Chrysler Debt Talks Fail, Bankruptcy Looms

Negotiations Between Automaker's Lenders And Treasury Department Have Collapsed Less Than 12 Hours Before Deadline

(AP)  Talks between Chrysler LLC's lenders and the Treasury Department to reduce the automaker's $6.9 billion in secured debt and keep it out of bankruptcy protection have disintegrated, a person familiar with the talks said early Thursday.

Chrysler's fate was in the hands of about 40 hedge funds that hold about 30 percent of its debt. Although four banks holding 70 percent of the debt had agreed to erase it for $2 billion, the hedge funds were holding out for a better deal.

To entice the hedge funds into going along with the banks, the government on Wednesday afternoon added $250 million to the $2 billion that the banks had settled for and gave the hedge funds a 6 p.m. (2200 GMT) deadline to work it out, two people briefed on the talks said.

Michigan Gov. Jennifer Granholm, speaking in Lansing at a news conference about the swine flu, had urged them to consider Chrysler's 54,000 employees.

"On behalf of Michigan, on behalf of the thousands of people who will be affected if this company is forced into bankruptcy, I am publicly asking these hedge funds to not be greedy but to do what the banks have done and what everyone else around the table has done — take the concessions," she said.

But several of the funds came back with their own different counterproposals, leaving the Treasury Department to bargain with 46 funds, the person said. Treasury extended the deadline into the evening, but when it appeared there was no central authority to negotiate with, decided to end talks around midnight.

"This is the one shot when everybody had a chance to say yes or no," the person said. "You had 46 different people here, and they said no."

The collapse of the talks means Chrysler will almost certainly head for bankruptcy protection, unless a deal can be salvaged by the government's deadline of 11:59 p.m. Thursday (0359 Friday). Others briefed on the negotiations said that in order for Chrysler to get a deal without bankruptcy, it needs to get 100 percent of its creditors to sign on.

But bankruptcy doesn't mean the end of the company. The people said plan B is for Chrysler to file for bankruptcy with funding help from the government. Under the bankruptcy law that Chrysler would file under, a judge would decide how much creditors would get, but is likely to go with any settlement agreed to by the majority of the creditors, the people said.

If it files for bankruptcy, Chrysler would continue operating and Fiat would still sign on as a partner on Thursday, the people said. The government already has promised to back Chrysler's warranties in an effort to allay customers' fears that the automaker wouldn't be around to honor them.

The government in March rejected Chrysler's restructuring plan and gave it 30 days to make another effort, including a tie-up with Fiat. The company, which has borrowed $4 billion from the federal government and needs billions more, faces a Thursday night deadline to cut labor costs, slash debt and take on a partner if it wants more aid.

President Obama said Wednesday night while the lender talks were still ongoing that he was "very hopeful" that deals can be worked out to keep Chrysler LLC a viable automaker, and more hopeful than he was a month ago that the company will stay in business.

On Sunday, the Canadian Auto Workers ratified concessions to the automaker, and the United Auto Workers in the U.S. reached a tentative cost-cutting deal that members overwhelmingly ratified Wednesday night.

The UAW agreement, which will take effect May 4, meets Treasury requirements for continued loans to Chrysler Corp., and includes commitments from Fiat to manufacture a new small car in one of Chrysler's U.S. facilities and to share key technology with Chrysler.

"This has been a challenging time filled with anxiety and uncertainty for our membership," said UAW President Ron Gettelfinger. "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."

Meanwhile, the Fiat partnership means Chrysler CEO Robert Nardelli could be out of a job. In an April e-mail to employees, he said that if the deal is finalized, Chrysler would be run by a new board appointed by the government and Fiat. The new board, Nardelli wrote, would pick a CEO "with Fiat's concurrence."

Sergio Marchionne, CEO of the Italian automaker, told reporters earlier this month that he could run Chrysler. Obama said Wednesday that Fiat's management "has actually done a good job transforming their industry."

[swin5]

May 1, 2010

In the news today, it was announced that the site of the former General Motors plant in Flint, Michigan has been sold in preparation for a new Wal Mart to be built at that location. This news, coupled with the demolition of the former Chrysler truck plant in Warren, Michigan, marks the end of an era. Domestic-owned auto production ended last year with the bankruptcy and court-ordered liquidation of both the General Motors and Chrysler Corporations and the sale of the Ford Motor Company to Toyota. There are now no more American owned factories capable of assembling an automobile in the United States.

In an unrelated announcement, the Big 3, Toyota, Nissan, and Honda announced today that they will close all of their auto assembly plants in the United States. Citing high labor costs, they announced that they will move production of their vehicle lines to countries in Latin America and Asia. Mexico was listed as a preferred location since the North American Free Trade Agreement, NAFTA, will allow them to sell their vehicles in the United States free of any tariffs or taxes. Toyota also announced a 50% price increase in their vehicles sold in the United States. Nissan and Honda are expected to make a similar announcement in the next few days.

After their announcement, the Toyota executives were asked about the decline in quality of their vehicles sold in the United States. They were asked about whether they were concerned that many Americans feel that their quality has dropped below the standards of the former American owned car companies. The Toyota officials declined comment.

