Friday, April 17, 2009

Follow-up Report: U.S. Treasury asks GM to prepare for bankruptcy filing by June 1; and Fiat threatens Chrysler partership if union don't cut costs

Following the General Motors and Chrysler stories, which should come to a final answer by this month whether both GM and Chrysler will get loans to keep running from the U.S Government or not. Well things are getting even harder for both of them.
In GM's case, the U.S. Treasury Department is asking General Motors to prepare for a bankruptcy filing by June 1. Well according to an eariler report, GM is already filing the papers. Nevertheless, the company’s new CEO Fritz Henderson said that he still believes that General Motors can restructure without going into bankruptcy but said that a quick “surgical” bankruptcy is something that he’s willing to consider if anything goes wrong. In fact, Henderson just announced that the company will close more plants and make additional job cuts as it continues its tough restructuring efforts for a plan to be submitted to the Obama administration by the end of May. Henderson added that his daily contact with Obama’s auto task force and has been getting answers on the company’s future strategy to keep its four core brands.
As for Chrysler struggling situation, Fiat has warned the Chrysler LLC Group that if they DON'T cut labor costs, they'll throw-out the agreement, and Chrysler has to face Chapter 11 bankruptcy. According to an interview with Canadian newspaper Globe and Mail that was published on Wednesday, Fiat Group's CEO Sergio Marchionne said that the Italians are going to abandon talks with Chrysler LLC unless the American automaker's unions agree to perform deep cuts in costs. "Absolutely we are prepared to walk. There is no doubt in my mind," he said. "We cannot commit to this organization unless we see light at the end of the tunnel." Yet again, if Fiat and Chrysler don't reach a deal by the 30-day deadline which is by the end of this month, Chrysler’s current CEO Bob Nardelli may be asked to step down by Fiat and the U.S. Treasury as the two will select a new round of board of directors, seeing Chrysler and Fiat do finally partner-up. But if that is to happen, then Fiat technically takes over Chrysler and heads the struggling company into a new direction.

So all we can do at this point, is to wait till the end of this month to see what's happening to Chrysler's industry and next month for GM's.

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