Chrysler on their way to survival

[clubracergt1]

Hopefully this works better for Chrysler than it did for United (?) Airlines:

UAW members ratify Chrysler contract concessions

Workers approve by more than 4-to-1 margin, union says


David Barkholz
Automotive News
April 29, 2009 - 10:38 pm ET
UPDATED: 4/29/09 11:34 p.m. ET


Chrysler's UAW members, facing the specter of the automaker seeking bankruptcy as early as Thursday, approved contract concessions that may help the company win additional U.S. rescue loans.




The UAW said 82 percent of production workers, 80 percent of the skilled trades, 90 percent of clericals and 94 percent of engineers voted for approval. Vote totals weren't released.

"This has been a challenging time filled with anxiety and uncertainty for our membership," UAW President Ron Gettelfinger said. "Our members have responded by accepting an agreement that is painful for our active and retired workers, but which helps preserve U.S. manufacturing jobs and gives Chrysler a chance to survive."

The ratification by Chrysler's 26,000 U.S. hourly workers resulted from two days of voting. The contract requires the UAW to accept Chrysler equity for half the $10.6 billion obligation that the automaker owes a retiree health-care trust that the union will administer.

The agreement will give the UAW 55 percent of the ownership in a proposed new Chrysler-Fiat partnership. (See box below.)

"Today's vote enables us to continue our work to meet the conditions laid out by the U. S. Treasury Department," Chrysler President Tom LaSorda said in a statement.

Even with the concessions, it remains unclear whether Chrysler can avoid filing for bankruptcy protection.

The Obama administration has set a midnight deadline on Thursday for Chrysler to show it can become viable through an alliance with Fiat S.p.A. Chrysler needs the Fiat deal and concessions from workers and creditors to qualify for as much as $6 billion in rescue loans on top of $4 billion received already.

Terms of the concessionary contract allow Chrysler to hire as many new workers as it can at a wage and benefit rate roughly half that paid to veteran UAW workers. The new terms eliminate until 2015 a 20 percent cap on the number of these lower-paid workers in the Chrysler U.S. work force.

The rank-and-file also gave up cost-of-living allowances, bonuses and some break time.

The UAW agreement follows a concessionary package approved Sunday by the Canadian Auto Workers. That deal will save Chrysler about C$240 million ($200.2 million) annually.

Four New York banks have also agreed to reduce the secured debt owed them by Chrysler. The banks, which represent about 70 percent of $6.9 billion in secured loans, said they would take $2 billion in cash for their holdings.

Another 40 banks and hedge funds holding the balance of that debt must still approve the change.

President Obama, in an evening news conference before the UAW vote was released, said it is still too early to tell if Chrysler can reorganize without a bankruptcy filing. If one is necessary, he said it could be done quickly.

Said Obama: "I'm actually very hopeful, more hopeful than I was 30 days ago, that we can see a resolution that maintains a viable Chrysler."

New Contract Details
Below are some key points for the text of the UAW's revised contract with Chrysler, which covers 26,800 UAW-represented workers:
ÔÇó In exchange for concessions, the UAW is to get 55 percent stake in Chrysler
ÔÇó Italian car maker Fiat S.p.A. will "eventually" get a 35 percent stake in Chrysler
ÔÇó The U.S. government and Chrysler's secured creditors will split a 10 percent stake between them.
ÔÇó Chrysler will pay a new note to a retiree health care trust with a principal amount of $4.587 billion note
ÔÇó Further annual cash payments under that new note would start at $300 million for 2010 and 2011, then increase to $400 million in 2012 and $600 million in 2013. Annual payments would rise to $650 million for 2014 through 2017, then $823 million for 2019 through 2023.
ÔÇó Fiat would provide "key" engine technology -- such as 3.0 liter diesel and 1.4 liter gasoline engines -- that the UAW said would be "equivalent" to an investment of $8 billion and create 4,000 new UAW jobs.
ÔÇó Under the agreement UAW workers would be paid overtime after working 40 hours a week
ÔÇó The cost-of-living-allowance would be suspended.
ÔÇó Workers would lose of Easter Monday holiday in 2010 and 2011
ÔÇó Workers would lose their performance bonuses in 2009 and 2010
ÔÇó Workers would lose their Christmas bonuses in 2009 and 2010.

[Darryl Buckner]

Sorry to say it, or maybe not, the UAW is the biggest problem the car manufacturers have, but I still hate to see it..

[clubracergt1]

I agree fully, Darryl. It's a shame really. Everybody has a right to earn a decent wage; but the UAW needs to make concessions to keep jobs in the states.

