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Chrysler Raises $5 Billion to Prepay VEBA Note

Maker saving $200 million with latest financing efforts.

by on Feb.11, 2014

Chrysler Group completed its efforts to prepay its VEBA trust obligations.

Chrysler Group LLC has finished raising approximately $5 billion to prepay an unsecured note issued in June 2009 to the United Auto Workers VEBA Trust as Fiat’s takeover of Chrysler cleared another milestone.

Chrysler also disclosed it expects to record a non-cash charge of approximately $500 million in connection with the repayment of the VEBA Trust Note. The transaction helps the health care benefits promised more than 80,000 Chrysler retirees, who belonged to the UAW, more secure.

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“This transaction brings to a successful and earlier than anticipated conclusion the process that led the U.S. and Canadian governments, the UAW and the VEBA, together with Fiat, to take on the task of reestablishing Chrysler as a viable automotive enterprise,” Chrysler Group LLC Chairman and CEO Sergio Marchionne said in a statement that accompanied the announcement had bee completed. (more…)

Chrysler Retirees Get Security from Fiat-VEBA Deal

Deal ensures trust has enough assets to fund benefits.

by on Jan.22, 2014

Sergio Marchionne, head of Fiat and Chrysler, reached a deal with the UAW for the union's stake in Chrysler.

Chrysler retirees have been one of the big winners in the deal that gave Fiat control of the large block of stock that was held by the employee benefit trust or VEBA.

Regardless of what might happen to Fiat or Chrysler or the new combination of the two – and there are plenty of doubts about Fiat’s ability to weather the economic storms in Europe and simultaneously expand there – the retirees will have a sizable insurance policy in the form of $4.35 billion that the new Italian-American company transferred directly to the VEBA.

A Sporting Choice!

The VEBA, which is no longer a Chrysler shareholder, plans to broaden and diversify its asset base in effort to protect the retirees, who depend on the trust for all or part of their health care. (more…)

Chrysler IPO Not Happening until 2014

UAW trust's unwillingness to sell stake holds up offering.

by on Nov.25, 2013

Sergio Marchionne's planned IPO of Chrysler has been delayed until the first quarter of next year.

Investors looking to buy shares of new Chrysler stock as part of an IPO this year are going to have to rethink their investment strategy, as the company won’t be conducting that offering until next year.

Fiat – which owns 58.5 percent of Chrysler and assumed management of Chrysler in 2009 as part of the Auburn Hill automaker’s bankruptcy restructuring – said today that Chrysler’s board “has determined that it will not be practicable” to launch and complete the IPO before the end of the year. Chrysler will continue readying for a first-quarter 2014 launch of the IPO.

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“No assurance can be given as to whether or when an offering will be launched, as any launch will be subject to market conditions and other relevant considerations,” Fiat said. (more…)

GM, Chrysler Retirees to Regain Some Key Benefits

Dental, vision care on list, according to union.

by on Sep.23, 2011

GM and Chrysler retirees will get some of their health care cuts restored in 2012.

Though they were largely left out when General Motors and the United Auto Workers Union hammered out a new 4-year contract last week it looks like retirees at GM – as well as Chrysler – may have something to cheer about after all.

They will see a restoration of some of the medical benefits they lost as part of earlier concessions made to help the two automakers survive their 2009 bankruptcies, according to a posting made by a UAW union local on its Facebook page.

In the Know!

GM and Chrysler retirees have had to pay for their own vision and dental care for the last two years but will now get at least some of that coverage restored, according to the letter from the director of care and benefit management for the so-called VEBA program established jointly by the UAW and the makers to take over retiree health care.

The additional coverage appears limited, however, the restored vision care allowing for exams every other year.

(more…)

Labor Boss King: UAW is the Union of the 21st Century

Collaboration, not confrontation key, says autoworkers chief.

by on Jun.02, 2011

UAW Pres. Bob King says the union is "reinventing" itself for a new era.

Saying his union is in the midst of “reinventing” itself, United Auto Workers President Bob King strode into the lion’s den, this week, aiming to convince a gathering of Michigan’s most powerful business leaders that the labor movement is not just relevant but useful.

Collaboration, rather than confrontation, has been a key message for King, a one-time fire-breathing orator who has taken a much more laid-back and conciliatory approach since assuming the helm of one of the nation’s most powerful labor organizations last year.

