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Chrysler Deadline Nears as GM Looks to Downsize

After General Motors announced plans to cut another 21,000 jobs and Chrysler reached a deal with United Auto Workers that may help the automaker avoid bankruptcy, a New York Times reporter provides an update on Detroit automakers' latest efforts to stay afloat.

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    Next, the latest on critical negotiations for Detroit's automakers. Both Chrysler and GM need additional government loans to survive, but both must radically overhaul their businesses to receive the money, and both are moving towards doing so.

    Chrysler has to present its plan to the Treasury Department by Thursday. And today, Chrysler has reportedly reached a deal freeing it from billions of dollars in debt obligations to its creditors.

    Yesterday, GM said that it plans to dramatically shrink the company, eliminate 21,000 more workers and close 2,600 dealers.

    To fill us in on the latest, we turn to Micheline Maynard of the New York Times. She's a senior business correspondent covering the auto industry, and she joins us tonight from Ann Arbor, Mich.

    Mickey Maynard, thank you very much for talking with us. First of all, fill us in on what you know about this deal that's been reached tentatively between Chrysler and its major debt-holders.

  • MICHELINE MAYNARD, The New York Times:

    Thank you, Judy. Well, the major debt-holders are banks like JPMorgan, Morgan Stanley, Citibank, and these are some of the banks that took part in the deal when DaimlerChrysler sold Chrysler to Cerberus Capital Management, which is a private investment fund.

    They were supposed to circulate $20 billion in debt, and this was back in the summer of 2007. They ended up holding about $7 billion of that debt. They weren't able to find takers for it.

    And so under the deal that tentatively has been reached with the Treasury Department, they will get $2 billion in cash or less than a third of that money and no stake in the new Chrysler. And that's the settlement that these big banks have agreed to.

    Now, there are other lenders. There are about 46 other lenders that are involved here. And as far as we know, they haven't signed off on this yet.