Chrysler to get $15-billion in government aid

Financing from Canadian and U.S. governments will help car maker operate through Chapter 11 bankruptcy
JACQUIE MCNISH AND GREG KEENAN
Globe and Mail Update
April 30, 2009 at 9:25 AM EDT

U.S. and Canadian governments will provide about $15-billion (U.S.) in financing to Chrysler LLC to help keep it operating through bankruptcy protection, sources said Thursday.

The federal and Ontario governments will provide about $3-billion, the sources said, which will cover debtor-in-possession financing and exit financing when the beleaguered auto maker emerges from Chapter 11 bankruptcy protection. The governments will hold a 10-per-cent stake in Chrysler, with the Canadian governments' stake sitting at 2 per cent.

Chrysler is expected to file for bankruptcy protection on Friday.

Talks between debt holders that were insisting on a higher cash payment than major banks accepted, broke down early Thursday, although the deadline for a deal is still 11:59 p.m. on Thursday.

A key piece of the Chrysler plan is in place, however, with the signing of a strategic alliance with Fiat SpA imminent and expected to be announced late Thursday morning by U.S. President Barack Obama, sources said.

Fiat will take a 20-per-cent stake in Chrysler.

If the No. 3 Detroit auto maker goes into bankruptcy protection as expected, it will be split into two companies, with its key Canadian operations being placed into the part of the company that will emerge from creditor protection and form the basis for the Fiat-Chrysler strategic alliance. Unwanted assets will be hived off into another company.

Source;
http://www.theglobeandmail.com/servlet/story/RTGAM.20090430.wgovs0430/BNStory/Business/home

GM to close down 1,700 dealerships by June 1st

GM has accelerated its restructuring as the impending June 1 deadline approaches along with Chapter 11 speculations.

The carmaker has informed its dealers that it will expedite the close down of about 1,700 dealerships, an insider has said. At present, there are around 200 dealers that were shut down in this year’s first quarter.

Although the closure of such large numbers of dealers was not confirmed by GM officially, a spokesman did confirm GM-dealers meetings. The insider refused to comment on what happened behind the closed doors of the meeting. General Motors is counting on either the demise or sale of Saturn and Hummer. If GM succeeds in getting rid of these liabilities, the dealerships for these brands will also follow. GM can get rid half of the 1,700 dealerships it intends to close from the Saturn and Hummer brands alone. This will mean that there will be no buy-outs for the respective dealers together with those which GM will deem to be underperformers, whose franchise will ends by the first of June. Dealership closures will take place, whether GM goes bankrupt or not. One of the suggestions offered for the survival of the dealers is for them to acquire Saturn.

Source;
http://www.autospies.com/news/GM-to-close-down-1-700-dealerships-by-June-1st-43071/

Automakers fear domino effect from GM, Chrysler failure

Sorry, more doomsday BS.

Honda executives tell Trade Minister fallout from financial woes could hurt supply chain

Bruce Campion-Smith Ottawa bureau chief

OTTAWA–The collapse of North American auto giants General Motors and Chrysler could drag down other automakers, International Trade Minister Stockwell Day warns.

Day had met executives from Honda during a trade mission to Japan and reported yesterday they shared his concerns about the potential domino effect from the fallout of the sector's financial woes.

"The supply chain in North America really serves all of the automakers and if the main company goes down, it will pull supply chains down with it. That will affect other automakers whose position might not be so precarious," Day said yesterday in a conference call from Nagoya, Japan.

"If – again, underlining the `if' – if there started to be failure, that would affect all auto companies," Day said. "It's important that the industry survives, because what hurts one could hurt the other."

Ottawa and Queen's Park have said interim loans of $3 billion for GM of Canada Ltd. and $1 billion for Chrysler Canada will be advanced to assist the companies with their restructuring plans.

Honda has survived the recession better than most but even it has been facing "worldwide challenges," Day said. "This is one of the most difficult times Honda has faced.... They're doing their best to stay efficient," he said.

"Companies like Honda are ... relatively well capitalized and can ride out a storm for a while."
Earlier this week, federal Industry Minister Tony Clement prepared Canadians for the possible bankruptcy of GM or Chrysler.

"There used to be a phrase in the auto sector, `too big to fail,'" Clement said. "I don't think that phrase exists anymore."

Source;
http://www.thestar.com/Business/article/616625

Detroit 3 health crucial for Japan carmakers-lobby

TOKYO, Feb 19 (Reuters) - A healthy U.S. auto industry is vital for a sound U.S. economy and by extension for Japanese carmakers, a Tokyo-based auto lobby said, giving a tacit nod to the latest request for federal aid from ailing rivals in Detroit.

General Motors Corp and Chrysler this week sought nearly $22 billion in additional U.S. government loans on top of the $17.4 billion in loans they have so far received to survive as car sales plummet around the world.

"The auto industry -- the Big Three -- plays an important role in the U.S. economy," Satoshi Aoki, chairman of the Japan Automobile Manufacturers Association, told a news conference.
"The latest (aid request) is quite substantial but we hope it will lead to the health of the U.S. auto industry," he said.

The United States is the single-biggest and traditionally most profitable market for Japan's top three automakers, Toyota Motor Corp, Honda Motor Co and Nissan Motor Co.

Aoki, also chairman of Honda, said the U.S. market appeared headed for a weaker year than the sales of 12.5 million vehicles he had forecast for 2009 at the end of last year.

"We are still anticipating an improvement in the latter half of the year driven by economic stimulus steps under the new Obama administration, and we hope total demand will come in just below 12 million units."

Most industry forecasts are lower, with 11.5 million at the higher end. The U.S. market totalled 13.2 million vehicles in 2008, down 18 percent from 2007.

Many governments have announced various forms of aid to the struggling auto industry, which has been hit by a simultaneous slide in demand globally. Among them, France has pledged loans of 3 billion euros ($3.77 billion) each to its two local carmakers while Britain has said it would guarantee up to 2.3 billion pounds ($3.28 billion) of loans to the industry.

Japan has been conspicuously absent from that growing list. Aoki said the auto lobby has made no request for specific aid even as many members brace for their worst annual financial results in years.
"The auto industry requires a lot of capital for research and development of advanced safety and environmental technologies, but basically it's up to each company to raise funds in the market or use its own cash reserves," Aoki said.

"But right now market conditions are tough and abnormal, and we only hope that the government will take steps to bring the market closer to normal levels," he said.

Responding to such concerns, the Bank of Japan on Thursday extended its commercial paper buying scheme and pledged to boost supply of low-cost funds as it battles a credit crunch that is pushing the world's second-biggest economy deeper into recession. ($1=.7949 Euro; $1=.7007 Pound) (Editing by Michael Watson)

Source;
http://uk.reuters.com/article/governmentFilingsNews/idUKT867220090219?sp=true