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April 27, 2009
Chrysler and Union Agree to Deal Before Federal Deadline

DETROIT — Union leaders said Sunday that they had reached an agreement with Chrysler that meets the federal government’s requirements for the automaker to receive more financing.

The deal also includes Fiat, the Italian automaker with which Chrysler was ordered by the government to form an alliance before Thursday.

Neither the United Automobile Workers union nor the company released details of the agreement, which modifies the union’s 2007 contract and reduces the amount of money Chrysler must pay into a new health care fund for retirees.

The union plans to have its 26,000 Chrysler workers vote on the deal by Wednesday.

“We recognize this has been a long ordeal for active and retired auto workers, and a time of great uncertainty,” the union’s president, Ron Gettelfinger, said in a statement. “The patience, resolve and determination of U.A.W. members in these difficult times is extraordinary, and has made it possible for us to reach the agreement we will present to our membership.”

Chrysler said the agreement, reached during marathon negotiations over the weekend, satisfies the requirements laid out by the Obama administration for a deal by an April 30 deadline.

Chrysler, which has received $4 billion in federal loans, is in the final stages of a reorganization process ordered by the government, which includes a mandate to provide financing for half of all union retiree health care using company stock.

“The provisional agreement provides the framework needed to ensure manufacturing competitiveness and helps to meet the guidelines set forth by the U.S. Treasury Department,” Chrysler said in a statement Sunday night.

The tentative deal with the union also paves the way for a global alliance between Chrysler and the Italian automaker. “As a result, Chrysler can continue to pursue a partnership with Fiat,” Chrysler said.

Meanwhile, the Canadian Automobile Workers union said Sunday that its members had ratified a cost-cutting deal covering 8,000 Chrysler workers in that country. The deal, which is expected to lead to similar cuts for Canadian workers at General Motors and Ford Motor, cuts workers’ benefits, reduces time off and creates a health care trust for retirees. The union said 87 percent of its members voted in favor of the deal, even though the union’s president, Ken Lewenza, described the negotiation process as “torturous and unfair.”

Mr. Lewenza said, “The high acceptance of this agreement is a recognition that although workers did not cause this crisis, we all have an interest in maintaining good jobs and ensuring the auto industry remains central to the overall Canadian economy.”

The union deals increase pressure on Chrysler’s lenders to come to an agreement to reduce the automaker’s $6.9 billion in secured debt. The lenders, a group of banks and hedge funds led by JPMorgan Chase, are still in talks with Treasury officials over terms of a debt-for-equity exchange to eliminate at least two-thirds of the debt.

On Sunday morning, before the union deals became public, President Obama’s economic adviser, Lawrence H. Summers, said that the White House remained optimistic about Chrysler’s ability to restructure without having to resort to bankruptcy protection.

“We’re hopeful that the negotiations, which have been proceeding with great energy, are going to conclude successfully,” Mr. Summers said on “Fox News Sunday.” “There are some issues that remain to be worked out, but it’s in everybody’s interest to see these negotiations succeed and we’re hopeful that they will.”

In February, Chrysler said bankruptcy would most likely result in the liquidation of the company. But since then, the company has signaled that it could file for bankruptcy protection without having to shut down.

“My sense is that it’s not liquidation, that it would be a reorganization,” a Detroit-area Chrysler dealer, Carl Galeana, said Sunday. “I just think a shutdown of a corporation this size, in this economy, would be devastating.”

LINK:http://www.nytimes.com/2009/04/27/business/27chrysler.html?hp
 

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Chrysler LLC Statement in Response

Chrysler LLC Statement in Response to UAW and Chrysler Reaching a Tentative Agreement

Auburn Hills, Mich. , Apr 26, 2009 - Chrysler LLC Statement in Response to UAW and Chrysler Reaching a Tentative Agreement Attributed to Al Iacobelli, Chief Bargainer and Vice President – Employee Relations:

Chrysler LLC has reached an agreement today with the UAW subject to ratification. We commend the UAW’s leadership for their endless determination and perseverance in reaching this tentative agreement especially during these unprecedented economic circumstances that plague the automotive industry.

The provisional agreement provides the framework needed to ensure manufacturing competitiveness and helps to meet the guidelines set forth by the U. S. Treasury Department.

As a result, Chrysler LLC can continue to pursue a partnership with Fiat SpA.

Chrysler management has the utmost respect for thousands of men and women who are an integral part of our manufacturing operations.
 

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US Treasury to make new offer

US Treasury to make new Chrysler debt offer-sources
Sun Apr 26, 2009 11:00pm EDT

DENVER, April 26

- The U.S. Treasury is expected to make a new debt restructuring offer to Chrysler's first-lien lenders as soon as Monday in the wake of cost-cutting deals the struggling automaker won with unions in Canada and the United States, people briefed on the negotiations said on Sunday.

Chrysler's lenders are owed $6.9 billion in secured loans that stem from the 2007 deal that spun off a majority stake in the No. 3 U.S. automaker from Germany's Daimler AG. (DAIGn.DE: Quote, Profile, Research, Stock Buzz)

Chrysler, now 80-percent owned by Cerberus Capital Management, faces a deadline of later this week to wrap up concessionary deals with its unions and creditors and to close an alliance with Italy's Fiat SpA (FIA.MI: Quote, Profile, Research, Stock Buzz) in order to win continued financial support from the U.S. government.

A committee of Chrysler's lenders including JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz), Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz), Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) and Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) last week proposed taking $3.75 billion in debt and a 40-percent equity stake in a restructured company.

The terms of the Obama administration's offer in response to that proposal were not immediately known, according to the people who spoke about the confidential discussions on condition that they not be named.

LINK:US Treasury to make new Chrysler debt offer-sources | Industries | Consumer Goods & Retail | Reuters
 
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