Fiat Threatens to Walk on Chrysler Deal
04-15-09 | 12:17 PM
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Fiat Threatens to Walk on Chrysler Deal
Ford may have gotten a credit rating upgrade but we could find out if the notion that any one of GFC going under would have devestating impact on the US auto industry. ChryCo is going to be first and while I don't view a linkup with Fiat as being their salvation, even that option is running into trouble with the UAW being named.
Chrysler's debt, labor could derail Fiat deal, bailout funds
Chrysler has until May 1 to complete a deal with Fiat.
By Sharon Silke Carty, USA TODAY
DETROIT — With the clock ticking to sign a merger deal with Italian automaker Fiat, Chrysler is struggling to shed a majority of its debt by getting the holders to take shares in trade.
It's a stumbling block that could delay or derail the proposed partnership, which the government has ordered completed by May 1. If Chrysler can't meet that deadline, the government has said, it will get no more bailout money. That likely would push it into filing Chapter 11.
Standard & Poor's last week cut its ratings on Chrysler and said it doesn't believe it would survive bankruptcy.
"We believe that if the company filed for Chapter 11 bankruptcy protection, many of its assets and operations would be sold in discrete transactions over time, while other segments may be closed," said Standard & Poor's recovery analyst Greg Maddock.
Adding another obstacle, Fiat CEO Sergio Marchionne said in an interview published Wednesday that Fiat will walk away from a deal if the U.S. automaker's unions don't agree to major cost cuts.
Chrysler has asked for $9 billion in loans to help weather the collapse of car sales that started in the fall. It has received $4 billion and is getting enough working capital to make it through April. President Obama said last month that he doesn't believe Chrysler can become viable as a stand-alone company. He gave it 30 days to find a partner, saying only then would it be eligible for $6 billion in additional loans to make a deal work.
Chrysler's situation differs from General Motors' (GM). GM also has massive debt, but much of it is unsecured. Chrysler is saddled with a huge, for its size, load of $6.8 billion in first-lien-secured debt alone. Those debt holders have more leverage to hold out for a better debt-restructuring deal. They know that in a bankruptcy, they have first dibs on any money, even if it means selling off Chrysler in pieces.
The debt holders have been meeting with the president's automotive task force in the past few days, attempting to hammer out a deal.
Rep. Gary Peters, D-Mich., has urged big banks holding much of the debt to do something quickly. Many of them, including JPMorgan Chase, Citigroup, Goldman Sachs and Morgan Stanley, also have taken bailouts from the government and, he says, should be doing more to help save Chrysler.
"These banks hold the key to Chrysler's survival," he said recently. "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."
In the interview published in the Toronto Globe and Mail, Marchionne said: "Absolutely we are prepared to walk. There is no doubt in my mind. We cannot commit to this organization unless we see light at the end of the tunnel."
A Fiat spokesman confirmed Marchionne's statements.
Marchionne said there is a 50% chance the deal will fail because of lack of progress in labor negotiations in both the United States and Canada.
"The dialogue is out of sync," Marchionne said. "I think they need to see what state the industry is in. Canada and the U.S. are coming in as the lender of last resort. .... No one else would put a dollar in. This is the worst condemnation of the viability of this business.
http://www.usatoday.com/money/autos/...t_N.htm?csp=34
I still don't understand why a Fiat/ChryCo linkup is viewed as the salvation but that is what the gov has laid down as a condition for more "loans". The rumor of the day has GM buying Jeep to put into "Good GM" with Chevy, Caddy, and GMC and maybe Buick sold to the Chinese. Because of ChryCos debt being secured, the bondholders may force liquidation. Then I guess we will see what the real impact of having one of GFC go under on the supply chain in the US is going to be. The next six weeks should be pretty busy as the deadlines approach
Chrysler's debt, labor could derail Fiat deal, bailout funds
Chrysler has until May 1 to complete a deal with Fiat.
By Sharon Silke Carty, USA TODAY
DETROIT — With the clock ticking to sign a merger deal with Italian automaker Fiat, Chrysler is struggling to shed a majority of its debt by getting the holders to take shares in trade.
It's a stumbling block that could delay or derail the proposed partnership, which the government has ordered completed by May 1. If Chrysler can't meet that deadline, the government has said, it will get no more bailout money. That likely would push it into filing Chapter 11.
