Chrysler not viable, has 30 days to ally with Fiat

President Obama’s auto task force has determined that Chrysler LLC is not viable as a standalone company so the federal government will give Chrysler and Fiat SpA 30 days to complete their alliance. If they are successful, the Obama Administration could provide as much as $6 billion in assistance. Currently, Chrysler has requested $5 billion in government-backed loans. Without the alliance, the government will not supply any more money to Chrysler.

The boards of both automakers have approved the alliance.

According to sources close to the task force, neither Chrysler nor GM qualified for additional aid based on the reorganization plans they submitted on February 17. The task force said Chrysler’s debt was far beyond what the company could sustain and its plan included unrealistic assumptions. The government wants Chrysler to get more concessions from the UAW and significantly reduce its debt obligations. GM’s plan to reduce its debt didn’t go far enough. However, the Obama Administration has decided to ignore the March 31 deadline imposed by the previous administration to allow the automakers time to complete an acceptable restructuring process. The government will provide an unspecified level of financing during that time.

A structured, debtor-in-possession bankruptcy is still a possibility as it would allow the automakers to shed liabilities. To allay consumer concerns about buying vehicles from a bankrupt manufacturer, thus hopefully averting a Chapter 7 liquidation, the federal government would back the warranties.

 Like on Facebook