With one day left to go before its deadline, Chrysler LLC’s chief executive said Wednesday that the automaker is making progress toward meeting the government’s restructuring requirements.
In a letter to Chrysler employees obtained by The Associated Press, CEO Robert Nardelli pointed to the deal reached Tuesday with the automaker’s largest bondholders, along with a tentative new labor agreement approved by union leaders earlier this week.
Under the agreement with the four banks, Chrysler’s secured creditors would accept $2 billion cash to settle the automaker’s $6.9 billion debt. But Chrysler and the Treasury still need to persuade the rest of the automaker’s 46 secured creditors to go along with the new proposal.
Bankruptcy experts have said it may be tough to get them to take a big haircut because their loans are secured by Chrysler’s physical assets like plants and brands that could provide a better payoff if the company is liquidated.
Final approval of the deal with the United Auto Workers, which would give the union a 55 percent stake in the company, could come as early as Wednesday.
Meanwhile, Nardelli said talks continue between Chrysler and Italian automaker Fiat Group SpA — another requirement imposed by the government — and he hopes to finalize an agreement.
“I’m encouraged by this progress and I want you to know I deeply appreciate the sacrifices made by so many constituents to help us reach the restructuring targets established by the government,” Nardelli wrote in Wednesday’s letter.
Chrysler has borrowed $4 billion from the government since the start of the year after the automaker said it wouldn’t be able to survive the steep decline in U.S. auto sales without government help.
In March, the government’s auto task force rejected Chrysler’s restructuring plan and determined that the automaker could not become viable without taking on a partner. The government told the company it must ink a deal with Fiat, gain concessions from its unions and get debt holders to cut the amount owed by the company by April 30.
If Chrysler is successful, the government has promised another $6 billion in loans. Without a deal, the government said it would not even provide bankruptcy financing and Chrysler almost certainly would end up in liquidation.
Nardelli said in Wednesday’s letter that Chrysler’s restructuring plan is already working, noting that its costs for the first quarter of this year were significantly lower than they were in the same quarter a year ago and in the fourth quarter of 2008.