Standard & Poor's last week cut its ratings on Chrysler and said it doesn't believe it would survive bankruptcy.
"We believe that if the company filed for Chapter 11 bankruptcy protection, many of its assets and operations would be sold in discrete transactions over time, while other segments may be closed," said Standard & Poor's recovery analyst Greg Maddock.
Adding another obstacle, Fiat CEO Sergio Marchionne said in an interview published Wednesday that Fiat will walk away from a deal if the U.S. automaker's unions don't agree to major cost cuts.
Chrysler has asked for $9 billion in loans to help weather the collapse of car sales that started in the fall. It has received $4 billion and is getting enough working capital to make it through April. President Obama said last month that he doesn't believe Chrysler can become viable as a stand-alone company. He gave it 30 days to find a partner, saying only then would it be eligible for $6 billion in additional loans to make a deal work.
Chrysler's situation differs from General Motors' (GM). GM also has massive debt, but much of it is unsecured. Chrysler is saddled with a huge, for its size, load of $6.8 billion in first-lien-secured debt alone. Those debt holders have more leverage to hold out for a better debt-restructuring deal. They know that in a bankruptcy, they have first dibs on any money, even if it means selling off Chrysler in pieces.
The debt holders have been meeting with the president's automotive task force in the past few days, attempting to hammer out a deal.
Rep. Gary Peters, D-Mich., has urged big banks holding much of the debt to do something quickly. Many of them, including JPMorgan Chase, Citigroup, Goldman Sachs and Morgan Stanley, also have taken bailouts from the government and, he says, should be doing more to help save Chrysler.
"These banks hold the key to Chrysler's survival," he said recently. "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."
In the interview published in the Toronto Globe and Mail, Marchionne said: "Absolutely we are prepared to walk. There is no doubt in my mind. We cannot commit to this organization unless we see light at the end of the tunnel."
A Fiat spokesman confirmed Marchionne's statements.
Marchionne said there is a 50% chance the deal will fail because of lack of progress in labor negotiations in both the United States and Canada.
"The dialogue is out of sync," Marchionne said. "I think they need to see what state the industry is in. Canada and the U.S. are coming in as the lender of last resort. .... No one else would put a dollar in. This is the worst condemnation of the viability of this business.
http://www.usatoday.com/money/autos/...t_N.htm?csp=34
I still don't understand why a Fiat/ChryCo linkup is viewed as the salvation but that is what the gov has laid down as a condition for more "loans". The rumor of the day has GM buying Jeep to put into "Good GM" with Chevy, Caddy, and GMC and maybe Buick sold to the Chinese. Because of ChryCos debt being secured, the bondholders may force liquidation. Then I guess we will see what the real impact of having one of GFC go under on the supply chain in the US is going to be. The next six weeks should be pretty busy as the deadlines approach
04-15-09 | 01:29 PM
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I know Fiat has been named as the one for a deal to be completed and the most often reported reason is Fiat's small car technology. Is the US really straining to get a ChryCo built Fiat 500? I just don't see that as being significant and even if it is, it won't kick in for at least a couple of years. Going to be a lot of money needed to last that long.
Oh well, should get more headlines the closer we get to first April 30 and then May 31.
Oh well, should get more headlines the closer we get to first April 30 and then May 31.
04-15-09 | 01:32 PM
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Nicely stated!! I was developing the same opinion as I was keeping track of Daimler's dying dedication to Chrysler over the past 3 years. I guess we all can't be shocked?
04-16-09 | 12:42 PM
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With these types of deals, almost nothing happens until you get right down to the wire. Lawyers just love to operate that way and I am sure the UAW figures they have the most to gain by being the last ones to agree to a deal. Whether it works or not is anybody's guess, I don't want to run a business that way. But the rumors du juor are that 1) Black Oak, the investment firm interested in Saturn has no interest in keeping them but just wants to spif them up and sell the dealer network to either a Chinese or Indian co and 2) Fiat is rumored to be one of the buyers of Saturn. If 2 is correct, then they will play that car for all it's worth. In either event I think the notion of Saturn existing for any amount of time selling GM-Saturn product is looking pretty dim, the potential buyers want the 440 dealers, nothing else. And to tell you the truth, Fiat would probably do a lot better going that route than screwing around with ChryCo IMO. Then the UAW (and CAW) can go pound sand.
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