Chrysler to Offer Buyout Plans to 23,000 Hourly Workers
Chrysler confirms
to The Wall Street Journal that it will be making buyout offers to 23,000 hourly workers. The move is part of the company's continuing cost cutting which includes plant closings due to falling consumer demand for cars.
Employees have until Nov. 13 to accept the offer, Chrysler said in a statement. Special programs are also being offered at factories that are being closed as part of the bankruptcy process. The dates for those programs vary.
Separation dates are at the discretion of the company.
The buyouts come as Chrysler prepares to reveal its five-year product plan to the public during a press conference at its Auburn Hills, Mich.-based headquarters Wednesday. Chief Executive Officer Sergio Marchionne is expected to address how Chrysler will survive while it attempts to deliver new products to the market.
Chrysler has been cutting thousands of jobs since late 2007 as demand for its Chrysler, Jeep and Dodge products fall amid an economic recession in the U.S.
The cost cutting measures are part of the bankruptcy process. Chrysler filed for bankruptcy last April and Fiat now owns most of the assets. As part of the deal with the U.S. government, Chrysler extended the buyout program to more workers than would normally be eligible.
GM to Assume Liability For Future Product Liability Claims
General Motors has agreed to shoulder defect liability for product liability of their cars, even after the company emerges from bankruptcy. All claims against the company must be adjudicated in a bankruptcy proceeding, which had all the states' attorneys general worried about GM car owners' rights. Under the settlement, GM will assume legal responsibility for injuries suffered by consumers who are injured by a product defect in GM cars.
The concession means consumers who are injured in car accidents after GM emerges from bankruptcy protection will be able to bring product-liability claims against the government-owned auto maker.
Under GM's original bankruptcy plan, the auto maker planned to leave such liabilities behind after selling its "good" assets to a new GM owned by the government. That meant future car-accident victims who believe that faulty manufacturing by the old GM caused their injuries would be unable to sue the new GM. Instead, they would have been treated as unsecured creditors, fighting over the remains of GM's old bankruptcy estate.
GM's agreement to take responsibility for future product-liability claims, outlined in a court filing late Friday, represents a partial victory for more than a dozen state attorneys general and several consumer-advocacy groups. They had objected to GM's original plan to shed these liabilities, arguing it would rob future car-accident victims of their legal rights because they would have no way of knowing they might be entitled to claims.
GM advisers, members of President Barack Obama's auto task force and the attorneys general negotiated for several days to address concerns about product-liability claims, among other issues. The talks heated up Friday ahead of GM's Tuesday court date, when it will ask a judge to approve the auto maker's plan to create a new GM by selling its desirable assets to the government.
The move is considered a legal victory for consumers. Chrysler, which just emerged from bankruptcy, is not responsible for those types of claims in the future. The assumption of liability only applies to future claims made against the new GM. Current claimants will be treated as unsecured creditors and are likely to get little or nothing.
With Chrysler in bankruptcy, GM heading for bankruptcy and the unemployment numbers at a high level, automaker are worried that Americans are about to break their new car habit.
In recent years Americans appeared to be hooked on it and took advantage of home equity loans, easy credit and cheap short-term lease deals to send new-car sales to levels of more than 17 million a year.
Now the market has collapsed by 46 percent to below 10 million, as people are making do with the cars they have, leaving the industry to debate — and worry — about what the new normal will be once the recession ends.
Some say the downturn is temporary and that sales will spring back in a few years. Others believe Americans will rethink whether they need so many cars, particularly new ones.
The answer will be important to the Obama administration as it prepares to put G.M. into bankruptcy on Monday. After the company emerges from bankruptcy, the federal government will own about 70 percent of it, in return for $50 billion in taxpayer aid. G.M. has already received about $20 billion in federal help.
The Treasury Department’s advisers, who initially expected auto sales to pick up late next year, now foresee no jump in demand this year or in 2010. And even five years out, they expect annual sales to be about 15 million, still well below the peaks of this decade.
*****
Donald Grimes, an economist at the University of Michigan, is forecasting the lowest sales for the driving-age population this year since 1970.
From 1970 to 2001, there were 0.76 vehicles sold per driver in the United States. Now that figure has dropped to 0.4 vehicles per driver, and he does not see much of a rebound in coming years.
