Archive for the 'Bankruptcy' Category
Posted on July 22nd, 2011 • by Bill Cawthon
In an statement from Turin today, Fiat SpA announced it has completed the purchase of the U.S Treasury’s 6% interest in Chrysler Group LLC for $500 million, and of the Canadian government’s 1.5% stake for $125 million. With these these purchases, Fiat SpA now holds a majority interest of 53.5% of Chrysler.
With the final milestone to be reached later this year when Chrysler demonstrates a U.S.-made, 40-mpg car, Fiat’s stake will rise to 58.5 percent. (The 40 mpg specified appears to be the EPA combined rating used for CAFE calculations, but the car is likely to be rated at 40 mpg highway as well.)
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Posted on June 29th, 2011 • by Bill Cawthon
In his latest column, Rod Meloni, business writer for “Click on Detroit,” highlights Chuck Fortinberry, a former Chrysler-Jeep dealer from Clarkston, Michigan, a small town northwest of Detroit.
Fortinberry he found his dealership listed among the 789 to be cut as Chrysler went into bankruptcy in 2009. He fought to keep his business and the 51 jobs that went with it, but in the end there was nothing he could do but close on June 9, 2009, literally days before he would have received his 25th anniversary trophy as a Chrysler retailer.
He tried using the facility as for a variety of purposes, but nothing seemed to work.
The he struck on the idea of doing vehicle conversions for mobility-challenged customers. He had the space, he had the hoists and there was a conversion business in trouble in Kalamazoo. Fortinberry took over the company and last fall he opened AutoAbility. The former dealership is now a manufacturing facility employing 13, a figure Fortinberry hopes to double this fall when he adds a second line. The company does five minivan conversions a week and can’t keep up with the demand. Fortinberry says AutoAbility will be profitable within eight months of opening for business.
To learn more about Chuck Fortinberry’s story, read Rod Meloni’s column “Out of Adversity” at the “Click on Detroit” website.
To learn more about AutoAbility, click here.
Thanks to Marc Rozman for the tip!
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Posted on June 3rd, 2011 • by Bill Cawthon
President Barack Obama today visited the Toledo Assembly Complex. Upon his arrival at the 1.5-million-square-foot assembly plant, the President was met by Chrysler CEO Sergio Marchionne, General Holiefield, Director of the UAW’s Chrysler Department General Holiefield and Ken Loortz, Director of UAW Region 2B. Mario Pino, the plant manager, and Walt Schweifert, UAW Local 12 Committeeman, escorted the President as he toured the trim line where the front end, instrument panel and center console are installed in the Jeep Wrangler.
After the tour, the President spoke to plant employees. He was introduced by Jill Opial, 37, who has worked at the plant for 17 years. Ms. Opial thanked the President for having faith in auto workers and for giving Chrysler the opportunity to reorganize. The President then congratulated the employees for the job they have done:
“Now, we had a few options. We could have followed the status quo and kept the automakers on life support by just giving them tens of billions of dollars of taxpayer money, but never really dealing with the structural issues at these plants. But that would have just kicked the problem down the road.
“Or we could have done what a lot of folks in Washington thought we should do, and that is nothing. We could have just let U.S. automakers go into an uncontrolled freefall. And that would have triggered a cascade of damage all across the country. If we let Chrysler and GM fail, plants like this would have shut down, then dealers and suppliers across the country would have shriveled up, then Ford and other automakers could have failed, too, because they wouldn’t have had the suppliers that they needed. And by the time the dominos stopped falling, more than a million jobs, and countless communities, and a proud industry that helped build America’s middle class for generations wouldn’t have been around anymore.
“So in the middle of a deep recession, that would have been a brutal and irreversible shock to the entire economy and to the future of millions of Americans. So we refused to let that happen.
“So I placed my bet on you. I put my faith in the American worker. And I’ll tell you what — I’m going to do that every day of the week, because what you’ve done vindicates my faith.”
