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 TheDetroitBureau.com 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…)

"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…)