FORUMula1.com - F1 Forum

[hamilton08]

America's third largest car manufacturer, Chrysler, has declared itself bankrupt after a handful of creditors withstood pressure from the Obama administration to forgive billions of dollars in debt, casting a cloud of uncertainty over tens of thousands of jobs at factories, suppliers and dealers.

After round-the-clock negotiations broke down, the 83-year-old Detroit ­carmaker said it was putting its future in the hands of the courts despite an 11th-hour deal with Italy's Fiat to pool ­technology in building new vehicles.

Both the White House and Chrysler expressed hope for a "surgical" bankruptcy lasting 30 to 60 days, clearing the company's liabilities and allowing it to emerge in healthy shape. But legal experts questioned whether this will be achievable and factory workers expressed fear for their jobs.

Although unions and Chrysler's leading banks accepted a rescue package brokered by the Treasury to swap Chrysler's liabilities for shares in the business, a group of hedge funds and investment funds refused to countenance a clause in which Chrysler's $6.9bn (£4.6bn) of debt would be cancelled through a cash payment of just $2bn.

Speaking in the foyer of the White House, President Obama made clear his anger towards the hold-outs: "While many stakeholders made sacrifices and worked constructively, I have to tell you that some did not. A group of hedge funds and investment funds decided to hold out for an unjustified taxpayer bailout."

He said it was "unacceptable" for a "small group of speculators" to endanger Chrysler's future. But he expressed optimism that Chrysler, which makes brands including Jeep and Dodge, can be restructured through a bankruptcy filing: "This is not a sign of weakness but rather one more step on a clearly charted path towards Chrysler's revival."

Chrysler employs 54,000 people but tens of thousands more work for parts companies and in motor dealerships that depend on the firm for business. About 115,000 retired Chrysler workers depend on the company for healthcare and benefits.

http://www.guardian.co.uk/business/2009 ... s-collapse

[Gilles 27]

Jeep are about the only brand in that group that are worth saving. Chrysler, GM and Ford have been so stupid for so long, they deserve to go. Trouble is, the guys who led the companies into trouble will most likely get off ok while the livelihoods of hard working people lower down the chain will be threatened.

[darwin dali]

Latest news today:


US carmaker Chrysler will file for Chapter 11 bankruptcy protection immediately and has formed an alliance with Fiat, President Obama has said.

Chapter 11 protects firms from their creditors, allowing them to rearrange their finances while still trading.

Some Chrysler dealerships will close over time but no jobs will be lost in the short term, President Obama said.

The move came after talks had broken down with Chrysler's lenders late on Wednesday, the White House said.

Chrysler will receive a further $8bn (£5.4bn) in government aid, up from the $6bn the Treasury had promised it if it had successfully restructured the business by midnight.

The White House described the move as a "surgical short bankruptcy" which should last between 30 and 60 days.

President Obama said the "necessary steps" had been taken to give Chrysler "a new lease of life".

He added that he had "every hope" that Chrysler will become "stronger and more competitive".

New Chrysler

The filing for bankruptcy protection will lead to the forming of a new corporate entity.
Chrysler and Fiat logos
Fiat's technology will enable Chrysler to build fuel efficient cars

Details of the new Chrysler include:

• Fiat will take a 20% stake, with the possibility of it rising to 35%

• The Treasury will have an 8% stake, a union-run trust fund VEBA will take a 55% stake, and the governments of Canada and Ontario will gain a combined 2% stake

• Current owner Cerberus will forfeit its 80.1% stake

• Daimler will give up its remaining 19.9% stake in Chrysler

• Chrysler bondholders will receive $2bn in cash in exchange for forgiving their $6.9bn debt.

'Hedge fund block'

The deal will need to be ratified by the bankruptcy court.

While Chrysler's main banks, holding 70% of the debt, accepted this proposal, it was rejected by hedge funds that hold a sizeable proportion of its remaining debt. Hedge funds are private investment funds that typically attract rich private investors.

BANKRUPTCY PROTECTION
US bankruptcy protection is called Chapter 11
It gives US businesses time to rearrange their finances while continuing to trade, protected from their creditors

Their stance in the negotiations was criticised by President Obama.

"A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout," he said.

"They were hoping that everybody else would make sacrifices and they would have to make none. Some demanded twice the return that other lenders were getting. I don't stand with them."

Chrysler is owned by private equity firm Cerberus Capital Management, which bought an 80.1% stake from Germany's Daimler for 7.4bn euros ($9.9bn; £6.6bn) in 2007.

Cerberus will forfeit its stake as part of the deal.

The partnership with Fiat will create the world's sixth largest carmaker.

Italy's Fiat will not have to pay anything for its share, which will give it access to the North American marketplace. It will also have the right to appoint three company directors.

In return, Chrysler will be able to take advantage of Fiat's expertise in making smaller, more fuel-efficient cars in its existing US factories.

No Chrysler plants in the US will close.

The Treasury will provide Chrysler with $3.3bn in working capital to support it through the Chapter 11 process.

It will also extend a $4.7bn loan to the new company, once it has emerged from bankruptcy, repayable over the next eight years.

Chrysler's financial arm - that makes loans to buyers and to dealers - will be merged into GMAC Financial Services. GMAC is the finance arm of General Motors (GM) but was bailed out by the government in December. The new GMAC will get government support.

Chrysler, the smallest of the US "Big Three" carmakers after GM and Ford, secured a $4bn loan from the US government at the start of the year, and has since gained $500m more.

[madbrad]

A bankrupt Chrysler is even better for Fiat. No one but a select few know the terms of this partnership, but Fiat will probably be able market the Chrysler and Dodge and Jeep name should Chrysler fail in the near future.

[darwin dali]

I found this quite interesting:

Italy's Fiat will not have to pay anything for its share, which will give it access to the North American marketplace. It will also have the right to appoint three company directors.

Cushy deal if you ask me. In return Daimler lose their shares and get nothing, not that those shares were worth anything anymore...

[bud]

hopefully what ever happens the workers jobs arent lost.

[madbrad]

Of course they(jobs) are lost. Cost cutting and human resource chopping is the order of the day in viable corporate recovery plans, which GM and Chrysler had to submit in order to get thier big government loans. So the whole process seems to defeat the purpose of said loans, by encouraging massive layoffs.
The entire problem was cause by the banks, who after causing this disaster got bailouts hundreds of times the size of the automaker loans, and without any hoop jumping to boot!

[madbrad]

Hamilton, pulling up alongside Massa on the grid:
"Hey Phillipe, that thing got a hemi?"