Chrysler files bankruptcy, Pontiac ends
By CONNIE ESHThe Wilson Post
Thursday’s filing of Chapter 11 bankruptcy by Chrysler LLC may help local dealerships in selling more cars and in meeting the needs of customers.
That was the word yesterday from Dan Kirk who manages the Chrysler Jeep Hyundai lot of Rockie Williams’ Premier Automotive in Lebanon.
He made the comments after Chrysler officials announced they had filed for Chapter 11 bankruptcy protection in New York.
The company plans to close all of its factories until the bankruptcy proceedings are complete, action that is expected to take 30 to 60 days. The plan also includes a merger with European car maker Fiat that would allow Chrysler access to Fiat’s fuel efficient technology.
“Who better to have backing your new car warranty than they federal government?” Kirk asked Thursday afternoon.
He added that he thought the changes would help dealers to sell more cars as well as help them better meet the needs of customers.
The bankruptcy filing was made after some of the car maker’s smaller lenders would not agree to a demand from the U.S. Treasury Department to cut the amount of money Chrysler owed to them. Larger creditors like Citigroup and JPMorgan Chase did agree to reductions.
The United Auto Workers union also agreed to concessions with Chrysler.
The deal, reached at the last minute, will ensure the company’s survival, officials said.
A midnight deadline had been set by the Treasury Department for Chrysler to reach agreements with its creditors who had loaned the car maker some $7 billion.
Under the deal that has been reached, the majority owner of Chrysler will now be the UAW with 55 percent. Fiat will have 20 percent ownership, but can increase that amount to 35 percent. The U.S. government will have an 8 percent ownership and Canada will have a stake in the company of 2 percent.
Some dealerships are expected to close eventually, and some jobs with the company will be lost, but Robert Nardelli, Chrysler CEO, said the reductions would not be “catastrophic,” but would be “noticeable.”
Nardelli is to leave the company after it comes out of bankruptcy and the deal with Fiat closes. A new board of directors will choose his successor.
The news about Chrysler comes on the heals of an announcement earlier this week by General Motors that by 2010 it intends to close 13 car plants, eliminate 21,000 jobs, reduce its dealer network by 42 percent, and eliminate its Pontiac brand.
However, locally Wayne Felder at Rockie Williams Premier Pontiac-GMC-Cadillac said the changes will not have any great impact on folks who already own Pontiacs or successful dealerships.
“GM assures us that the warranties will go on for several years,” he said. “And the parts won’t be a problem for a long, long time. Besides, lots of the parts are shared with other GM vehicles.”
He also said he doesn’t foresee GM closing any dealerships that are doing well.
“I’m not worried about here,” he said.
He noted that some dealers sell strange combinations of cars. “I knew of one that sold Pontiacs, Fords and Chryslers,” he said with a chuckle. If those dealerships quit selling Pontiacs that would be part of the 42 percent cut.
He also said that attrition could account for most of the rest of the closures. Some dealerships have already closed and if those that aren’t doing well close it would mean more business for the ones that stay open.
“I don’t see them forcing anyone to close that’s not already in trouble,” he said.
Felder added that GMC had already decided to stop making Hummers, Saabs and Saturns. “They say they think they are going to be selling the rights to at least two of those three.”
GM officials said the company was taking these steps to reduce costs as it also struggles to avoid bankruptcy and meet a June 1 deadline from the government for restructuring its operations.
It also announced that it has reached an agreement with the U.S. Treasury to convert 50 percent of the outstanding government loans to the company, or about $5 billon, into GM stock. As a result of this swap, the U.S government would become the majority shareholder of GM. The automaker also said that it is seeking an additional $11.6 billion in government loans.
Staff Writer Connie Esh may be contacted at email@example.com. Reports from www.cnnmoney.com were used in compiling this article.