Originally Posted by Automotive News

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.

Originally Posted by Automotive 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.