Detroit Bureau on Twitter

Posts Tagged ‘chrysler llc’

GM Bankruptcy Plan Includes UAW Lobbying Organization for Health Care Reform

Protection is asked for funding for what will largely be a taxpayer-financed organization that includes Chrysler and Ford.

by on Jun.08, 2009

While the union preserved active woker benefits for the moment at GM, retirees took a a bit hit. Mor ecuts could be on the way.

While the union preserved active worker benefits for the moment at GM, retirees took a a big hit. More health care cuts could be on the way.

The United Auto Workers Union in its revised contract with bankrupt General Motors is attempting to establish a lobbying organization funded by the automaker that would push for health care reform. Ford Motor Company and New Chrysler would contribute as well.

GM has agreed to provide funding of $3 million annually for five years to a “National Institute for Health Care Reform,” provided that Ford and Chrysler participate with proportionate funding.

GM CEO Fritz Henderson told TDB that, “We are committed to go ahead with the Institute,” even though he didn’t know the status of Ford and Chrysler contributions. “There has to be change in the health care system,” Henderson said.  Henderson disagreed with our lobbying designation, insisting  that the Institute is a research group.

The Institute  funding, of course, will be largely taxpayer supplied since the U.S. Treasury will hold majority stakes in GM and the Chrysler Group when they emerge from bankruptcy.

The new push comes at a time when the national debate on health care is heating up, as President Obama tries to fulfill his campaign promise to reform a system that spends more money and produces worse results when compared to any other industrialized nation. We are now facing skyrocketing costs, massive numbers of uninsured people and the ongoing problem of profit-driven decision-making on the delivery of health care.

Almost 47 million Americans are without health insurance, and the cost of providing medical services from a private, for-profit system is rising at an unsustainable rate. This  is forcing businesses to increasingly trim or eliminate benefits for workers with health care — precisely what is happening at the auto companies.

The revived union initiative is taking on new urgency since the UAW has now assumed enormous risks on behalf of its one million retirees and dependents whose health care will be financed by Voluntary Employee Beneficiary Associations (VEBA) run by the union, funded in part by automaker stock.   (more…)

Chrysler Wants $224 Million from U.S. for EVs

If granted, the company will match the federal money.

by on May.26, 2009

Bob Nardelli, Chairman and CEO, Chrysler LLC, introduces the Jeep EV and Dodge EV to automotive journalists at the Company's World Headquarters in September of 2008. Chrysler LLC announced today that it has packaged new, production-intent advanced electric-drive technology in three different vehicles - one for each of its brands, Chrysler, Jeep and Dodge. Chrysler said at least one model is targeted to be produced in 2010 for consumers in North American markets, and in European markets after 2010. The Dodge EV is an all-electric sports car. The Jeep EV is a Range-extended Electric Vehicle with Wrangler capability.

In September of 2008, Chrysler said that at least one model was targeted to be produced in 2010 for consumers in North American markets. The Dodge EV is an all-electric sports car. The Jeep EV is a "range-extended" electric vehicle.

Chrysler LLC is asking the U.S. Department of Energy for $224 million from the department’s Transportation Electrification Initiative to finance the development of electric vehicles (EVs). It joins a long list of competitors also seeking federal funds.

The list of vehicles targeted from the program includes the Dodge Ram 1500 Plug-in Hybrid-electric Vehicles (PHEV), Chrysler Town & Country PHEVs and Chrysler Town & Country Electric Vehicles.

“Department of Energy (DOE) initiatives aimed at vehicle electrification “demonstrates how Chrysler LLC, with its partners and the DOE, can work together to promote technological innovation and energy independence in the United States,” Chrysler said.

Chrysler LLC applied for two programs established by the DOE: the Electric Drive Vehicle Battery and Component Manufacturing Initiative; and the Transportation Electrification Initiative.

Both are designed to speed up development, demonstration, evaluation and manufacturing of EVs and PHEVs. The programs represent a 50/50 cost-share opportunity with $224 million from Chrysler LLC and its partners, combined with a matching $224 million from the DOE. These funds will accelerate the market introduction and penetration of advanced powertrains.    (more…)

Chrysler Picks Future Suppliers

Bankruptcy Court Filing lists some winners and losers.

by on May.15, 2009

Scott Garberding, Chrysler LLC

Chrysler will continue to work with those suppliers who wish to become part of the new enterprise.

Chrysler LLC today announced this morning that it would begin the process of assigning the “overwhelming majority” of the company’s supplier contracts to the new company established in with Fiat SpA once an asset sale is completed as it emerges from bankruptcy. Some of the winners are Alcoa, Continental, Delphi, Johnson Controls, Magna International and Penske Corporation.

