DETROIT, April 30, 2009
Obama Backs Chrysler Bankruptcy
Automaker Files Chapter 11; Will Receive $8B To Carry Through Deal With Fiat; Also Will Temporarily Halt Manufacturing
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The Treasury Department's auto task force had been racing in the past week to clear the major hurdles that prevented Chrysler from coming up with a viable plan to survive the economic crisis ravaging nation's automakers. (AP)
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"No one should be confused about what a bankruptcy process means," Mr. Obama said. "This is not a sign of weakness but rather one more step on a clearly chartered path to Chrysler's revival."
As part of the deal, Chrysler is signing a partnership with the Italian company Fiat. The government will be an investor in the revamped Chrysler and will help choose its new directors, but the Obama administration does not plan to help manage the company.
The government of Canada is chipping in another $2.5 billion of aid for Chrysler. Mr. Obama and Canadian Prime Minister Stephen Harper released a joint statement Thursday afternoon thanking one another, the United Auto Workers , the Canadian Auto Workers, and Chrysler creditors for allowing the restructuring to take place.
Soon after Mr. Obama spoke, Chrysler CEO Robert Nardelli announced he would resign his post after the automaker emerges from bankruptcy protection.
As the president announced the bankruptcy and restructuring of a company he called an American icon, Chrysler workers in Kokomo, Ind. watched in stunned silence. "Just kind of scared - you know, never thought I'd have to try to start over again when i got this job," Chrysler employee Brad Ice told CBS News business correspondent Anthony Mason.
Chrysler also said it would temporarily idle manufacturing starting Monday as part of the restructuring and the United Auto Workers union agreed last night to significant pay cuts as part of the restructuring. No further layoffs were planned, however.
Bankruptcy does not mean the No. 3 U.S. automaker will shut down. A Chapter 11 bankruptcy filing would allow a judge to decide how much the company's creditors would get while the company continues to operate. The goal is for the whole process to happen quickly, Mr. Obama said, perhaps within a couple months.
Consumers can still buy a Chrysler, warranties will be honored, and dealerships will continue to offer repair service, reports CBS News correspondent Alexis Christoforous.
The union agreed last night to significant pay cuts. Further layoffs are not expected. But Chrysler will idle most of its plants during bankruptcy.
Typically bankruptcies last for months or years, but the stigma alone could be disastrous for Chrysler. A recent survey found that more than 90 percent of buyers wouldn't chose the brand if the company went bankrupt, Mason reports.
"So its critical that not just Chrysler, but General Motors clear the air here and get a clear direction of where they're going," said Gary Dilts of J.D. Power & Associates.
But Fiat hasn't had a presence in the American market since the early 1980s, when some buyers joked that fiat stood for "Fix it again, Tony," Mason reports.
The president said that Chrysler has been responsible for helping to build the American middle class, but over the years also had been weakened by "papering over tough problems and avoiding hard choices."
"For too long," Mr. Obama said at the White House, "Chrysler moved too slowly to adapt to the future, designing and building cars that were less popular, less reliable and less fuel efficient than foreign competitors." (Click here to read President Obama's full remarks)
The Obama administration said it had long hoped to stave off bankruptcy for the nation's third largest automaker, but it became clear that a holdout group wouldn't budge on proposals to reduce Chrysler's $6.9 billion in secured debt.
Mr. Obama praised the sacrifices made by the autoworkers' union and the majority debtholders, whose concessions gave officials hope that Chrysler would be able to restructure without filing for Chapter 11. But the small hedge funds who hold 30 percent of Chrysler's outstanding debt held out for "an unjustified taxpayer bailout," according to the president.
"I don't stand with them," Mr. Obama said. "I don't stand with those who held out when everybody else is making sacrifices."
The Treasury Department's auto task force had been racing in the past week to clear the major hurdles that prevented Chrysler from coming up with a viable plan to survive the economic crisis ravaging nation's automakers.Read a Q&A with CBS Evening News business producer Guy Campanile on the bankruptcy.
Along with the Fiat deal, the United Auto Workers ratified a cost-cutting pact Wednesday night. Treasury reached a deal earlier this week with four banks that hold the majority of Chrysler's debt in return for $2 billion in cash.
(AP Photo/Ron Edmonds)
A third person briefed on Wednesday night's events said the Treasury Department and the four banks tried to persuade the hedge funds to take a sweetened deal of $2.25 billion in cash. But in the end, this person said most thought they could recover more if Chrysler went into bankruptcy and some of its assets were sold to satisfy creditors.
Speaking of the hedge funds who rejected the deal, an official told CBS News "their failure to act in either their own economic interest or the national interest does not diminish the accomplishments made by Chrysler, Fiat and its stakeholders nor will it impede the new opportunity."
President Obama's auto task force in March rejected Chrysler's restructuring plan and gave it 30 days to make another effort, including a tie-up with Fiat. The company has borrowed $4 billion from the federal government and needs billions more to keep operating. 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.
The UAW agreement, which would 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.
Sergio Marchionne, CEO of the Italian automaker, told reporters earlier this month that he could run Chrysler. Mr. Obama said Wednesday that Fiat's management "has actually done a good job transforming their industry."
The U.S. and Canadian governments will own 10 percent of the new Chrysler. Fiat will own 35 percent. The majority, 55 percent, will be owned by the United Autoworkers.
"And probably for the first time ever, you're going to have a union that's really tied to the outcome of the outcome of the company in a way that they've never been tied before," Dilts told Mason.
© MMIX, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
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See all 194 CommentsUnconfirmed reports have it that former head of Chrysler, Lee Iococa, who rescued Chrysler back in the 1980's, was seen sobbing and mumbling "What have those idiots done to MY company???" when he heard the news.