“Today, all three American automakers are turning a profit,” the President continued. “That hasn’t happened since 2004. Today, all three American automakers are gaining market share. That hasn’t happened since 1995. And today, I’m proud to announce the government has been completely repaid for the investments we made under my watch by Chrysler because of the outstanding work that you guys did. Because of you.
“Chrysler has repaid every dime and more of what it owes the American taxpayer from the investment we made during my watch. And by the way, you guys repaid it six years ahead of schedule. And last night, we reached an agreement to sell the government’s remaining interest in the company. So, soon, Chrysler will be 100 percent in private hands. Early. Faster than anybody believed.”
After he finished speaking, President Obama shook hands with employees as they departed the Chrysler Group paint shop.
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Posted on June 3rd, 2011 • by Bill Cawthon
Fiat SpA reached a deal last night to pay $500 million for the U.S. government’s remaining 6% share of Chrysler Group. In addition, the Italian automaker will pay $60 million for the Treasury’s rights to buy the stake held by the United Auto Workers Voluntary Employee Benefits Association (VEBA). An additional $15 million will be paid to the Canadian government.
A Fiat press release announcing the deal was issued this morning in Italy. In the release, Fiat Chairman John Elkann said: “On behalf of my family and I, I reiterate our confidence in Sergio Marchionne and his leadership team and our support of all the people at Fiat and Chrysler who are working with dedication and humility and have made it possible to repay the trust that the U.S. government demonstrated towards us a mere 23 months ago. We will continue to support them as they further strengthen this historic alliance and together build an international automotive group capable of competing with the very best in the automotive market.”
Combined with the 46% it already holds, the government share will give Fiat majority ownership of Chrysler. Chrysler is also negotiating for the Canadian government’s remaining stake and will acquire another five percent when the final milestone, certification of a 40 mpg engine built in the U.S., is reached later this year. Altogether, Fiat could have nearly 59% of Chrysler by year’s end.
With the options to buy the VEBA stake, Chrysler CEO Sergio Marchionne says the company may not need an initial public offering. While this would be the easiest route for the VEBA to sell its holdings, financial analysts believe there might not be significant investor interest in buying into a company already majority-owned by another. Speaking to Bloomberg News, Stamford, Connecticut-based consultant Maryann Keller said, “Why would anyone buy shares in a situation where you are perpetually a minority investor. In that situation, you would buy stock in Fiat, not Chrysler.”
With the sale of its remaining stake and the repayment of the loans extended to Chrysler Group, the U.S. Treasury has recovered $11.2 billion of the $12.5 billion it loaned the automaker. The remaining $1.3 billion, loaned to the former Chrysler LLC when it was still owned by Cerberus Capital Management, is unlikely to be repaid.
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Posted on May 31st, 2011 • by Bill Cawthon
Reuters reports that Canadian Finance Minister Jim Flaherty said the government is open to selling its 1.7 percent stake in Chrysler to Fiat, but is going to look for the best price.
Speaking at a news conference at the Etobicoke Casting Plant yesterday, Flaherty said, “We have to look out for good value for Canadian taxpayers.”
Unlike the deal with the U.S. government, Canada did not give Fiat an option on its share as part of its loan package. The Canadian government is free to shop for the best deal. Flaherty said Ottawa would wait to see what price Fiat is able to negotiate for the U.S. government’s holdings and then decide whether to take a similar amount or take its chances with an initial public offering down the road.
Last week, Chrysler CEO Sergio Marchionne said Fiat would pay “a reasonable price” for Canada’s stake.
Fiat currently owns 46 percent of Chrysler and will expand its holdings to 51 percent upon U.S. government certification of new, more efficient engine. Fiat also can gain majority control of Chrysler buy acquiring the U.S. government’s remaining six percent.
Chrysler’s financial accounts will be folded into Fiat’s accounting beginning tomorrow, June first.
To read the Reuter’s story, click here.
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