After Filing For Bankruptcy, Chrysler Faces Tough Road Ahead
JUDY WOODRUFF: Chrysler filed for federal bankruptcy protection today, but the automaker aimed to emerge from the process quickly, with a new business partner and new federal aid. Jeffrey Brown has our lead story report.
JEFFREY BROWN: The announcement came from President Obama. He said Chrysler was taking the hard path, but also the right one.
U.S. PRESIDENT BARACK OBAMA: I have every confidence that Chrysler will emerge from this process stronger and more competitive.
JEFFREY BROWN: The administration had given the nation's third-largest automaker until today to come up with a restructuring plan and avoid the Chapter 11 bankruptcy filing, and it almost made it.
Four banks, holding 70 percent of the company's debt, agreed to erase it for $2 billion in cash. And last night, the United Auto Workers ratified a cost-cutting pact, in return for part ownership of Chrysler.
DON MILLS, Chrysler worker: I think we have to vote for it just to keep things rolling in the Motor City here, keep Chrysler afloat.
RENEE SMITH, Chrysler worker: I just hope and pray that something will definitely turn around in another way, but that's all you can do at this point.
JEFFREY BROWN: But talks broke down between the government and 40 hedge funds. They were owed nearly $7 billion, and they refused a Treasury offer of $2.25 billion in cash to write down the debt.
That standoff triggered the bankruptcy move, and it did not sit well with the president.
BARACK OBAMA: They were hoping that everybody else would make sacrifices and they would have to make none. Some demanded twice the return that other lenders were getting.
I don't stand with them. I stand with Chrysler's employees and their families and communities. I stand with Chrysler's management, its dealers, and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars.
JEFFREY BROWN: President Obama said those who have made sacrifices will help Chrysler emerge from Chapter 11 faster, possibly in less than 60 days.
BARACK OBAMA: This is not a sign of weakness, but rather one more step on a clearly charted path to Chrysler's revival. Because of the fact that the UAW and many of the banks — the biggest stakeholders in this whole process — have already aligned, have already agreed, this process will be quick, it will be efficient. It's designed to deal with those last few holdouts, and it will be controlled.
JEFFREY BROWN: As part of the process, Chrysler will form a global partnership with Italian automaker Fiat. The government will provide additional financing, up to $8 billion, and help choose Chrysler's new directors.
The current chief executive, Robert Nardelli, said today he will step down after the company comes out of bankruptcy protection.
In the meantime, Chrysler will halt most production during the legal proceedings starting Monday, but it will continue to sell cars, and the government will back its warranties.
If and when Chrysler comes out of bankruptcy, the United Auto Workers' retiree health fund would have a majority stake in the company, 55 percent; Fiat would own up to 35 percent; the U.S. government, 8 percent; and the Canadian government, the final 2 percent.