[walt1944]

Chrysler is headed for bankruptcy because Chrysler's creditors could not reach an agreement withthe US Government.

It has been learned that the real issue is that the creditors want to be paid in Euroes rather than worthless "funny money" US dollars.

HAIUL OBAMA!!!!

[consciousnes]

Tell the executives to give up their big bonus' and salaries and go back to living like americans instead of some international play boy. That should give the company about 100,000,000 to work with. Tell me you couldn't live on a million dollars the rest of your life, esecially if you have everything paid for. A million in the bank would give you a hundred thousand a year income.

[cheetah-man7]

I hop as amuslim the u.s.a and this big company to pass this economic crisis where our quraan,our prophet (peace be upon him) order us to life in peace with other religions,especially the jews,the chrictians(note that the terrorists who attack the innocent civilians violate the orders of our quraan,our prophet peace be upon him), but we must learn from this economic crisis that the most reason of it the lending moneyor giving credit without searching the benefit of this credit and there is no control at the exchnge of the stocks market,where the value of these stocks rise for no relations with the situation of their company,but only for operations of the speculator.
Posted by hlmelsaid761
________________________

Rather than worry about our cars and credit, how about speaking out against your own Muslim terrorists who make your religion so despised and feared and destroy them and their anti-Mohammed lifestyles so that the peace you preach about can become a reality?

[Socialistnation]

Chrysler should have been in bankruptcy before the Gov gave them any money in the first place.

The Hedge Funds have clients that have invested with them as well and obviously they feel a better deal will be had through the courts.

I ma also sure that Fiat prefers the courts as they could then disolve the UAw agreements once and for all.

For me, no matter what I will never buy a car from any company that has taken Chinese money and paid for by the taxpayers. Never. I will buy a Ford as they have not taken the money.

End of UAW I hope is near. I am sure they are happy they supported Obama.

[JackGarvey]

I agree with ewverything luye 4u states.

[afmcalax]

Once again the small minded "let everything fail" crowd have crawled out of their neanderthal caves. If they would have their way, along with Rush and the GOP, all the major banks in the U.S. would now be in bankruptcy, the insurance companies would have followed and there would be no U.S. owner auto manufacturing. Since the collapse of the entire financial market would be assured by their inaction, businesses, both large and small, would be failing at an ever increasing rate. The safety nets would fail under the weight of these financial failings and soaring unemployment. Tent cities would spread throughout America as even those not caught up in the mortgage mess would lose their homes for lack of income. I guess their goal is 30% unemployment and a return to the days of the Great Depression. Your belief that American capitalism can self-correct is simplistic and childish. The lack of government intervention in the markets is what got us here; only the reintroduction of government back in the markets will resolve the crisis.

Luckily you and your GOP counterparts are in an ever increasing minority. When the economy starts to turn in 2010 right before the next election cycle, the conservative doom mongers will see their precious GOP fade even further into obscurity. The party of NO will have no defense. All you people will have left is listening to self-proclaimed GOP leader, Rush Limbaugh., spout his unintelligent rants.

[geminispyder-2009]

na-na-na-na... na-na-na-na... hey hey hey.... goodbye

na-na-na-na... na-na-na-na... hey hey hey.... goodbye

na-na-na-na... na-na-na-na... hey hey hey.... goodbye

[luke_4u]

If they gotta go under, then they gotta go under. So what ? If a business, any business, can't make it, then that's the way it is. Somebody will always make the cars, and there will always be employees doing the job. Taxpayers shouldn't have to bail out private companies, they should stand on their own. And if they can't, there are others that can and will. I've got absolutely nothing against unions, nothing at all. But just maybe they are pricing themselves right out of a job. Everybody wants to make as much money as they can, but there's a limit to every thing. The company has to be able to support those high union wages, and if they can't there's a problem. It's not only about what the CEO's are making, although that's certainly a big part of it. There's only so much money to go around, if they give too much of it away to the employees and CEO's, then there's not going to be enough left for the company itself. It's basic math.

[grabandgo]

I guess they bail out money we the taxpayers gave them is now lost forever.
Good job nobama.....you are just another empty suit controlled by the rich.

It time to let this dinosaur die. The vehicles they build are substandard and always have been. Even the Korean and Chinese vehicles have better fit and finish. A turd is a turd.

[demongirl60]

Gee, too bad. Maybe NOW their overpaid fata$$ crybaby CEO's at the top will have to get a REAL job!

[tmittelstaed]

Daimler should have sold Chrysler to the UAW back in 2007, this deal is long overdue. Over Chrysler's long history, it's owners and exec staff have pulled literally billions of dollars out of the company in compensation, stock, and golden parachutes, and it's been a half-century since Walter P Chrysler died. None of the owners since Walter have done anything to deserve their compensation, with the possible exception of Lee Iacocca, and all that green goodness was generated by the labor of countless UAW members. It's about time that the UAW took over the company.

With the UAW having controlling interest, you can bet your britches that UAW will drop pricing on Chrysler cars and trucks and undercut everyone else, just to gain market share, and drop their own wages to pay for this, to whatever pricing levels it will take for Chrysler to dominate the market. Ford and GM are likely very concerned with the latest developments.