Wednesday, April 29, 2009

Fighting chance? Chrysler & Fiat Alliance

AP sources: Fiat to sign partnership with Chrysler
Wall Street Journal: UAW to get 55% Stake in Chrysler for Concessions
LA Times: Chrysler, Fiat appear near a deal

Deal as soon as Thursday, according to one source. Regardless of whether Chrysler files for Chapter 11 or not, Fiat (F.MI) would be a partner and the US government would finance the restructuring.

Chrysler's lenders are yet to agree to forgive $6.9 billion in secured debt in exchange for $2 billion cash now [I would prefer money at hand; I would take $2 billion today]. Four large banks that control 70% of the debt (JP Morgan Chase (JPM), Goldman Sachs (GS), Morgan Stanley (MS), and Citigroup (C)) already agreed, but 42 hedge funds who hold 30% of the debt were still holding out.

If they don't agree, Chrysler would file for Chapter 11 to restructure. If they do agree, the company would restructure out of court.

Under the deal,

  • United Auto Workers union will hold 55% equity stake;
  • Fiat will get 20% equity stake in exchange for its small car and engine technology (valued at $8 to 10 billion) , which could be increased to 35%;
  • Daimler's $19.9% stake will be turned over to Chrysler's parent company, Cerberus Capital Management LP.

According to Wall Street Journal,

"The latest concessions would bring the UAW contract at Chrysler closer to the pay and benefits earned by workers at nonunion auto factories operated by rivals Honda Motor Co. and Toyota Corp."

Deal or no deal? We will find out soon enough.


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