Chrysler also reached an agreement in principle with GMAC to become the preferred lender for Chrysler dealer and consumer business. GMAC will be able to offer the best long-term finance options for Chrysler dealers and customers with standard rate installment products.
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US President Barack Obama speaks about the Chrysler Chapter 11 filing and its partnership with Fiat from the White House in Washington April 30, 2009. [Xinhua]
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Under the plan the Obama administration outlined Thursday, the Treasury Department will provide Chrysler with up to 3.5 billion US dollars in DIP financing, and the Canadian government will provide around 800 million dollars and get 2 percent of Chrysler's equity. The United States has transferred 280 million dollars to a Chrysler warranty guarantee program.
The government will loan GMAC LLC additional money so it can take over financing of Chrysler vehicles from Chrysler Financial. The government already has infused nearly 6 billion dollars into GMAC.
After the partnership deal is completed, the Voluntary Employee Beneficiary Association (VEBA) will own 55 percent of the new company and the U.S. and Canadian governments will own proportionate shares of a 10 percent stake. Fiat will initially hold a 20 percent ownership stake in Chrysler. Fiat can conditionally increase its ownership stake by an additional 15 percent in three increments.
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US President Barack Obama (C) speaks about Chrysler and the auto industry, as he stands with his auto task force at the White House in Washington April 30, 2009. [Xinhua]
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Chrysler also indicated that most manufacturing operations will be temporarily idled from next Monday. Normal production schedules will resume when the transaction is completed, which is anticipated within 30 to 60 days.
Nardelli, who is going to leave the company and return to Chrysler's biggest stockholder Cerberus Capital Management as an advisor after the transaction, assured that the new Fiat-Chrysler company will produce and support quality vehicles under the Jeep, Dodge and Chrysler brands as well as parts under the Mopar brand. Chrysler dealerships remain open for business serving customers. All vehicle warranties will be honored without interruption and consumers can continue to purchase Chrysler vehicles with complete confidence.
Chrysler's official bankruptcy announcement came after President Obama's speech about the Chrysler's future on Thursday ,after talks between the Treasury Department and the Auburn Hills automaker's creditors failed to reach an agreement on late Wednesday night.
The president harshly scolded the group of investment companies and hedge funds that balked at a debt restructuring. "I don't stand with those who held out when everybody else is making sacrifices," Obama said, calling them "speculators" who sought to endanger Chrysler's future for their own benefit.
The bankruptcy "will be quick, it will be efficient, it is designed to deal with those last few holdouts," Obama said.
He emphasized filing for bankruptcy "is not a sign of weakness, but rather one more step on a clearly charted path to Chrysler's revival."
(Xinhua News Agency May 1, 2009)