Chrysler has also started a process by which suppliers may be paid pre-bankruptcy accounts receivable. Chrysler claims that the amount it is willing to pay is higher than those normally assigned during a bankruptcy process, a contentious assertion no doubt with some suppliers.

About 40% of what is owed is offered immediately, with the balance to be assumed by the new company and paid back over time. Whether its ailing suppliers can last that long is an open question. Roughly 20% of Chrysler suppliers were in the “high risk” or “risk” categories Chrysler uses to assess their financial health, and that was before all of its plants were shut down last month. Typically it takes Chrysler 45 days to pay a supplier after it has received the parts.

The bankruptcy continues to have potential dire consequences for Ford Motor and General Motors since 96 of Chrysler’stop 100 suppliers also supply both of those loss-making companies.

Chrysler will mail letters to approximately 1,200 of its suppliers setting forth the amounts that Chrysler has determined will be required to “cure” all contracts to be assumed and assigned to the new company.

It appears Chrysler will attempt to not negotiate the amounts that it will pay. Some struggling suppliers may have little bargaining power to ask for more.

Suppliers have ten days to dispute the Chrysler amount, and a court hearing is scheduled for June 4th to resolve differences.

Some of Chrysler’s biggest creditors were not on the list in the court filing, which could mean that they will not be part of the supply chain for the new company.

However, the “list is not a complete or final listing of suppliers” for the new company. “Chrysler will continue to work with those suppliers who wish to become part of the new enterprise,” Chrysler said.    (more…)

Bob Lutz Joins List of Chrysler Creditors

Some surprising companies and people stand in a long line of those with unsecured claims against bankrupt Chrysler.

by on May.11, 2009

Bankruptcy lightning has already stuck twice at companies Lutz has led. GM will make it thrice.

Bankruptcy lightning has already stuck twice at companies Lutz has led. GM will make it thrice.

The list of creditors that are owed big money by bankrupt Chrysler LLC includes many of the usual companies that are suppliers to the auto industry. But not all of them are immediately obvious, even to veterans of what remains of the auto supplier’s beat. So it’s not surprising that Johnson Controls is owed $50 million, or Continental Automotive, $46 million, or Cummins Engine, $44 million. These are all large, global companies that have been in the auto arena for decades or more, and are among the biggest creditors that would lose the most money if Chrysler doesn’t revive itself.

It’s puzzling that Chrysler’s ad agency, BBDO Detroit Incorporated, is the second largest creditor, at $58,055,133.44? Who would have thunk it! Well maybe it’s like American beer, the advertising and promotion cost more that the production of the stuff inside the can. Still, this is more money owed for advertising than steel, since U.S. Steel Corporation is owed only $16,182,772, as of April 30. 

Subscribe to TheDetroitBureau.comThen we have an order entered Saturday by the Honorable Arthur J. Gonzalez, the presiding judge in the Chrysler bankruptcy matter. It grants a motion for admission to practice pro hac vice, or for the occasion, to Michael S. Leib, a member in good standing of the bar in the State of Michigan to practice in this one case before the Federal court in New York for a $25 fee. This without question is going to be much smaller than the fee he charges his client, creditor Robert A. Lutz.   (more…)

Chrysler to Shut Down Most Manufacturing Operations While Bankruptcy Proceeds

Production halts this Monday, May 4, and only resumes when the New Chrysler emerges from the court proceedings.

by on Apr.30, 2009

Tom LaSorda, Chrysler Vice Chairman and President, left, and Bob Nardelli, Chairman and CEO, will leave Chrysler.

Tom LaSorda, Chrysler Vice Chairman and President, left, and Bob Nardelli, Chairman and CEO, will leave.

Chrysler LLC today announced that, as a result of the comprehensive restructuring plan agreed to by many of its stakeholders, it has reached an agreement in principle to establish a global strategic alliance with Fiat SpA to form a new company. 

Unfortunately for workers, the company also filed for bankruptcy at a Federal court in New York City. During the bankruptcy proceedings, which are expected to last from 30 to 60 days, most of its manufacturing facilities will be closed. It is only when the New Chrysler emerges from bankruptcy that production will gradually resume. Workers will be eligible for supplemental unemployment benefits, worth about 80% of pay. Some additional plant closings are anticipated.

Chrysler already has a relatively low inventory as a result of previous cutbacks. The decision does not restrict Chrysler’s ability to reopen the plants if buyer demand warrants. Nonetheless, this is a severe blow to suppliers, who are also under pressure from GM’s announcement last week to take its plants down for 90 days.

