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Chrysler factories may close

Thursday, April 16, 2009

As many as five Chrysler LLC factories could close as the company reorganizes under the watchful eye of the federal government in anticipation of a merger with the Italian carmaker Fiat.

Chrysler officials said Wednesday they could not comment on the ongoing discussions with the U.S. Treasury Department and Fiat. President Barack Obama’s Auto Task Force is requiring the negotiations be completed by the end of April.

In response to pressure from Obama administration for deeper cuts, Chrysler also has come up with a list of additional plants that would be closed as the company restructures in return for additional federal loans. Assembly plants in St. Louis, Mo.; Brampton, Ontario; as well as engines plants in Detroit, Trenton and Kenosha, Wis., are all now on the chopping block, according to sources familiar with the discussions inside the company. Chrysler’s assembly plant in Sterling Heights also has been identified as possible candidate for closure.

The cuts would further downsize a company that is already far smaller than it was only two years ago. Since the beginning of 2007, Chrysler’s employment in the U.S. has dropped from 68,000 to around 38,000.

In February, Chairman Robert Nardelli said the company expected to eliminate 3,000 more jobs this year and the total is now expected to climb as the company continues to restructure.

The company is currently offering buyout and early retirements to 27,000 hourly workers in the U.S. Workers have until Monday, April 27, to accept the offer and they will separate from the company by Thursday, April 30, said spokeswoman Dianna Gutierrez.

Gutierrez, however, said she could not comment on the future talks with either the United Auto Workers or the Canadian Auto Workers or any pending cuts and plants closings. “I can’t get into that,” she said.

A spokeswoman for the UAW also declined to comment on the talks with Chrysler.

Meanwhile, Fiat Chief Executive Officer Sergio Marchionne, told the Toronto Globe and Mail that he was prepared to cut off the discussions about taking a stake in Chrysler if the UAW and CAW didn’t agree to concessions.

“We’re just not going to get into that,” said one UAW official.

Other union officials said privately they suspect it is already too late to organize any kind of fight against additional concessions.

Chrysler’s creditors also have fortified their position as the talks over the company’s future move into the critical phase.

The so-called Chrysler Senior Secured Lender’s Steering Committee added new members Wednesday, including the Oppenheimer funds, Perella Winberg Partners and Stairway Capital. The new members demonstrate the diversity of the lending group, which represents thousands of individual investors, public pension funds endowments and other ‘Main Street’ investors.

Earlier, U.S. Rep. Gary Peters, D-Bloomfield Hills, had warned four of the nation’s major financial institutions — JP Morgan, Citigroup, Goldman Sachs and Morgan Stanley — not to block Chrysler’s chances for survival.

In a letter to the chief executive officers of the firms, Peters noted that these institutions have already received billions of dollars in taxpayer investments and that any debts they collected from Chrysler would simply be more tax dollars.

“These banks hold the key to Chrysler’s survival,” Peters said.

“Despite taking billions in taxpayer support to keep themselves solvent, these creditors are unwilling to reach a fair deal to keep Chrysler alive and to protect hundreds of thousands of American families. These financial institutions are already leading recipients of taxpayer support and any money received from Chrysler will simply be more tax dollars. The banks that hold Chrysler’s debt were provided federal support for the good of the economy, and they should negotiate in good faith with automakers for the same reason,” Peters said.

The major creditors appear wary of triggering a political fight but some creditors, particularly hedge funds that have picked up Chrysler debt at a deep discount, have suggested the company should be forced into bankruptcy and then broken up.

Brad Coulter, an analyst with O’Keefe & Associates in Bloomfield Hills, said that the investors looking at trying to break up Chrysler have overestimated the value of the company’s various parts.

Moreover, the market for automotive assets is basically glutted right now, he added.

LINK:Chrysler factories may close - The Oakland Press Business: The best place for news in and around Oakland County
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