talks with Chrysler

DETROIT – The United Auto Workers union has placed concession talks with General Motors Corp. on the back burner as it tries to reach a deal with Chrysler LLC before an April 30 government deadline, two people briefed on the negotiations said Thursday.

The decision likely means that any deal with Chrysler will set the pattern for concessions granted to GM as both companies try to show the government they have cut costs enough to get more government loans.

The people, who spoke on condition of anonymity because the talks are private, said the union is focusing on Chrysler because its government deadline to cut labor costs and swap debt for equity is just two weeks away.

Chrysler also has to ink an alliance deal with Fiat Group SpA by April 30 to get more government aid. Without further help, Chrysler likely would be auctioned off in pieces under bankruptcy court supervision.

GM's government deadline is June 1, but the Obama administration said it will provide bankruptcy financing if the company can't successfully restructure outside of court.

GM spokeswoman Sherrie Childers Arb and UAW spokeswoman Christine Moroski would not comment on the negotiations. Chrysler spokeswoman Shawn Morgan would not comment beyond a statement that the company has a goal is to reach a conclusion by April 30.

The Canadian Auto Workers union has said that it plans to resume negotiations with Chrysler on Monday after Fiat CEO Sergio Marchionne said the Italian automaker will walk away from the proposed tie-up unless Chrysler's unions agree to major cost cuts.

Canadian Industry Minister Tony Clement said Thursday that the CAW must make significant concessions to ensure Chrysler survives. Without a deal in the next two weeks, the Canadian government will also shut down its support for the troubled automaker, Clement said.

Chrysler, GM and Ford Motor Co. all reached concession deals with the UAW in February to limit overtime, cut lump-sum cash bonuses and eliminate cost-of-living pay increases. The union also agreed to suspend the jobs bank in which laid-off workers are paid most of their wages.

Workers at Ford, which is not receiving government aid, ratified their deal, but the GM and Chrysler agreements were never presented to union members because they got hung up on funding for a union-run trust that will take over retiree health care expenses next year.

Then, the Obama administration said last month that the cuts outlined in GM and Chrysler's viability plans didn't go far enough, and the union would have to give up more. Just how much more has not been stated publicly.

GM has received $13.4 billion in government loans and may need more money this month as it tries to survive the worst auto sales downturn in 27 years. Chrysler has received $4 billion and may also need more funding to stay alive until its deadline.

The government said it will lend Chrysler up to $6 billion more if it completes a deal with Fiat and gains concessions from unions and debtholders.

But creditors that hold $6.9 billion in Chrysler debt — mostly banks and hedge funds — have rejected an offer from the Treasury Department to erase the debt for $1 billion. They are preparing a counteroffer that likely will include more cash and an equity stake in the company.

A committee representing the holders of $28 billion in GM bonds is awaiting an offer from the company that aims to slash its unsecured debt by at least two-thirds.

Associated Press Writer Rob Gillies in Toronto contributed to this report.

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

Will The Auto Task Force Have A Sit On Chrysler's New Board?

Chrysler and potential partner Fiat are discussing a new management and board for the U.S. automaker under a proposed alliance that could see Fiat take a stake in Chrysler, Automotive News reported on Monday.

Chrysler is racing to complete a partnership with the Italian automaker by April 30, with the Obama administration warning the alternative would be bankruptcy.

The two automakers are discussing a new seven-member board for Chrysler that would include representatives from Fiat and possibly President Barack Obama’s automotive task force overseeing the restructuring of the auto industry, Automotive News reported, citing sources close to the negotiations.

Chrysler's new deal-Different owners and Marchionne-led management team

Article from the Automotive News-

Different owners, a new board of directors and maybe a Marchionne-led management team

TURIN, Italy — As Chrysler LLC negotiates an alliance with Fiat S.p.A. that would satisfy the Obama administration, sources say the companies are discussing a revised ownership structure, a new board and possibly a different management team for Chrysler.

Among the options being discussed is a direct role in Chrysler's operations for Fiat CEO Sergio Marchionne — possibly even the chief executive's job.

Sources close to the merger negotiations say that after completing the deal, the plan is to elect a seven-member Chrysler board that would include representatives from Fiat and possibly President Barack Obama's automotive task force.

But the companies face major obstacles in getting the deal done. The ownership of the future Chrysler is still subject to complex negotiations involving Cerberus Capital Management LP, Daimler AG, the UAW and the big banks that hold Chrysler's debt.

A person familiar with the negotiations said the new management structure would divide the roles of CEO and chairman between two executives. The job of Chrysler chairman would be held by an American, the source said.

Since 2007, Chrysler's chairman and CEO jobs have been held by Bob Nardelli, appointed by Cerberus.

On March 30, Obama gave Chrysler and Fiat until the end of April to prove their alliance is workable. The government then would grant Chrysler up to $6 billion in additional loans. Chrysler already has received $4 billion.

Obama impressed

Marchionne (mar-kee-OHN'-nay) — the energetic, chain-smoking architect of Fiat's turnaround — has led the Italian automaker since 2004. In his March 30 speech about the auto industry, Obama praised Marchionne and described Fiat as a company where "the current management team has executed an impressive turnaround."

Another source familiar with the negotiations said Obama's task force may even dictate that Marchionne be directly involved in running Chrysler.

It's unclear whether Marchionne would try to exert hands-on control of Chrysler in the style of Carlos Ghosn, the CEO of Renault and Nissan. But there is evidence that he might try. The 56-year-old executive already spends several days each month in the United States, usually at the offices of Fiat's Case New Holland subsidiary in suburban Chicago.