“Even though total agreement was not possible, I am truly grateful for all that has been sacrificed, on the part of many of Chrysler’s stakeholders to reach an agreement in principle with Fiat,” said CEO and Chairman, Bob Nardelli. “My number one priority has been to preserve Chrysler and the thousands of people who depend on its success. While I am excited about the creation of the global alliance, I am personally disappointed that today Chrysler has filed for Chapter 11. This was not my first choice. “ 

Things didn’t work out so well for Nardelli, as previously predicted, and even though he was singled out for praise by the Administration today. “Chrysler’s management, and in particular, its CEO, Robert Nardelli, have played a positive and constructive role throughout this process,” President Obama said. (more…)

U.S. Treasury Moves Forward with Chrysler Bankruptcy and Fiat Partnership!

President makes tough decisions to move forward with the agreement of major stakeholders.

by on Apr.30, 2009

"It is unaceptable to let a small group of

"It was unacceptable to let a small group of speculators endanger Chrysler's future by refusing to sacrifice like everyone else.

The failure of some of Chrysler LLC’s creditors to agree to a debt-for-equity swap, tested President Obama’s patience for a month, but not his resolve or his readiness to save the once proud Michigan automaker from oblivion, and give it what he said would be a “new lease on life.”

So the President agreed with the recommendations of his Auto Task Force and directed that Chrysler LLC enter into bankruptcy under Chapter 11, section 363, in a Federal District Court in New York City, which is vastly experienced in such matters. The bankruptcy was filed today.

New Chrysler will emerge “stronger, and more competitive,” the President said.  No further job cuts are anticipated at this time. If all goes well, more jobs will ultimately be created.

The “alliance” with Fiat will create the sixth-largest global automaker, spreading R&D and design development costs over higher volumes, making it more competitive in an increasingly global and consolidating industry.

Fiat is contributing billions of dollars in advanced technology and intellectual property, and offering Chrysler access to its global distribution network.  Fiat’s technology will allow Chrysler to build new fuel-efficient cars and engines in North American factories.

The “appropriate level of shared sacrifice” was not achieved, so Chrysler will go through what is termed a “surgical, short bankruptcy in order to finish the restructuring of its balance sheet and  emerge with as a properly capitalized company that could be competitive,” a senior administration official said in a background briefing that participated in.

Chrysler’s largest secured creditors have agreed to exchange their portion of the Company’s $6.9 billion secured claim for a pro-rata share of $2 billion in cash at closing. The Bankruptcy Court will be used to impose this treatment on those lenders that failed to accept the offer, which was accepted by a majority of the lenders.

The President lambasted hedge funds and speculators looking for “unacceptable” taxpayer subsidies.

During the 30 to 60 days the bankruptcy is predicted to take, Chrysler will function normally, suppliers will be paid and people will be able to finance and purchase vehicles because of funding from the U.S. and Canadian governments. Funding  is being provided on about a $3:C$1 ratio, reflecting the highly integrated nature of Chrysler’s operations on both sides of the border.

Employees will get paid, including salary, wages and ordinary benefits.  Workers compensation claims will continue to be paid by Chrysler’s insurers.  Assuming the sale moves forward as expected, Pension Plan and VEBA funding will be transferred to the purchaser. (more…)

Virtually all UAW Members Ratify Chrysler Settlement Agreement. President Obama Speaks at Noon About the Company’s Future

Only bondholders remain in the way of a last minute reprive of the company.

by on Apr.29, 2009

"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."

"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."

UAW members at Chrysler have overwhelmingly ratified a settlement agreement with Chrysler, Fiat and the U.S. Treasury that will allow the restructuring of the ailing company to go ahead.

The remaining obstruction to a reorganized Chrysler this morning are hedge funds that hold its virtually worthless secured debt. The four largest banks, holding 70% of the debt have already agreed to the proposed swap, but it appears that all of the bondholders must go along, and small ones are refusing to do so.

The funds are expected to try and hold out until the last possible minute – midnight tonight – of the deadline imposed by the Auto Task Force. But President Obama is due to speak at noon today, an indication that the administration is willing to act forcefully and move on. If agreement is not reached by then, the U.S. government is prepared to put Chrysler in receivership and provide funding until Chrysler’s assets can reassigned to a new company that would then go on.

With the approval of a new contract, union workers are putting their jobs on the line, saying they are willing to take the risk that a new, new Chrysler can survive and ultimately thrive.

Eighty-two percent of production workers, and 80% of skilled-trades workers voted for the agreement in balloting that took place at UAW Chrysler locations throughout the United States. Ninety percent of office and clerical workers voted in favor of the agreement, and 94% of UAW-represented Chrysler engineering workers voted for approval.

“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.”

UAW Vice President General Holiefield, who directs the union’s Chrysler Department, said: “Once again, UAW members have stepped up to the plate and acted responsibly. If other stakeholders will join us in making difficult sacrifices, Chrysler will have a chance to rebuild and participate in the eventual recovery of the U.S. vehicle market.” (more…)

UAW Agrees to Ban Strikes

New Chrysler contract alters traditional confrontational mode.

by on Apr.29, 2009

Picket Lines are a thing of the past as a UAW bargaining tool.

