Chrysler Workers Await Bankruptcy Fallout
Fears that a Chrysler LLC bankruptcy could devastate southeast Michigan and harm Chrysler workers and retirees nationwide were abating somewhat as details of the deal were released Thursday.
"It's the best deal we can come up with," said Mark Conner, who works on the production line that makes Jeep Wranglers at Chrysler's plant in Toledo, Ohio. "Anything else that could have happened would be worse."
President Barack Obama announced Thursday that Chrysler would head into bankruptcy with the aid of up to another $8 billion in taxpayer money, a last-resort attempt to quickly restructure the struggling automaker. He also blasted hedge-fund creditors whom he said held out for a richer deal.
Those holdouts drew anger from workers, who had agreed to more concessions to try to save the automaker.
"Everybody expects the autoworker to take a pay cut," said Conner, 51, who watched Mr. Obama's noon announcement at a bar near the Toledo assembly plant. "Nobody else wants to take a pay cut."
But he and other autoworkers - as well as politicians and community leaders - were glad to hear the deal will keep workers' pensions and health care benefits secure.
The president of the United Auto Workers also mustered up some optimism for the beleaguered industry.
"This is an opportunity," Ron Gettelfinger told CBS' The Early Show Friday. "We just want to keep the American auto industry going."
Indirectly, UAW will hold a majority stake in Chrysler, but Gettelfinger said the union will only have one, non-voting seat on the board of directors.
Michigan Gov. Jennifer Granholm said a bankruptcy filing "was everyone's last choice" and warned that the next 60 to 90 days while the company goes through bankruptcy are going to be "very, very tough."
But she also told reporters that the bankruptcy filing "gives us in Michigan certainty - certainty that Chrysler won't just survive, but thrive."
She said that's good news for the 21,000 Chrysler workers in Michigan and the 38,000 in the U.S. The governor vowed the state would fight for its share of the 5,000 U.S. jobs she says Italian automaker Fiat could eventually fill once a partnership with Chrysler is in place.
But Oakland County Executive L. Brooks Patterson, a Republican whose county is home to Chrysler's headquarters and many of its plants and suppliers, foresees a less rosy scenario.
"I just disagree strongly with the president that we can get in and out of bankruptcy in four to six weeks," said Patterson, a lawyer and former prosecutor. "Once you're in there, it's the judge that tells you when you get out. ... Basically, you lose control."
Following Mr. Obama's announcement, Chrysler said it will temporarily idle manufacturing starting Monday as part of the restructuring while it goes through bankruptcy. The move will help the automaker clear out inventories.
Steve Grabowski, a worker at Chrysler's Warren Stamping Plant for the past seven years, said managers told workers around 1:45 p.m. Thursday to go home.
Workers are being laid off indefinitely. They'll get unemployment and supplemental pay from Chrysler that will make up most of their wages during the furlough. But the bankruptcy announcement still was unsettling for many.
"A lot of us are scared," said Grabowski, 33, of Roseville. "We knew something like this was going to happen, but we didn't think it would be so soon."
Peter Brown of Automotive News told CBS News that Chrysler's bankruptcy - and a longer-than-usual summertime hiatus at GM - will definitely ripple through the economy:
"There's going to be very little automotive production in America for the next quarter or so, and that's going to be catastrophic for the automotive suppliers who make the parts for all of those cars."
In Twinsburg, Ohio, 47-year-old Phil Grainger of Hudson said he wasn't surprised by the bankruptcy filing. But the maintenance millwright and 19-year plant employee was concerned the filing would hurt Chrysler sales, and he wasn't comfortable with the extended furlough.
"I don't feel good about it," he said. "Hopefully, we'll all be back."
Many communities and companies that rely on Chrysler plants remained nervous that tax revenues will continue to shrink. Michigan already has the nation's highest unemployment rate, 12.6 percent, and state economists are estimating the current budget could face a $1.3 billion deficit. Granholm is expected Tuesday to release an executive order calling for hundreds of millions of dollars in tax cuts.
More than 500,000 Michigan workers already are collecting unemployment, and the Democratic governor said the temporary Chrysler layoffs will add to the jobless rolls and cost the financially strapped state more money.
But the pain won't stop there.
"It's not just workers," said Karen Boroff, dean of the Stillman School of Business at Seton Hall University in New Jersey. "There are dealerships, there are towns where these dealerships are in. ... There are school districts. There are going to be many people who are going to suffer here."
Chrysler is looking to substantially reduce its 3,200 auto dealerships, something it should be able to do through bankruptcy.
"All Chapter 11 is, is a reorganization. It doesn't close anything," said Mencini, who has owned the dealership for 26 years and hasn't laid off any of his 45 employees despite a 10 percent drop in sales since last April. "I'll be here and the parts will be here and the president came out and spoke and said he's going to make sure the warranties are all covered."
Michigan Rep. Gary Peters, whose Oakland County congressional district includes Auburn Hills, said the key now will be to get the economy moving again so consumers feel confident enough to buy new vehicles.
"We're not selling as many cars as those that are wearing out and need to be replaced," he told reporters in a conference call. "We've got to get people in the show rooms."
Gregg Toles, 52, arrived for his afternoon shift at the Warren Stamping plant only to be told to go back home. The 11-year Chrysler veteran said he would use the time off to straighten out his finances, do yard work after a rough winter and visit relatives.
"I'm confident everything's going to work out," said Toles, of St. Clair County's East China Township. "This is the backbone of American industry."