Well, for better or worse, it looks as if one of the Big Three is about ready to go under. Not really surprising, but one has to wonder what the aftershocks will be like.
From Automotive News:
President Obama is planning to announce Thursday morning that Chrysler LLC will file for Chapter 11 bankruptcy protection as it completes an alliance with Fiat S.p.A., Bloomberg News reported, citing people familiar with the matter.
Separately, the Wall Street Journal said two versions of Obama's speech are being prepared -- one if Chrysler files for protection and another if it avoids bankruptcy.
A government source familiar with the negotiations said Chrysler will survive and avoid liquidation but whether it will file for bankruptcy hasn't been determined. A spokesman for Cerberus Capital Management LP, Chrysler's majority owner, declined to comment.
"We're not in a position to comment," said Todd Goyer, a Chrysler spokesman.
The U.S. Treasury Department has reached an agreement with Chrysler's largest creditors to cancel $6.9 billion of debt in exchange for $2 billion in cash. But the deal still must get unanimous approval from all the debt holders.
A person knowledgeable about the talks said Oppenheimer Funds, Perella Weinberg Partners and Stairway Capital are the holdouts.
The Michigan congressional delegation and the administration are in contact with the holdouts in an attempt to get them to reach a deal, this person said.
Spokespersons for the three lenders did not return phone calls today.
David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., today estimated the likelihood of a Chrysler bankruptcy as 50-50.
"The higher the threat of death is, the more likely it can be worked out," he said. "The wild card is whether any of the remaining bond holders have taken out insurance policies that pay them in full if Chrysler fails. If anybody benefits more from a bankruptcy than from no bankruptcy, then you have a problem stopping it."
Cole said beyond the remaining bondholders, the Obama administration must still negotiate a deal with the dealers it insists Chrysler eliminate to avoid a bankruptcy. That virtually impossible to do quickly with any dealers, but if Obama's team can find a settlement pattern before the deadline -- cash or perhaps equity in Chrysler -- the details could be worked out later, Cole said.
Obama in St. Louis
In St. Louis earlier today, Obama said he was hoping a merger would be worked out between Chrysler and Fiat, but said he was not sure "if the deal is going to get done."
"We're hoping we can get a merger where the taxpayers will put in some money to sweeten the deal but ultimately the goal is -- we get out the business of building cars and Chrysler goes and starts creating the cars that consumers want," Obama said in a town-hall style meeting near St. Louis.
"We don't know yet whether the deal is going to get done," Obama said. "I will tell you that the workers at Chrysler have made enormous sacrifices -- enormous sacrifices -- to try to keep the company going.
"One of the key questions now is, are the bond holders, the lenders, the money people, are they willing to make sacrifices, as well? We don't know yet, so there's still a series of negotiations that are taking place."
Earlier, White House spokesman Robert Gibbs told reporters:
"Hurdles still remain, but we remain optimistic and hopeful that something in the next many hours will get done that will provide a pathway for Chrysler's viability without continued government assistance."
Chrysler CEO Bob Nardelli, in a letter to employees today, said Chrysler continues to make progress in its efforts to complete the proposed alliance with Fiat.
"If approved, it would clear a significant hurdle on our continuing journey toward long-term success, but the proposed agreement still needs to be approved by all of the secured lenders," Nardelli said in the memo.
Chrysler allies were buoyed by the framework deal, but the near-term future of the American icon hinged on several parts coming together, before Thursday's U.S. government deadline, to prove that the company can be viable again.
Chrysler's more than 40 lenders were performing due diligence on the terms, a source with knowledge of the banks' review has said.
The development with lenders came after a weekend agreement between Chrysler and the UAW to modify the union's labor contract and reduce the amount of money Chrysler would need to contribute to a retiree healthcare trust.
"The UAW leadership unanimously approved a tentative new labor agreement with the company and has sent the agreement on to local union members who will vote (Wednesday) on its ratification," Nardelli said in the memo
If the contract changes are ratified, the UAW's retiree health care trust would end up owning 55 percent of the automaker.
Posts
No comments:
Post a Comment