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Treasury Adds Capital to GMAC Financial Services

GMAC financing is key to Federal auto bailout plans.

by on May.22, 2009

While Chrysler and Cerberus are separated, the hedge fund still owns part of its new finance company.

While Chrysler and Cerberus are now separated, the hedge fund still owns part of its new finance company, which is being propped up by the government.

The U.S. Department of the Treasury has strengthened the weak balance sheet of GMAC Financial Services by adding $7.5 billion in capital to the ailing finance company and bank.

The troubled lender had a first-quarter loss of $675 million, up from $599 million a year ago.

GMAC sold $7.5 billion of mandatorily convertible preferred (MCP) membership interests and warrants to the U.S. Treasury. The U.S. Treasury immediately exercised the warrants and GMAC issued an additional $375 million of MCP. The investment included $4 billion of MCP related to GMAC’s agreement with Chrysler LLC to provide automotive financing to Chrysler, and $3.5 billion of MCP toward the Supervisory Capital Assessment Program (S-CAP) requirement.

This reduces the new capital required to $5.6 billion after GMAC failed a Treasury audit earlier this month. After analyzing GMAC’s books, Treasury determined that it would need an additional $11.5 billion in capital in order to ensure survival as the Great Recession continues on. By failing the so-called stress test GMAC was put under the Supervisory Capital Assessment Program (S-CAP).

The latest loans are only part of the actions the U.S. government is taking to prop up GMAC, which is vital to its auto bailout plans. The company has been designated as the wholesale and retail lender for GM and Chrysler when it emerges from protection of the U.S. Bankruptcy court in New York. GM will almost certainly file for similar protection by June.

The Federal Deposit Insurance Corporation is now involved in assisting GMAC, by guaranteeing as much as $7.4 billion in new debt to be issued by GMAC as part of S-CAP.    (more…)

Obama Administration Spares Nardelli from Sacking

Calling the Chrysler situation different, a Fiat deal is blessed.

by on Mar.30, 2009

Chrysler CEO Bob Nardelli has 30 days to forge an alliance with Fiat.

Chrysler CEO Bob Nardelli now has just 30 days to forge an alliance with Fiat.

The Obama White House appears to have cleared away some of the barriers to a deal between Chrysler and the Italian carmaker. A green light for the Fiat deal was near the top Chrysler’s wish list when it submitted its viability plan to the White House back in February. Washington hands said the Fiat deal might not pass muster in the nation’s capitol. However, Obama’s Auto Task Force has now approved the concept of Chrysler-Fiat, pending resolution of the final details. The Obama’s administration said that the company has another 30 days to finish restructuring its operations and debt, and complete negotiation with Fiat. The deal with Fiat could be instrumental in reviving Chrysler, Obama said.

Chrysler Chairman Robert Nardelli said he was encouraged by the administration’s commitments to both the American automobile industry and “Chrysler’s viability through an alliance with Fiat.”

“I want to personally assure all of our customers, dealers, suppliers and employees that Chrysler will operate ‘business as usual’ over the next 30 days,” Nardelli said. “While we recognize that we still have substantial hurdles to resolve, Chrysler is committed to working closely with Fiat, the Administration, U.S. Treasury and the Task Force to secure the support of necessary stakeholders. If successful, the government will consider investing up to the additional $6 billion requested by Chrysler to help this partnership succeed.

Nardelli ignored comments from the White House and the Automotive Task Force, suggesting the company was no longer “viable as a stand alone company.” (more…)

Federal Money Off-Limits for Fiat, Says Nardelli

Another sweeping buying underway at Chrysler.

by on Feb.02, 2009

Chrysler CEO Bob Nardelli: "Hands off, Fiat"

Chrysler CEO Bob Nardelli: "Hands off, Fiat"

Fiat won’t be able to touch any of the “bailout” loan money provided by the U.S. government if it decides to move forward with its alliance with Chrysler LLC, says Chrysler Chairman Robert Nardelli.

In addition, Chrysler also said it is going ahead with a sweeping buyout of hourly workers at the company’s throughout its manufacturing system, which now has about 34,000 employees.

“Given the difficult economic and market conditions in the U.S., Chrysler LLC determined in December 2008 that it would offer another phase of its ‘Special Programs,’” said a company spokeswoman, adding that, “The original window to offer the programs was slated to begin in December and run into January, per an agreement with the UAW. Due to the fact that many of the company’s facilities had suspended production for extended periods in December and January, the program offerings are being rolled out now.”

Workers have until Feb. 25 to decided whether to accept the buyouts, which would provide up to $75,000 in cash and $25,000 to buy a vehicle to those who leave the company without retiring. The incentive for early retirement is $50,000 cash and a $25,000 voucher.

The latest program follows another buyout, in November, that saw some 5,000 salaried employees – or 25 percent of Chrysler’s white-collar workforce – agree to leave the company.


Dear Employee (or Have You Been Fired Yet?)

Nardelli aims to rally the Chrysler troops

by on Jan.23, 2009

Chrysler CEO Bob Nardelli

Chrysler CEO Bob Nardelli

In this digital era of mass e-mails, it’s always nice to get a personal note. So, we at were pleased to discover the following note land in our digital transom from our old friend Bob. That’s Nardelli, to you, of course, as in CEO of the Italian automaker, Chrysler. We thought we’d share his words with you readers, and ask you to pass on the additional missive to Chrysler workers – and soon to be unemployed ex-Chrysler employees.

It was only a week ago that we met during media days at the North American International Auto Show…what a difference a week can make. It was good to spend time with you and I have appreciated reading your reports. Additionally, I recognize the intense pressure you face in reporting accurately on all that is going on in the automobile industry today.

We at Chrysler LLC recognize that the current economic and industry environment is extremely difficult. We don’t underestimate the challenges ahead. I would like to reinforce, however, that Chrysler is developing a successful viability plan. The federal bridge loan allows us to continue our aggressive restructuring effort and invest in high quality, fuel efficient vehicles while developing a plan that anticipates we will begin repayment of the U.S. Treasury loan by 2012.


Will Fiat Deal Save Chrysler?

Proposed alliance could save money, add global reach

by on Jan.20, 2009

Chrysler turns to the Italians for salvation

Chrysler turns to the Italians for salvation

The perennially-troubled Chrysler LLC will form a new “global strategic alliance” with the Italian automaker that often has words like “weak,” and “troubled,,” associated with its own name, Fiat s.P.a. Barring problems with federal overseers, who must review the proposed deal – and give a sign-off on Chrysler’s business plan – the two automakers’ alliance could come together in April.

The announcement, which first reported on yesterday, comes nearly 20 years after Chrysler and Fiat called off a proposed, trans-Atlantic merger. The new deal will be significantly less far-reaching in scope, though it could still play a critical role in determining the companies’ long-term viability, according to industry observers.

The proposed deal, said a press release, “would provide Chrysler with access to competitive, fuel-efficient vehicle platforms, powertrain, and components to be produced at Chrysler manufacturing sites. Fiat would also provide distribution capabilities in key growth markets, as well as substantial cost savings opportunities” stemming, among other things, through increased economies of scale.

One of the more telling comments in the release, which seems to underscore just had badly understaffed Chrysler has become as it has been forced to pare back to survive, notes that, “Fiat would provide management services supporting Chrysler’s submission of a viability plan to the U.S. Treasury as required.”