Chrysler Files for Bankruptcy and Combines With Fiat
April 30, 2009

By Michelle Krebs

DETROIT -- President Obama announced Thursday that Chrysler will combine with Italy's Fiat but is filing for Chapter 11 reorganization to get the job done.

In a White House press conference Thursday, President Obama chastised the banks and hedge funds that refused a government-sweetened deal to reduce Chrysler's debt owed to them.

Obama called them "speculators" who refused to make sacrifices when the workers, plant communities, major lenders and dealers did. As a result of debtholders holding out, the president said, Chrysler is filing for bankruptcy to "clear away remaining obligations so the company can get back on its feet onto a path of success." 

"This partnership was only possible by the unprecedented sacrifices of stakeholders who gave something up so the company and the men and women whose livelihoods depend on it could see a better day," Obama said.

He specifically praised Chrysler CEO Robert Nardelli, who will leave his post once the company comes out of bankruptcy, and the United Auto Workers union, whose members only Wednesday night, overwhelmingly approved a concessionary contract.

Obama noted that while many stakeholders made sacrifices, some did not. "In particular, a group of investment firms and hedge funds held out the prospect for an unjustified taxpayer bailout. Everybody else sacrificed and they wanted to make none. Some demanded twice the return of others.

"I don't stand with them," the president said. "I stand with Chrysler employees and communities, dealers and suppliers and the millions of Americans who want to own Chrysler vehicles."

President Obama said bankruptcy should not be viewed as a sign of weakness but as "one more step on a clearly charged path of revival" for Chrysler. He guaranteed the process would be "quick, efficient, designed to deal with the last few holdouts and controlled" so as not to disrupt the lives of Chrysler workers, plant communities and the ability of American consumers to buy, service or repair their Chrysler vehicles.

The U.S. government will help finance Chrysler through bankruptcy. So will the government of Canada, where Chrysler has substantial Chrysler operations.

While the Obama administration has repeatedly said any automaker bankruptcy would be quick -- 30 to 60 days -- Chrysler's Nardelli, in an interview with MSNBC, said he didn't know if it could be done in 60 days but still would be a relatively short process.

The Chrysler-Fiat deal is coming down about as predicted, with Fiat initially taking a 20 percent stake in Chrysler with no cash but rather providing billions in fuel-efficient technologies and cars that will be made in the U.S. 

Fiat eventually could own up to 35 percent of Chrysler. However, President Obama said Fiat has certain milestones to meet. "Every dime of new taxpayer money must be repaid before Fiat takes a majority stake in Chrysler," he said.

President Obama acknowledged the path Chrysler is taking is hard. "But as is often the case, the hard path is the right one."

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