Politics | 04/23/2009 3:30 pm
Treasury Dept. Preparing Bankruptcy for Chrysler, Say Sources
© AP
Treasury Department staffers are currently hard at work preparing Chapter 11 bankruptcy papers for ailing auto giant Chrysler. The bankruptcy could be enacted as early as next week, sources tell The New York Times.
Lenders, who currently hold about $6.2 billion in debt, could be given .22 cents to the dollar, the anonymous officials claim, while members of the United Automobile Workers’ pensions and health-care programs would be safe. Those programs require $10.6 billion and would be financed through Chrysler stock.
The plan, which has not been announced, may give Americans a view into General Motors’s possible future. That company today announced that they’ll shutter their factories for about nine weeks this summer.
The New York Times provides more details on the Chrysler plan:
Some analysts questioned whether the Treasury’s steps to prepare a bankruptcy case were an effort to put more pressure on lenders, with which it has exchanged proposals meant to reduce Chrysler’s debt. Chrysler faces an April 30 deadline from the Treasury, while GM faces a June 1 deadline in its own efforts to draft a new restructuring plan.
Under the most likely assumptions, Treasury will provide the financing that Chrysler needs to operate while under bankruptcy protection. The Canadian government is also expected to participate in backing the company.
Chrysler has also been talking to Italian company Fiat, which may buy 20 percent of the company and pick which assets and resources it wants to keep, like factories and dealerships. The rest would be put out to pasture.
We’ll keep you informed as the story develops, of course.
Read more about: Auto Industry, Cars, Chrysler, Chrysler Bankruptcy, General Motors, GM, News, Recession, U.S., United Automobile Workers
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16 Reader Comments (so far…) Sign In or Register to comment
Good for Chrysler.
They will work it out, without squandering the taxpayers money. GM is standing there with their hands out asking for more, more. GM is spending ONE MILLION a MONTH in taxpayers money on lobbyists. Good grief…the irony of it all.
That is what bankruptcy is for. They will be better for it. I will not support GM, giving the government more of my money is not in the cards.
Gosh, has any union worker on the assembly line ever volunteered to work for $1 per year? There will always be leaders of a company and then the rank and file. The balance of power shifts and for the last couple of decades the rank and file have dug in believing that Americans will always buy American made automobiles …..and then seen their factories move south to Alabama or to Brazil. Those companies will never return to the Midwest.
So many decisions as to design, fuel efficiency and cost of American automobiles have been poorly made …. and that is the fault of management. Bankruptcy is the only solution when management fails in it’s primary task … to manufacture a product the public will buy and thereby create a profit. No profit … then cutbacks and then bankruptcy. We are there now. Let us hope that this grand old company will be able to reorganize and provide a new hope for their customers and, of course, for their remaining American employees.
Volunteered to make $1 per year after making hundreds of millions in the years prior………and being directly responsible for all the decisions that drove the company into bankruptcy? You’re right……no union worker has ever done that.
Management salaries at these companies were/are far more exhorbitant the the assembly line worker — and who exactly agreed to the union contracts in the first place? Why management! Amazing.
MK P - I do not exactly understand your point. The blame for the failure of the automobile industry is not solely due to management nor is it solely due to the union. However, were each too greedy? Yes. Management, whose salaries went beyond the normal ratio between labor and management, made some terrible decisions which left only a small area between profitability and being in the red. The production of the SUVs was apparently a success until the oil price surge last year and the decline in sales was sudden and sharp.
During the union contract negotiations, management of the auto companies have said for years that the cost of labor was going to eventually break the financial viability of the industry. And that, too, has happened. Contracts were signed every three years but soon the auto leaders were looking to move their plants South where the labor costs were cheaper. Were they wrong to move? Was the Union wrong to continue to demand higher benefits when profits were dropping?
Ford built a beautiful new plant … not in Tennessee or Alabama … but in Brazil! And some of ancillary companies built new facilities right along side. Why wasn’t that Ford plant built in Michigan? Because the Union would not let it be built there because Ford was going to use more robotics in the plant, lower the cost of manufacturing and, thereby, keep the retail price down. Do you blame management for this decision? They were responsible for keeping Ford a profitable company and if the Union would not allow a new plant to be built in America, then they would build outside of America. I think the Union has continuously made bad decisions for their rank and file and now those employees in the Midwest are paying the biggest price of all because they will not see a return of those companies. They are gone forever.
I agree…..and both may have in fact been too greedy. However, management cut a much sweeter deal than the rank and file, and that was what my response was direct toward. The CEO offering to work for $1 a year is a joke and to suggest that somehow he was "taking one for the team" absurd. That said, I think the Board of Directors and management get paid enough to take responsibilty for "managing" the company into bankruptcy.
I also think lawmakers are responsible for allowing companies to take production overseas and not only take advantage of lower labor costs (abysmally low) and get a tax break to boot. I have been on the management side of union negotiations — never for the auto industry, but I have found unions to be sensitive need to make a profit………..
Ford’s philosophy is very sound. They intend to build in the market where they sell. No cars from Brazil are imported to sell in the US. They are sold in South America. GM to a certain degree also follows this philosophy.
Some countries, such as China, require manufacturing to be there if the company wants access to their market. Even Canada has domestic content laws for some products sold there. The US should consider similar measures as well as FAIR TRADE agreements, not just FREE TRADE agreements. There are still many countries around the world that have slave labor. To expect American workers to compete with places that use slave labor in the production chain in absurd.
It amazes me that people who have little problem with financial sector employees averaging hundreds of thousands in salary annually, before even addressing the outrageous wages paid to the upper echelon, can be so short sighted they rail against an hourly line worker who *might* take home $60,000 in a good year.
I am usually on the side of the working person, but these auto workers have benefits, pensions and salary amounts which are much higher than the typical blue collar worker and even a lot of white collar. People who are building cars at companies which are not a Big Three and where the workers are non-union are not making anywhere near these salaries. And the car prices of these companies are much lower and the cars have good warranties….and they stand behind the warranties unlike some of the Big Three.
I read that Fiat said they wouldn’t merge, even though that merger was a part of the requirements, because of no concessions have been made with the auto workers. The auto workers really haven’t made any concessions. The auto workers have said something to the affect that new workers now start at $14 but there haven’t been any new workers…so this is superfluous. Laid off auto workers get most of their salary…regular non-auto workers sure don’t get this. And retirees get their full medical benefits and super good pension benefits. Many non-auto worker retirees are now being asked to participate in the cost of their health care premiums.
My husband is a blue collar worker who lost a very high paying job due to closing a facility. From our family’s standpoint, if he had been asked if he were willing to accept a much lower salary but still have a job the answer would have been yes. The older you get the harder jobs are to find. And, to me, having a job is better than not having a job. Many of those auto workers will never find jobs because of their age. They will just accept their full pay as being laid off as well as their state/federal unemployment checks and then draw their pensions. No wonder they don’t want to cut benefits and pay. Appears it’s a Catch-22.