Picket Lines are a thing of the past as a UAW bargaining tool under the revised contract.

The United Auto Workers Union’s tentative contract with Chrysler LLC presented to union members Tuesday fundamentally changes labor relations by curbing the UAW’s right to strike for the next several years.

The contract was being presented to the more than 28,000 UAW members ahead of the ratification vote today.

“It’s very difficult,” said one union leader, who asked not to be identified.

“I really don’t think we had much choice but to go along,” Harley Shaiken, a labor expert from the University of California-Berkeley, said the “no-strike” provision represents a major change in Detroit’s often contentious labor relations. “That’s a fundamental change,” Shaiken said. “But it’s being done in the context that it will take anywhere from three to five years for this company to recover,” he said.

For years, the union had used the strike threat in economic disputes, particularly at General Motors and Chrysler. In fact, the union staged brief strikes against Chrysler and GM during contract talks in 2007, and a major 80-day strike against American Axle. However, the terms of the bridge loan agreements, effectively ban strikes. A strike is considered a default under the terms of the loan, which means even a local strike, a favorite union bargaining weapon in recent years, is probably off the table now, said one key union official. (more…)

Chrysler Deadline Met or Just Chrysler is Dead?

Chrysler working to the bitter end (beginning) to meet Treasury's demands for continued aid.

by on Apr.29, 2009

Once again financial speculators on Wall Street will determine Main Street's fate.

Financial speculators on Wall Street will determine Main Street's fate.

It all comes down to bondholders of $6.9 billion in debt. Chrysler LLC, in the latest version of its restructuring plan, wants to give them $2 billion in cash and shares in a restructured company.

Bondholders are balking, though, and it apparently requires the agreement of almost all of the 46 financial institutions and hedge funds that hold its virtually worthless debt at current trading prices to prevent a bankruptcy.

Chrysler, late yesterday, reached a tentative agreement to an equity swap with its four largest banks that hold 70% of its debt.  But it isn’t clear, if that is enough to force the 42 others to fold. As of this evening, Chrysler was still waiting to hear if  it will be forced into bankruptcy tomorrow by the  U.S. Treasury Department Auto Task Force.

Neither the President and Vice President would confirm a bankruptcy today, and the Treasury Department appears to be using the uncertainty, and media leaks about getting reading for a filing, as a cudgel to force the bondholders to relent.

“I am very pleased that principal banks have reached a deal with Chrysler to restructure the company’s debt so it can achieve viability.  A month ago when I first wrote to the CEOs of Chrysler’s major debtholders they were not even at the table, so this is a very positive development,” said Rep. Gary Peters (D-Michigan), who has been prodding the banks to negotiate with Chrysler. “The remaining debt holders should understand that this deal is better than what they could expect in bankruptcy and I encourage them to accept this fair offer,” he said.  

All the other pieces of the restructuring are basically in place. The Canadian Auto Workers Union and the United Auto Workers Union have cut their labor and benefit costs. By accepting stock for its health care fund, the UAW will end up with 55% of the new company, if ratification of the  revised agreement by members comes through tonight as expected. (more…)

Arab Investors to Dominate Daimler

Abu Dhabi government investment fund to become maker’s largest shareholder

by on Mar.23, 2009

Zetsche: It was either pry open an ATM or sell a stake to Abu Dhabi.

Zetsche: It was either pry open an ATM or sell a stake to Abu Dhabi.

An investment fund controlled by the government of Abu Dhabi is now the biggest shareholder in Mercedes-Benz’s parent company, Daimler AG.

Aabar Investment PJSC is spending $2.72 billion for a 9.1 percent stake in the German company.  Unlike many Mideast sovereign wealth funds, some shares in Aabar are publicly traded.  But in a series of recent steps, the government has been steadily increasing its stake in the investment firm.

“We are delighted to welcome Aabar as a new major shareholder that is supportive of our corporate strategy,” Daimler Chief Executive Officer Dieter Zetsche said in the statement. “We look forward to working together to pursue joint strategic initiatives.”

“Daimler is an iconic brand and a financially strong company with a reputation for excellence worldwide,” said Aabar Chairman Khadem al-Qubaisi, in a statement. “We are delighted to have the opportunity to make this investment and are excited by the commercial potential of our partnership.”

The Daimler investment appears to be Aabar’s biggest foreign move to date.  Last December, it bought the Swiss-based wealth management unit of the struggling American International Group, or AIG, for $273 million – a deal in which it also agreed to assume about $90 million in debt.