President Obama said in his Wednesday press conference that he doesn’t want to be in the car business—to which we can all say Amen. When he announced this noon that Chrysler was going to proceed with Chapter 11, he put forward the hope that it would be quick (maybe 30-60 days), would establish a strong relationship with Fiat, and would represent a new beginning on the road to better cars. Who can argue with that?
The one point that may have gotten lost in the reporting was the President’s remark that this move “will save more than 30,000 jobs.” That to me is the administration’s bottom line, the reason why they worked so hard and to the last minute to avoid bankruptcy. It was the thrust of their “rescue” policy. Dumping those people into the defunct Michigan economy would have been simply unacceptable.
Whether the UAW benefit fund, now Chrysler’s presumed 55-percent shareholder, can run a car company any better than the government remains to be seen. But the U.S. and Canadian governments are still going to contribute billions more when the company emerges and restarts.
The 84-year-old Chrysler firm will remain in business, albeit haltingly, during the process, and CEO Bob Nardelli will step aside after the bankruptcy concludes. Chrysler financing will be available through GMAC, as Chrysler Financial departs. An unknown number of the automaker’s 3,600 dealers will close. Suppliers will generally remain in place.
Here are more details, as of 3:00 pm today. Fiat is to receive a 20 percent stake in the company, which could rise to 35 percent.
The U.S. Treasury Department, meanwhile, will own 8% of Chrysler, and the governments of Canada and Ontario, which will provide $2.4 billion in financing, will hold a combined 2% stake.
The company’s 54,000 employees and its 115,000 retirees, represented by the United Auto Workers’ union, late Wednesday approved their part of the bargain, eliminating a number of benefits.
While the court plan is being worked out, Chrysler said most manufacturing operations will be suspended Monday and will resume once the transaction is completed. Further layoffs aren’t expected at this point, although, once the agreement with Fiat goes through, more cost-cutting measures may be needed.
Chrysler said its operations in Mexico and Canada and other international operations aren’t part of any bankruptcy filing.
As we reported Monday, the sticking point in the restructuring has been a small group of hedge funds that took on the government for more money. In his noon statement, Mr. Obama took a tough stance against these “speculators,” as he called them. In fact, one could conclude these guys forced the bankruptcy—and the same kinds of debtholders may cause even bigger problems for GM when its turn possibly comes next month.
I just heard one of Motor Trend’s top editors (didn’t get his name) put down the just-announced Chrysler bankruptcy deal on CNN. In portentous tones, he proclaimed “big risks ahead” for the company. The problems he stated were “no product ready in the pipeline,” and the long time it will take Fiat to introduce same. Then he took the Obama administration to task for minimizing those risks.
What the world needs now is more naysayers for Chrysler. And let us note: Motor Trend’s comments are particularly ironic since Interlink, its publisher, just filed for Chapter 11. I love it when that happens.
Well, folks, what are the prospects now for a quick Chrysler bankruptcy? And what do you think of their plans for an Italian-American turnaround?