Every other Friday evening, Marchionne boards a chartered overnight flight, snatching a few hours of sleep and arriving Saturday morning in Chicago. After two days working in America, he catches the red-eye return flight on Sunday.

Marchionne, who speaks accent-free English, holds both Italian and Canadian citizenships and earned university degrees in Toronto and Windsor, Ontario. He spent a decade working in Canada.

Asked about possible changes, Chrysler spokesman Todd Goyer issued a statement: "Chrysler has no management changes to announce. The job of Chrysler's current management team is to get the company on a solid foundation moving forward."

Obstacles remain

Speaking last week at the New York auto show, Chrysler co-President Jim Press said he is optimistic that Fiat and Chrysler can meet the government's requirements and form an alliance.

But he cautioned that Chrysler is preparing for bankruptcy if the alliance does not work out. "We've got to be prepared to take care of the equity and the assets," he said.

Besides the negotiations over the ownership of the future automaker, Chrysler negotiators are in talks with UAW officials about reducing Chrysler's $10.6 billion obligation to the union's health care trust.

The Treasury Department also is negotiating with the major banks holding $6.9 billion in Chrysler debt, according to a Bloomberg News Service report. Bloomberg said the four largest lenders are JPMorgan Chase & Co., Citigroup, Goldman Sachs Group and Morgan Stanley.

Cerberus has offered to give up its stake in Chrysler. Cerberus Chairman Stephen Feinberg is involved in the negotiations. Cerberus also must iron out a dispute in its effort to acquire Daimler's 19.9 percent stake in Chrysler. Cerberus aims to consolidate its ownership as part of the overall plan to restructure the company.

Speaking at a shareholder meeting last week in Berlin, Daimler CEO Dieter Zetsche said Cerberus was making "unacceptable" demands in negotiations to acquire the remainder of Daimler's stake.

The two sides have been wrangling since November over a Cerberus request to acquire Daimler's stake. Daimler sold majority ownership of Chrysler to Cerberus in 2007.

Government Auto Task Force May Split Up Chrysler's Equity

Instead of Cerberus Capital Management and Daimler AG holding 80.1% and 19.9%, respectively, of Chrysler LLC, there will be a larger cast.

Under the latest scenario proposed by the U.S. government, Fiat SpA will have the largest block of Chrysler, at 20%. The remaining 80% will be allocated among a variety of secured creditors that include at least five banks and U.S. taxpayers.

Cerberus and Daimler likely will hold much smaller stakes because they still hold loans that helped finance the August 2007 acquisition of the Auburn Hills-based automaker.

Even the UAW could end up owning a piece of the company.

"They are trying to trade debt for equity among the current creditors," said Tom Stallkamp, a former DaimlerChrysler vice chairman and president. He is now a partner in Ripplewood Holdings LLC, a private equity fund. "It's all based on how much of a haircut the debt holders will accept."

Coincidentally, those debt holders include some of the giant banks -- J.P. Morgan Chase, Citicorp, Morgan Stanley and Goldman Sachs -- that auto industry advocates argue have benefitted from a double standard in how they accounted for government loans.

Debt-for-equity talks
There are three levels of Chrysler debt secured by such assets as manufacturing plants, equipment, vehicles, parts and real estate. The first level, valued by Chrysler at $6.9 billion, was borrowed from the banks. The second is $2 billion borrowed from Daimler ($1.5 billion) and Cerberus ($500 million). The third is the $4.3 billion in government loans committed in December and January.

If Chrysler were to file for bankruptcy, the banks would be first in line to sell assets, followed by Cerberus and Daimler, and finally the federal government.

"This is the worst possible time to be selling an auto plant," said Shelly Lombard, a credit analyst with Gimme Credit in New York.

Chrysler, Fiat and President Barack Obama's auto task force are working hard to avoid that outcome. To succeed, they must secure breakthrough agreements with the banks and the UAW. Then, the task force has said it would release up to $6 billion more to fund Chrysler's operations.


Unlike GM, which is dealing primarily with bondholders, Chrysler's debt is owed to banks and the government. Some of the bank loans have been sold to hedge funds and other investors. "It's hard to know who bought what, even with bonds, and it's harder still with bank loans," Lombard said.


One of the banks likely will act as an agent for the hedge funds. Then, the task force leaders, Steven Rattner and Ron Bloom, will negotiate for a settlement that offers the banks a fraction of the loans' face value in exchange for shares in the new Chrysler.

Challenges ahead
Fiat so far has not offered cash and has said it will not assume any current debt to partner with Chrysler. While Chrysler has valued Fiat's vehicles and powertrain technology at $8 billion to $10 billion, that won't likely satisfy the banks.

"Fiat is in many ways a reasonable long-term solution," said Craig Fitzgerald of Plante & Moran. "The big question is will $6 billion more from taxpayers be enough to fund Chrysler's turnaround."

The challenge with the UAW is to find a non-cash method to cover half of $10.6 billion Chrysler owes in 2010 to the Voluntary Employee Beneficiary Association, or VEBA, trust fund. The trust was created to cover health care insurance for UAW retirees.

If Fiat doesn't offer cash or its own stock, Chrysler may offer the union stock in the new company. Such a deal would save $5.3 billion, which could be enough to satisfy Obama's demand for more concessions, and bring the UAW into partnership with banks, taxpayers, Cerberus and Fiat.....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