[clubracergt1]

More news:

Chrysler to file for bankruptcy as Fiat deal appears close

Talks with bondholders halted; Obama to speak at noon



Automotive News
April 30, 2009 - 7:48 am ET
UPDATED: 4/30/09 10:01 a.m. ET


WASHINGTON (Reuters) -- Chrysler LLC will proceed with Chapter 11 bankruptcy protection now that talks with debt holders have broken down, an administration official said today.




Chrysler also appears close to wrapping up its partnership agreement with Italian automaker Fiat S.p.A. by a U.S.-ordered midnight deadline.

President Barack Obama and the federal auto task force are scheduled to make a statement on the Chrysler reorganization today at noon.

Chrysler this morning still had not gained the bondholder support it needs to move forward with a restructuring and avoid the first-ever bankruptcy filing by a Detroit 3 automaker. Talks among those parties and the U.S. Treasury broke down overnight despite a sweetened Treasury offer.

An administration official with knowledge of the talks said the holdout creditors were provided a final opportunity to approve an increased offer of $2.25 billion in cash, up from $2 billion, in exchange for writing off all of Chrysler's $6.9 billion in secured debt. They were given a deadline of 6 p.m. Wednesday.

"While the Administration was willing to give the holdouts 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," the official said.

"Their failure to act in either their own economic interest or the national interest does not diminish the accomplishments made by Chrysler, Fiat and its stakeholders, nor will it impede the new opportunity Chrysler now has to restructure and emerge stronger going forward."

Prospects for an alliance with Fiat were enhanced when UAW workers voted to approve concessions late Wednesday. Italian newspaper Corriere Della Serra reported Thursday morning that a deal with Fiat had been signed, but Fiat later denied this.

While getting a Fiat deal done is a key part of Chrysler's historic day, bondholders still hold the key.

"I think there is reasonable optimism that (a deal between Fiat and Chrysler) can be closed with an announcement perhaps even by President Obama today," Italian Industry Minister Claudio Scajola told Italian television on Thursday.

Chrysler, owned by Cerberus Capital Management LP, is among the world car industry's weakest players. Its plight reflects a slump in demand facing an industry whose $2.6 trillion annual revenue is equivalent to the GDP of France and which employs over 9 million people.

Obama more hopeful

On Wednesday, Obama said concessions by Chrysler's unions and its major bank lenders had made him more hopeful than a month ago that the automaker could be made viable.

But he added it was still not clear if Chrysler would need to seek bankruptcy protection to cement concessions from lenders and move ahead with the Fiat deal.

The White House has set a series of aggressive targets for Chrysler in order to justify another $6 billion in investment on top of $4 billion in emergency loans the government has extended since the start of the year.

The No. 3 U.S. automaker has also won cost-cutting concessions from its Canadian union. Putting Chrysler and Fiat together would give the combined group annual sales of some 4.16 million vehicles, making it equal with Hyundai and behind Toyota, General Motors, Volkswagen and Ford.

Fiat CEO Sergio Marchionne thinks a carmaker needs to produce at least 5.5 million cars a year to survive.

Under the terms of the proposed partnership, Fiat would get access to the U.S. market and a minority stake in Chrysler in exchange for the technology to make small cars and access to overseas markets. No cash would change hands.

Scajola said the Chrysler deal would also give the Italian company "good cards" to play in a reorganization of the European car sector, where speculation has linked Fiat to France's Peugeot and the Opel unit of GM.

Sweeter deal for bondholders

But in the final stretch before the deadline for a deal, the focus for Chrysler was on ongoing debt restructuring talks spearheaded by the Obama administration's autos task force and former investment banker Steve Rattner.

In a bid to win over three fund management firms that had spurned an offer to accept $2 billion in cash in exchange for writing off all of Chrysler's $6.9 billion in secured debt, U.S. officials sweetened the terms by throwing in another $250 million, people involved in those discussions said.

About 45 financial institutions hold Chrysler's secured debt.

Chrysler's race to restructure has played out as a kind of prelude to the slower-moving process under way for GM.

GM, which has been kept in operation with $15.4 billion of U.S. government funding, has until June 1 to push ahead with its own restructuring which includes plans to shrink its U.S. dealership network by 40 percent in less than two years.

Neil Roland contributed to this report.

[clubracergt1]

I've got a whole lot more of this stuff, if anyone is interested.

[05Saleen]

Alway's interested. Spread the word.