As it is, it is expected that THOUSANDS will lose their jobs thanks to "hedge fund" creditors who refused to "play ball" with the government and Chrysler. It is also expected that Chrysler will emerge from banklruptcy (the government hopes!) and be smaller, leaner, and more competitive in the market. Also, it is expected that many of the highly-paid, highly-perked, absolutely-GREEDY, and TOTALLY-STUPID corporate executives who brought Chrysler into Chapter 11, will have moved on to other positions, perhaps at GM or Ford!!!!!
HAIL OBAMA!!!!!
Posted by sky_five at 5:10 AM : May 1, 2009
These are LOANS, sky. They are to be paid back to the government (i.e., the taxpayers) eventually.
I'm sorry, you got your whole story mixed-up.
Posted by whitemale08 at 9:09 PM : Apr 30, 2009
rowdy reinvents history to her liking.
That was a FU to NY to let them know that there is going to be another attack. Just like last time. Best wake up while you can
Posted by wardoglrs
Were you born stupid or did you have to work at becoming this way?
Why is Fiat taking over Chrysler? Is it yet another stupid merger in the automobile industry, which will be reversed in a few years similar to...
BMW bought British automaker Rover; BMW sold British automaker Rover.
Daimler-Benz bought Chrysler; Daimler-Benz sold Chrysler.
Ford bought Jaguar; Ford sold Jaguar.
GM acquired Saab; GM "loses" Saab.
Ford buys shares in Mazda; Ford sells shares in Mazda.
Who is orchestrating this insanity?
That was a FU to NY to let them know that there is going to be another attack. Just like last time. Best wake up while you can
Posted by Rowdy108 at 8:51 PM : Apr 30, 2009 --
I'm sorry, you got your whole story mixed-up.
Of course Barney and Pelosi were complicit with Paulson in the Wall Street bailout but that was purely Paulson and Ben Bernanke especially since Paulson's 400 million dollar fortune in retirement stocks were sitting in a so-called 'trust' at Goldman Sucks.
Paulson also comitted treason when he forced Ken Lewis, CEO of Bank of America to swallow Merrill Lynch because Merrill Lynch had billions in worthless derivatives and credit-default swaps tied to Goldman Sucks where Paulson worked before.
Paulson also committed treason a year ago when he had Ken Lewis, CEO of Bank of America swallow Country Wide because of counter-party exposure could hurt Goldman Sucks.
So get your facts straight. Chrysler/GM shouldn't have been bailed-out in the first place because it was too late and would've only benifited Goldman Sucks and others to get out of their positiions and credit-default swaps but should've been re-organized so that the workers could start working on mag-lev trains that this country desperatly needs.
It's all about the worthless derivatives and credit-default swaps that Hank the Snake Paulson told us for years that were 'fundamentally sound' and when Bush told the world that: "Our entire economy was in danger", it was a trick so Paulson could use a 9/11-style crisis to sucker the taxpayer into bailing out the now defunct and worthless-derivatives and credit-default swaps.
And after he gets his bonus.
Posted by TexasEd at 8:29 PM : Apr 30, 2009 --
Look, I like President Obama and I know you don't, just like Bush.
But the problem is that Obama has is now a sucker for Wall Street because of these silly bail-outs.
The toxic derivatives and credit-default swaps are in the 100's of trillions and could never be bailed-out entirely and yet Wall Street/City of London has convinced this president that it's possible when the real agenda is to just simply bankrupt the United States.
Folks, we have to see the hyper-inflation that will dwarf Weinmar Germany and bring about another Hitler but this time with nuclear weapons.
WE MUST PUT GOLDMAN SUCKS INTO RECEIVERSHIP NOW!!!!
Posted by Stuart2560 at 8:15 PM : Apr 30, 2009 --
What's your point?
If you're trying to be funny, I'm trying to be serious.
This bail-out from Hank the Snake Paulson, that Obama is being duped to continue by Larry Summers will make Goldman Sucks the ruler of the United States, doom President Obama and bankrupt this country for the sake of trillions and trillions of absolutely worthless toxic derivatives and credit-default swaps just on Goldman Sucks balance-sheets.
Now get your stupid head out of your butt and pay attention or face a certain DEATH!
What we have to worry about now is a post-Obama regime that will happen in very short order because we nor the President has the guts to put these TOO BIG TO FAIL banks, like Goldman Sucks and JP Morgan into RECEIVERSHIP and BANKRUPTCY RE-STRUCTERIING.
I say this and will continue to repeat posts like this as one of the few who predicted that our economy would not just enter a recession/depression but a general breakdown-crisis that end the United States and put in line with how British idiot PM Gordon Brown would like to think of us as just 'continents' of North America.
We have to do what ever is necessary to not stop the Obama/Clinton administration, because it's already doomed but to stop what will replace it, which is an extreme Fascist, possibly Republican but more like an Independent that will impose the austerity required by the very banksters we're bailing-out.
It won't solve anything, although that's how the new regime will sell itself, because the bail-out of the BIG BANKS will by-and-large be complete, leaving the taxpayer bankrupt and Goldman Sucks stronger to officially take over the reigns of Sovereign power.
Folks, the bail-outs are dangerous, not because it's bailing-out the rich, but because the purpose of the bail-outs is to purposely bankrupt the United States so a rich oligarchy can rule over mankind, reducing the population to less then a few hundred million people all serving as slaves and serfs to these greedy evil people.
PUT GOLDMAN SUCKS, JP MORGAN BofA, HSBC AND OTHERS INTO RECEIVERSHIP!
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