News you can use!

It was a direction already set by his predecessor, Ron Gettelfinger, who agreed to a series of once-taboo concessions during 2007 contract talks with Detroit’s Big Three, and again during the deep recession that nearly crushed the domestic makers, forcing General Motors and Chrysler into bankruptcy.

“Our union has learned many lessons from this crisis,” King proclaimed, adding that, “We are in the process of reinvesting our union.”

(more…)

Ford to Use Cash to Fund UAW VEBA Payment

Retiree Medical Benefits Trust to get $3.8 billion.

by on Jun.30, 2010

Happier days for all back in 2007.

Ford Motor Company (NYSE:F) today is reducing its debt by more than $4 billion by retiring debt owed to the UAW Retiree Medical Benefits Trust ahead of schedule. The company said it is taking the action to strengthen its balance sheet.

Analysts have noted that although Ford escaped bankruptcy during the Global Great Recession, it still has a relatively large amount of debt.

Moreover, Ford is increasingly returning to fleet sales in the U.S. this year to keep momentum going, and it is losing ground in Europe to stronger French competitors, notably Renault,  due to pricing and quality issues. The stock has been under selling pressure recently and is currently trading on the $10 range. (See European Auto Market Tanks in May)

Nonetheless,  Ford says it will post a profit and positive automotive operating-related cash flow this year, which means the stock price could be caught in forces beyond Ford’s control.

Ford is making scheduled payments in cash totaling about $860 million on Notes A and B held by the UAW Retiree Medical Benefits Trust – including about $250 million due under Note A, and $610 million due under Note B. Ford had the option to pay Note B with cash or Ford stock but agreed to pay with cash.

In addition, Ford and its subsidiary, Ford Motor Credit Company, are paying a combined $2.9 billion to retire the remaining obligation on Note A at an agreed upon discount of 2%.

Separately, Ford is making a $255 million cash payment to bring current previously deferred quarterly distributions on the 6.50% Cumulative Trust Preferred Securities of Ford Motor Company Capital Trust II.

With today’s actions and an April payment of $3 billion on its 2013 revolving credit facility, Ford will have reduced its debt by more than $7 billion in the second quarter. The second quarter debt reduction will save Ford more than $470 million in annual interest expense.

Debt Free!

“We expect to continue to improve our balance sheet as we deliver on our plan,” said Ford President and CEO Alan Mulally.

“Importantly, our business results make it possible to take these actions while still accelerating the investments we are making in our business to serve our customers with the very best cars and trucks,” Mulally claimed.

(more…)

GM Pays German Government another €200 Million

Government loans are being slowly paid as reorganized GM generates cash. More than $29 billion in debt is outstanding.

by on Nov.16, 2009

Angela Merkel, German Chancellor

The German government called the loan when it became clear that German jobs would not be overly protected in a GM reorganization.

General Motors has returned to German taxpayers another €200 million ($299.3 million) on the Opel bridge loan that was made last spring when it was planning on selling its loss making European arm.

GM has since decided to reorganize Opel by itself,  and the German government called the loan when it became clear that German jobs would not be overly protected  compared with other Opel/Vauxhaul locations in the United Kingdom and Europe.

GM now has an outstanding balance of €400 million, which GM expects to pay back by November 30,” according to Enrico Digirolamo, GM Europe Vice President and Chief Financial Officer.

With production restarted after its 60-day bankruptcy proceeding, GM is once again generating cash and paying down some of its debt.

With the Opel bridge loan, GM had a balance of €900 million (~$1.3 billion) as of September 30, 2009. Opel has already repaid €500 million (~$0.7 billion) of that in November, and will repay the remaining €400 million (~$0.6 billion) balance by the end of the month. The cash balance in Europe as of September 30, 2009 was $2.9 billion.

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Chrysler Follows GM in Requesting ERISA Waiver

Risky securities are proposed for UAW health care funding.

by on Oct.05, 2009

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The UAW is betting on the value of new stock.

The U.S. Department of Labor’s Employee Benefits Security Administration  announced a proposed exemption in the Federal Register today that, if granted, would allow the Chrysler to transfer about $4.59 billion promissory note and company securities to the Voluntary Employees Beneficiary Association (VEBA) plan established to provide health benefits for the company’s retirees.