[clubracergt1]

Give me a few. Chrysler is blowing up

[clubracergt1]

Chrysler to switch to GMAC for financing

Donna Harris
and David Barkholz
Automotive News
April 30, 2009 - 12:01 pm ET
UPDATED: 4/30/09 2:09 p.m. ET


Chrysler LLC will switch to GMAC Financial Services for its financing as part of its bankruptcy reorganization, a senior White House official said today.




"GMAC will become the financing source for new Chrysler cars," the official said on background. GMAC will handle both wholesale and retail financing.

"We made the determination that Chrysler Financial did not have the resources" to meet a reorganized Chrysler's needs, he said.

During the credit crisis, the asset-backed securities market that both finance companies heavily relied on for funding dried up. They were unable to bundle loans and leases and sell them to investors, who had become skittish about the auto industry.

As a result, both GMAC and Chrysler Financial turned to the federal government for aid. GMAC Financial Services received $6 billion; Chrysler Financial received $1.5 billion.

Chrysler Financial and GMAC already have cross ownership. Cerberus Capital Management LP, which owns Chrysler LLC, owns Chrysler Financial and had held a 51 percent stake in GMAC. Cerberus is reducing the stake in GMAC as the financier converts its status to a bank holding company.

Chrysler Financial is burning its cash more quickly than GMAC. And though both Chrysler Financial and GMAC applied with the federal government to become bank holding companies, only GMAC was approved. So while Chrysler Financial's cash is dwindling, GMAC is able to tap the GMAC Bank's growing deposits. Deposits are a relatively inexpensive source of financing.

GMAC also has provided commercial and retail financing for non-GM dealers in the past and expressed interest in expanding this business. Through the GMAC Bank, for example, it recently launched a dealership mortgage program that is open to dealers of all makes.

PRESS RELEASE: GMAC Financial Services Enters Agreement to Provide Financing for Chrysler Dealers and Customers

NEW YORK, April 30 /PRNewswire/ -- GMAC Financial Services today announced that it has entered into an agreement with Chrysler LLC to provide automotive financing products and services to Chrysler dealers and customers. GMAC will be the preferred provider of new wholesale financing for Chrysler dealer inventory and has a four-year agreement for incentivized retail financing with limited exclusivity.

The U.S. government has indicated that it intends to support GMAC in promoting the availability of credit for dealers and customers by making liquidity and capital available and by providing the capitalization that GMAC requires to support the Chrysler business.

"GMAC is pleased to be part of the solution to restructure and stabilize the U.S. auto industry," said GMAC Chief Executive Officer Alvaro G. de Molina. "Providing financing options to dealers and consumers is critical as we work through one of the most challenging periods in the global auto sector. We will leverage our strengths and capabilities as the leading automotive finance company to serve our new customers, while maintaining our commitment to current customers.

"Serving as the primary source of financing for Chrysler is consistent with our strategy to diversify our automotive business," de Molina said. "We intend to work through the operational process quickly and effectively to ensure that the appropriate level of credit is available to support the sale of Chrysler vehicles."

GMAC will leverage its servicing platform to provide customer service for the newly originated assets. GMAC has not acquired the existing assets or liabilities of Chrysler Financial.

The majority of Chrysler dealers and consumers are located in the U.S., while there are smaller concentrations of business in Canada and Mexico and other international markets.

GMAC was advised by Wachtell, Lipton, Rosen & Katz and Morgan Stanley in this transaction.

[clubracergt1]

THE CHRYSLER BANKRUPTCY


Nardelli to leave Chrysler once bankruptcy completed

Bradford Wernle
Automotive News
April 30, 2009 - 1:34 pm ET

Chrysler LLC CEO Bob Nardelli says he will step aside after the company emerges from Chapter 11 bankruptcy.




"Now is an appropriate time to let others take the lead in the transformation of Chrysler with Fiat," Nardelli said in a statement. "I will work closely with all of our stakeholders to see that this new company swiftly emerges with a successful closing of the alliance."

The White House expects the bankruptcy case to take 30 to 60 days.

Nardelli came to Chrysler in August 2007 after Cerberus Capital Management LP took an 80.1 percent stake in the automaker. He has guided the company through negotiations with the UAW and the U.S. Department of Treasury auto task force. Chrysler has been surviving on a $4 billion Treasury loan.

Nardelli, who turns 61 on May 17, represented the company in congressional hearings late last year. He plans to return to Cerberus as an adviser.

David Kelleher, a Philadelphia Chrysler-Dodge-Jeep dealer, praised Nardelli and Chrysler's management team.