The swift decline has spooked the industry. "I don't think there has ever been a period in our history like this," Josephine Cooper, Toyota’s group vice president for government and industry affairs, said of her company, which lost $7.1 billion in the first three months of the year. "It is very, very sobering."
It's hard to say what consumers will do when the economy turns around. But many city dwellers have decided that owning car is just too expensive and are using more public transportation. That is not an option in much of the southern United States and in the suburbs of California. Other than a few buses, public transportation is not available in much of the suburbs. And it's hard to take three kids to soccer practice, ballet classes and cub scouts on public transport. It's clear that for the next few years, people are going to be keeping their cars longer and avoiding new car debt.
CNN reports that Chrysler will be closing down 789 dealerships - 25% of the comapany's total dealerships. They have already sent out overnight letters to the dealerships by UPS.
"It is with a sense of profound sadness that we must take these steps and reject some of our dealer sales and service contracts," Chrysler said in letters delivered overnight by UPS to the dealerships, "But it is a neccessary step."
The letters began arriving Thursday morning.
Chrysler had a total of 3,181 authorized dealers in operation at the time of its April 30 bankruptcy court filing, according to court filings. Just over half of that number accounted for more than 90% of Chrysler sales, according to the filing.
The dealers being shut down represent 14% of Chrysler's total sales, the carmaker said.
Some of these dealerships will be forced to lay off employees or close. The article says 44% of the dealerships sell vehicles other than Chrysler vehicles.
New cars are still a tough sell in the recession. Auto sales plunged in April for both U.S. and Japanese automakers. Chrysler, which is filing Chapter 11, sold 76,682 vehicles in April. This was steep 48% drop from its sales a year earlier.
GM's sales were even worse with a 53% plunge. Ford Motor Co.'s sales were down 31.6% in April compared to its sales one year ago.
Honda's sales were down over 25% in April but they looked good compared to Toyota and Nissan. Sales were down 41.9% for Toyota and down 37.8% for Nissan.
Treasury Department Reportedly Preparing Chrysler Bankruptcy Filing
The New York Timesreports that Treasury Department is preparing a bankruptcy filing for Chrysler. A Chrysler-Fiat deal would be completed while Chrysler was in bankruptcy according to the Times story.
The Treasury has an agreement in principle with the United Automobile Workers union, whose members' pensions and retiree health care benefits would be protected as a condition of the bankruptcy filing, said these people, who asked for anonymity because they were not authorized to discuss the case.
Moreover, Fiat of Italy would complete its alliance with Chrysler while the company is under bankruptcy protection.
The only major question that remains unresolved is what happens to Chrysler's lenders, who hold $6.9 billion in company debt. The government's most recent offer, presented Wednesday, would give the company’s lenders about 22 cents on the dollar, or $1.5 billion, and a 5 percent equity stake in a reorganized Chrysler. Earlier this week, a steering committee of the lenders proposed that they receive 65 cents on the dollar, or $4.5 billion, and a 40 percent equity stake.
The Detroit News has an article about the possible Chrysler bankruptcy filing. It says talks between Chrysler and Fiat are continuing all week and this weekend as they try and complete a deal agreement before the April 30th deadline. The Obama administration gave Chrysler just 30 days to get it done on March 30th.
Obama Administration Takes Tough Stance With GM, Chrysler
The Obama administration is giving GM and Chrysler just a little big longer to come up with new plans. The administration said the auto manufacturers may have to go to into bakruptcy if they can't come up with a viable plan. You can see Obama's GM, Chrysler Plan Document here. The President also forced out GM Chairman and CEO Rick Wagoner.
GM is getting 60 days to come up with a new plan. Chrylser has just 30 days to try and cut a deal with Fiat. Take a look:
GM says it needs another $16.6 billion from the government to stay afloat during the recession. The company says it would also have to cut 47,000 jobs and close five more U.S. plants. Here are some of the details from GM's new plans according to an article in the Detroit News.
Eliminating 47,000 workers -- 37,000 hourly workers and 10,000 salaried workers -- around the world this year, including 20,000 workers in the U.S.
In the Dec. 2 submission to Congress, the automaker said it would cut up to 31,000 jobs.
Shuttering five more plants in North America, bringing the total to 14 plant closures within the next three years.