Following the same request by General Motors Company last month, Chrysler wants an exemption under the Employee Retirement Income Security Act (ERISA) to allow the VEBA plan to hold stock and debt of the reorganized Chrysler. The retiree health plan would cover about 120,000 retirees and dependents when it becomes effective on Jan. 1, 2010.

At the time they were originally proposed, VEBAs at the auto companies were a piece of financial engineering that allowed the transfer of billions of dollars in health care obligations from the books of the auto companies, thereby lowering their borrowing costs. The promised cash contributions from the auto companies never materialized in the amounts that were promised.

Follow the Feds!

Follow the Feds!

Now GM and Chrysler want to use securities in the reorganized companies to fund the health care but need a Federal exemption to do so. Ford Motor Company also has a similar agreement with the Untied Auto Workers union that allows it to use stock in lieu of cash payments. It is not clear when either Chrysler or General Motors will attempt a public stock offering.

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General Motors Company Arises from the Ashes

The new GM launches today, just 40 days after bankruptcy.

by on Jul.10, 2009

Fritz Henderson, CEO GM Company, photo TBD

The speed of the bankruptcy proceeding could not be matched by an impending reorganization plan.

General Motors Company, or the new GM, is abandoning the old way of doing business that drove it into bankruptcy, according to its CEO. He also will streamline its organization, focus on “best in class” products and attract enough customers to stop its sales slide.

The U.S. taxpayer-owned company is expected to go public by the middle of next year. And GM wants to pay off its U.S. loans that are currently keeping it afloat well before the required  2015 date.

These are all extremely ambitious goals, to put it politely, coming from a management team comprised almost entirely of old-line GM executives who set the policy and made the decisions that resulted in the largest corporate bankruptcy in U.S. history.

“One thing we have learned from the last 100 days is that GM can move quickly and decisively,” said Fritz Henderson, CEO. “Today, we take the intensity, decisiveness and speed of the past several months and transfer it from the triage of the bankruptcy process to the creation and operation of a new General Motors.”

The problem confronting GM — new or old — is the continuing decline in production, sales and share in the toughest vehicle market since WW2.

Keep up with the Reorganization!

Keep up with the Reorganization!

Little new ground in the all critical product or cost cutting areas was covered by Henderson in his first press conference as the operational head of GM Company, which was created today by an asset sale approved by a bankruptcy court in New York on July 5th. In fact, the cliche’s of a product and customer focused organization, repeated over and over, seemed more suitable for an internal pep rally than for a news event after a near death experience for a  company whose future is still by no means assured.

Even the claim that GM can move quickly was cast in doubt by the lack of detail in just how GM is going to trim its bloated corporate ranks.  Henderson’s new management organization was being prepared in anticipation of a July 31st closing date, and the restructuring could not keep pace with the swiftness of the bankruptcy proceeding.

(more…)

A Closer Look at the General Motors Asset Sale just Approved by the U.S. Bankruptcy Court

Yes, an appeal has already been filed. The outcome will almost certainly be the same as with Chrysler. GM's sale will proceed.

by on Jul.06, 2009

Ex GM Chairman and CEO Rick Wagoner,center, Ex GM Vice Chairmen Bob Lutz, left, and survivor Fritz Henderson, right

General Motors Company will be headquartered in Detroit and led by Fritz Henderson as the president and chief executive officer.

The U.S. Bankruptcy Court for the Southern District of New York approved the sale of almost all of General Motors Corporation’s assets to NGMCO, Inc., a new legal entity funded by U.S. taxpayers for about $51 billion. An appeal by product liability lawyers is unlikely to halt the sale at noon on July 9th. 

When the sale closes, during the next week, NGMCO, Inc. will change its name to General Motors Company and continue to operate much like GM did in the past, albeit with only four core brands, and far fewer employees and dealers. Current GM employees will be offered positions by the new company. The current General Motors Corporation will then change its name to Motors Liquidation Company. It will ultimately be dissolved under direction of the court.

Stay auto news solvent!

Stay auto news solvent!

General Motors Company will be headquartered in Detroit and will be led by Fritz Henderson as president and chief executive officer. Edward E. Whitacre, Jr. is chairman of the board of directors. 

Also selected to serve on the board of directors are six current members of the GM Corporation board — Erroll Davis, Neville Isdell, Kent Kresa, Philip Laskawy, Kathryn Marinello and Fritz Henderson. 

(more…)