"If people on top of the board hadn't done the job they did in the last six months, we wouldn't have a company," Kelleher said.

A senior administration official praised "the incredible role of Chrysler management and CEO Bob Nardelli. He led the team to this place and really deserves recognition for what he did."

[clubracergt1]

THE CHRYSLER BANKRUPTCY


Chrysler will idle most plants while in bankruptcy

David Barkholz and
and Robert Sherefkin
Automotive News
April 30, 2009 - 2:47 pm ET

DETROIT -- Chrysler LLC will idle most of its plants during its time in bankruptcy.




The shutdown begins Monday and will stretch through the 30 to 60 days it is expected to take to restructure in Chapter 11 bankruptcy, the company said in a statement today.

Chrysler has 12 assembly plants, including eight in the United States. It also owns and operates five North American engine plants, six stamping plants and seven transmission and parts plants.

Chrysler has 26,000 UAW workers and 10,000 represented by the Canadian Auto Workers.

Chrysler spokesman David Elshoff confirmed the plan. He said he would provide details as soon as he could today.

The plant shutdown will further strain a supply base stressed by a 50 percent vehicle production cut in North America since the start of the year. General Motors also plans to shut most of its plants for nine weeks beginning in May to reduce excess dealer inventories.

[clubracergt1]

But, wait... There's more:

Ford looks to gain from Chrysler bankruptcy

Mark Rechtin
Automotive News
April 30, 2009 - 3:34 pm ET

And the winner is ... Ford.




With Chrysler LLC in bankruptcy -- and the possibility of General Motors to follow suit -- analysts predict a giant shift in market share. They expect an exodus of customers who don't trust that a bankrupt automaker will be around tomorrow to service a car bought today.

Import brands should benefit, but "Buy American" sentiment still rings true with a large number of customers who will overlook generations of Dodge or Chevrolet loyalty and jump to Ford Motor Co.

The stakes are huge. For all the talk of "damaged" brands, Pontiac, Saturn, Hummer, Chrysler, Dodge and Jeep combined for 25.5 million sales from 2000-08, according to AutoPacific.

"All these buyers don't have a home anymore," said George Peterson, president of market research firm AutoPacific in Tustin, Calif. "All the other automakers are rubbing their hands together, although they'll all deny it. The day the bankruptcy announcement is made, the airwaves will be filled with rival brands' advertisements."

Already, consumer qualms about the "for sale" sign on GM's Saturn brand has helped trigger a 52 percent decline in dealership visits compared with last year, Peterson said. But a bankruptcy filing probably would make that seem minor.

No love for a loser

About 20 percent of consumers polled by TNS Automotive said they were less likely to shop an American automaker that received government aid. But the figure rises to 37 percent when bankruptcy is part of the equation.

Only 12 percent said they would rally to an imperiled American automaker receiving government aid. That dropped to 8 percent if the company has filed for bankruptcy, according to TNS.

"Buy American" sentiment was not enough to save American television manufacturers when they came under siege in the late 1960s from imported brands, said Lincoln Merrihew, TNS Automotive senior vice president.

"Ford looks like the quiet winner, when you look at emotional 'Buy American'-based purchases," Merrihew said. "Ford coincidentally has key fresh and new product now and in the coming months."

Todd Turner, principal of Car Concepts, a consulting firm in suburban Los Angeles, believes Ford would be a "big winner" should a competitor file for bankruptcy.

Between 22 and 30 percent of new-vehicle shoppers describe themselves as "always buy domestic" or "prefer to buy domestic," according to Car Concepts data.

"I suspect this is not lost on Ford in their quest to avoid accepting government money," Turner said.

"Of course, people lie, especially on surveys," Turner added. "The real analysis indicates that maybe half would go to Ford and the rest to other players in the industry, with Toyota, Honda, Nissan and the Korean brands expected to be the lucky recipients."

Asian brands typically top the cross-shop lists for domestic cars and smaller crossovers, meaning Toyota, Honda, Nissan, and Hyundai could cement their dominance in passenger cars.

On the truck side, however, the Detroit 3 still mostly duke it out among themselves. That means Ford could extend its lead in F-series sales, as well as revive its slumping SUV sales, Merrihew said.

Some automakers will be better positioned than others when it comes to ramping up capacity quickly to increase sales. Ford, Toyota and Nissan have the most capacity available in North America, AutoPacific's Peterson said.

