Obama confirms Chrysler bankruptcy
US president hopes carmaker will emerge stronger following tie-up with Fiat.
Obama had given the firm until midnight local time on Thursday (04:00GMT) to put deals in place with labour unions, creditors and Italian automaker Fiat or face bankruptcy.
It managed to secure deals with unions and with Italian automaker Fiat. However, some of its creditors – several hedge funds – rejected proposals on how to reduce Chrysler’s $6.9 billion in secured debt.
Obama strongly criticised those creditors, saying they had held out for the prospect of an “unjustified taxpayer bailout”.
“I don’t stand with them, I stand with Chrysler employees,” he said.
The government will be an investor in the revamped Chrysler and will help choose its new directors, but the Obama administration does not plan to help manage the company.
Meanwhile AP news agency reported on Thursday that Robert Nardelli, chief executive officer for Chrysler, said he would leave the firm after its emergence from bankruptcy.
Government aid
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| GM’s CEO, Rick Wagoner, was ousted by the White House in March [Reuters] |
Obama’s auto task force in March rejected Chrysler’s original restructuring proposals and gave it 30 days to come up with an alternative, including the link with Fiat.
Chrysler is one of the so-called Big Three auto firms in the US alongside General Motors (GM) and Ford.
Both Chrysler and GM had asked for a combined $21.6bn in financial aid from the US government on top of the $17.4bn in emergency loans approved in December.
GM still has another 30 days to develop further restructuring plans while Ford has said it has enough money to survive the economic downturn without government aid.
GM has already announced earlier this month that it was to slash a further 21,000 jobs and close plants and dealerships, while Rick Wagoner, its chief executive, was ousted by the Obama administration in March.
All three auto firms have faced criticism for failing to restructure their firms adequately as the US slid into recession and for not responding to consumer demand for more fuel efficient vehicles.