“No one should be confused about what a bankruptcy process means,” Mr. Obama said at a White House appearance. “This is not a sign of weakness but rather one more step on a clearly chartered path to Chrysler’s revival.”
Listen to President Obama’s full remarks on the Chrysler plan:
Chrysler is still expected to soon sign a partnership with the Italian company Fiat as part of a larger restructuring plan. The United Auto Workers also ratified a cost-cutting deal Wednesday night.
The UAW agreement, which will take effect May 4, meets Treasury requirements for continued loans to Chrysler Corp., and includes commitments from Fiat to manufacture a new small car in one of Chrysler’s U.S. facilities and to share key technology with Chrysler, reported the Associated Press.
Chrysler CEO Robert Nardelli said Thursday that he plans to leave the company after it emerges from bankruptcy.
Mr. Obama said he supports Chrysler’s decision to seek bankruptcy protection and that its forthcoming partnership with Fiat will save one of America’s “most storied automakers.”
The president’s auto task force in March rejected an earlier restructuring plan and gave Chrysler 30 days to come up with another.
Talks had been underway between Chrysler’s lenders and the Treasury Department to reduce the automaker’s $6.9 billion in secured debt and keep it out of bankruptcy protection, but they failed overnight.
“Their failure to act in either their own economic interest or the national interest does not diminish the accomplishments made by Chrysler, Fiat and its stakeholders nor will it impede the new opportunity Chrysler now has to restructure and emerge stronger going forward,” an unnamed official told Reuters.
Although four banks with 70 percent of Chrysler’s debt had agreed to erase it for $2 billion, about 40 hedge funds that hold 30 percent of its debt were holding out for a better deal, reported the AP.
The government has promised to back Chrysler’s warranties in an effort to allay customers’ fears that the automaker wouldn’t be around to honor them.
Chrysler has received $4 billion in government bailout funds since December. A bankruptcy filing doesn’t mean the nation’s third largest automaker will have to shut down.
General Motors Corp., meanwhile, faces a June 1 deadline to restructure on its own or face likely bankruptcy, Reuters reported. GM has received $15 billion in bailout money.
Mr. Obama predicted at his White House appearance that GM, as well as Chrysler, will “come back,” quoted the AP.
Ford Motor Co. has also faced financial troubles, but has not sought federal rescue funds.