"Toyota has been fine-tuning its capacity to the point that Toyota Motor Sales U.S.A. was caught by surprise by … how quickly the Tupelo (Miss.) plant delay was," Peterson said. "But Toyota can ramp up just as quickly, and Nissan really needs to fill its capacity fast."

'Respectful' competitors

Capitalizing on another's misfortune will be a delicate marketing dance. Rival automakers don't want to look like vultures, but this will be a prime opportunity to seize market share.

Merrihew said competing advertising likely will be "respectful" and focus on value, quality, residual values and warranty. A foreign brand might tout how long it has been in business in America or how many American employees work in its factories.

"We typically compete with Toyota, and not necessarily with Detroit," said Steve Center, vice president of advertising for American Honda Motor Co. "In some vehicles there's a big opportunity. The Pilot and Odyssey have gone toe-to-toe with Chrysler since the late-'90s."

A bankrupt automaker also will have a difficult challenge in marketing its long-term viability, Center said.

"You can say you back up the warranty, but what happens if a key part supplier goes away because of your bankruptcy?" Center said. "What about getting that spare part?"

Merrihew said the only positive marketing message that could come from a bankruptcy would be a "Welcome to the new Chrysler" campaign, even if consumers have heard that before.

[Slowleen]

Its terrbile...i've bought 2 new fords in 8 months...i did my part LOL

[clubracergt1]

Chrysler/Fiat deal looke to be done:

Highlights of Chrysler's bankruptcy, Fiat deal


April 30, 2009 - 6:09 pm ET

WASHINGTON (Reuters) --The Obama administration summarized its plan for Chrysler's Chapter 11 bankruptcy and Chrysler's alliance with Fiat S.p.A. as follows:

Bankruptcy

ÔÇóChrysler will use Section 363 of the federal bankruptcy code to "clear away the remaining impediments" to its restructuring.

ÔÇó"New Chrysler" will buy all assets of "old Chrysler" out of a Chapter 11 bankruptcy case in exchange for a $2 billion payment to secured lenders.

ÔÇó"New Chrysler" will create an independent trust to provide health care for Chrysler retirees, funded by a note of $4.6 billion payable over 13 years with a 9 percent rate of interest. It will receive 55 percent of equity of the reorganized Chrysler and will have the right to choose one director.

ÔÇóU.S. Treasury gets 8 percent of equity in new Chrysler and right to choose four company directors.

ÔÇó Governments of Canada and Ontario will together get 2 percent of equity in new Chrysler.

ÔÇóThe U.S. government will stand behind Chrysler's efforts to use our bankruptcy code to clear away remaining obligations.

Chrysler-Fiat deal

ÔÇó The alliance creates 6th largest global automaker.

ÔÇóFiat brings "billions of dollars" in technology to help Chrysler build more fuel-efficient cars in U.S. factories.

ÔÇó Fiat has right to choose three Chrysler directors. It can earn up to 15 percent in additional equity in three tranches of 5 percent for meeting targets such as producing a vehicle that performs at 40 mpg from a U.S. factory.

U.S. government

ÔÇóThe U.S. Treasury will lend up to $6 billion to the Chrysler-Fiat alliance through its restructuring period.

ÔÇóThe government is prepared to provide $3.3 billion debtor-in-possession financing through Chapter 11 proceeding.

ÔÇóThe government is prepared to lend $4.7 billion to the new Chrysler in the form of a term loan with $2.1 billion due in 30 months. Half of the balance will be due on the 7th anniversary, and the remainder will be due on the 8th anniversary of the loan. There is an additional note of $288 million, which is the government's fee for making the loans.

Dealers, customers

ÔÇóGMAC will provide dealer and customer financing, and continue to do so after Chrysler emerges from bankruptcy. The U.S. government will provide capitalization that GMAC requires to support the Chrysler business.

ÔÇóChrysler will honor consumer warranties. The U.S. Treasury is making $280 million available as a backstop on the orderly payment of warranties for cars sold during the restructuring period.

Creditors

ÔÇó Chrysler's largest secured creditors agreed to exchange their portion of $6.9 billion debt for a pro-rata share of $2 billion in cash.

ÔÇóThe UAW made concessions on wages, benefits and retiree healthcare that will help save jobs and make Chrysler more competitive.

ÔÇóDaimler, a minority shareholder in Chrysler, will waive its share of Chrysler's $2 billion of second-lien debt, give up its 19 percent equity interest, and pay $600 million to Chrysler's pension funds.

ÔÇóCerberus will waive its share of Chrysler's $2 billion of second-lien debt and forfeit its entire equity stake in Chrysler.