GM continues to talk to dealers about the future of the Saturn brand, which could be eliminated in 2011 unless dealers come up with an alternative.
GM has several parties interested in buying the Hummer brand, but the brand could be eliminated by the end of March if a deal is not reached.
GM is negotiating a deal for Saab with the Swedish government, but if none is reached, the subsidiary could file for reorganization this month or next. That would leave GM with four core brands: Chevrolet, Cadillac, GMC and Buick.
That is a large amount of money and a huge number of layoffs. Chrysler also reported its bailout needs today - $5 billion more plus 3,000 layoffs.
Chrysler is asking the government for another handout. They want $5 billion in loans. Chrysler also plans to cut 3,000 jobs. The Detroit Newsreports that Chrysler will also reduce one shift of manufacturing and discontinue three vehicle models.
"We believe that Chrysler LLC will be viable based on the updated assumptions contained in this submission, and that an orderly restructuring outside of bankruptcy, together with the completion of our standalone viability plan, enhanced by a strategic alliance with Fiat, is the best option," said Chrysler chairman Robert Nardelli.
But deteriorating market conditions and lack of credit, resulting in Chrysler sales falling 30 percent in 2008 and 55 per cent in January, has forced Chrysler to revise its U.S. annual sales forecast to 10.1 million units for this year and 10.8 million units for 2009-2012.
GM has not yet provided the details of its own restructuring plan but it is expected shortly.
Reuters reports that GM may file for bankruptcy and then form a new company after liquidating the undersirable assets. GM and Chrysler have to file restructuring plans with the government by Tuesday. The auto manufacturing giants may also ask for additional bailout funds.
"One plan includes a Chapter 11 filing that would assemble all of GM's viable assets, including some U.S. brands and international operations, into a new company," the newspaper said. "The undesirable assets would be liquidated or sold under protection of a bankruptcy court. Contracts with bondholders, unions, dealers and suppliers would also be reworked."
Citing "people familiar with the matter," the story said that GM could also ask for additional government funds to stave off a bankruptcy filing.
GM declined to comment, the story said.
General Motors and Chrysler LLC face a Tuesday deadline to file restructuring plans to the government in exchange for receiving $17.4 billion in federal loans.
Automakers have struggled as U.S. auto sales have tumbled amid a recessionary economy. U.S. auto sales in January tumbled to a 27-year low.
It's not clear whether or not the bankruptcy filing would mean more layoffs. GM already recently announced plans to cut 10,000 more jobs worldwide. An article in the Detroit News says bondholders have been squeezing GM and demanding 50 cents on the dollar.
This is some pretty bad news for the ailing U.S. auto industry: Chrysler is shutting down all its manufacturing plants for one month starting this Friday.
Chrysler LLC, awaiting a federal rescue as its cash dwindles, will shut all 30 of its plants for at least a month starting Dec. 19 as unsold cars and trucks pile up at showrooms.
Production won’t resume until Jan. 19 at the earliest, Chrysler said today in a statement. General Motors Corp., also waiting for word on U.S. loans, said a new factory making engines for the Chevrolet Volt electric car is being delayed to conserve cash.
The cutbacks showed how far the automakers are going to save money and prune output as plunging sales threaten their ability to stay in business. Both companies say they may run out of operating funds in just weeks without emergency U.S. aid.
"Vehicle manufacturers are going to closely align their demand with supply," said Michael Robinet, an analyst at CSM Worldwide Inc. in Northville, Michigan. "You are finding that these inventory correction actions are not only taking place at Chrysler but with all the vehicle manufacturers."
White House spokeswoman Dana Perino said in an e-mail that "there's nothing new on the auto front" as officials reviewed plans for a GM and Chrysler bailout. Today had been the earliest that the administration would finish a rescue proposal, a government official said yesterday, speaking on condition of anonymity.
GM and Chryslter have asked for $14 billion total from the U.S. government in order to stay in business through March 31st. A bailout plan failed in the Senate, but the White House is considering allocating some of the housing bailout money to the auto industry.
CNN 
GM says it needs another $16.6 billion from the government to stay afloat during the recession. The company says it would also have to cut 47,000 jobs and close five more U.S. plants. Here are some of the details from GM's new plans according to an 
