DETROIT — After months of struggling to stay alive on government loans, Chrysler finally succumbed to bankruptcy Thursday, pinning its future on a top-to-bottom reorganization and plans to build cleaner cars through an alliance with Italian automaker Fiat.
The nation’s third-largest car manufacturer filed for Chapter 11 bankruptcy protection in New York, with ambitions to emerge in as little as 30 days as a leaner, more nimble company. In return, the federal government agreed to give Chrysler up to $8 billion in additional aid and to back its warranties.
"It’s a partnership that will give Chrysler a chance not only to survive, but to thrive in a global auto industry,” President Barack Obama said from the White House
Future of the plants
Starting Monday, Chrysler said, it will close all its plants until it 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.
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.
"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.”
Industry faces trials
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 moving away from the gas-guzzling sport utility vehicles that once were 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.
"We understand that there will be more pain for people in Michigan,” said Sen. Debbie Stabenow, a Michigan Democrat.
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.
What Fiat deal means
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 also would gain access to the North American auto market through Chrysler’s factories and its dealerships.
Fiat CEO Sergio Marchionne said he planned to spend time meeting Chrysler 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 such as Alfa Romeo in the North American markets.
First, though, bankruptcy court Judge Arthur Gonzalez will have to sort out the issue of Chrysler’s creditors, who hold $6.9 billion of the company’s debt. The company’s first hearing is set for today.
by the associated press
The nation’s third-largest car manufacturer filed for Chapter 11 bankruptcy protection in New York, with ambitions to emerge in as little as 30 days as a leaner, more nimble company. In return, the federal government agreed to give Chrysler up to $8 billion in additional aid and to back its warranties.
"It’s a partnership that will give Chrysler a chance not only to survive, but to thrive in a global auto industry,” President Barack Obama said from the White House
Future of the plants
Starting Monday, Chrysler said, it will close all its plants until it 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.
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.
"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.”
Industry faces trials
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 moving away from the gas-guzzling sport utility vehicles that once were 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.
"We understand that there will be more pain for people in Michigan,” said Sen. Debbie Stabenow, a Michigan Democrat.
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.
What Fiat deal means
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 also would gain access to the North American auto market through Chrysler’s factories and its dealerships.
Fiat CEO Sergio Marchionne said he planned to spend time meeting Chrysler 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 such as Alfa Romeo in the North American markets.
First, though, bankruptcy court Judge Arthur Gonzalez will have to sort out the issue of Chrysler’s creditors, who hold $6.9 billion of the company’s debt. The company’s first hearing is set for today.
by the associated press
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