Chrysler could be split between government, banks and unions
13 February 2009

Chrysler has developed plans to divide itself between the US government, banks, the United Auto Workers Union and Fiat, in an attempt to prevent the car maker slipping into bankruptcy.

The Financial Times has reported that Cerberus Capital Management, which currently owns 80 per cent of Chrysler, could lose nearly all its equity in the company as part of the restructuring deal.

Daimler’s 20 per cent share in the maker could also be dramatically reduced.

The restructuring plan, which has to be before the US government by 17 February, could see banks receiving shares in exchange for their outstanding loans to Chrysler. The UAW is said to want a stake in exchange for Chrysler handing over much of its responsibility for the substantial health care costs of retired workers.

Whether the potential stakeholders fight over 100 per cent or 65 per cent of Chrysler depends on whether Fiat’s proposal to take a 35 per cent share of the company, in exchange for front-wheel-drive platform and engine technology, is given the go-ahead.

If the Fiat-Chrysler tie up goes ahead, more focus may be placed on the Dodge and Jeep brands and a range of smaller, more frugal, models could replace much of the existing Chrysler line-up.

Meanwhile, Reuters reports that GM has held discussions with Kia over the potential sale of Saab to the Korean company. However, the global recession has made it highly unlikely that any deal will be done. GM is also involved in a race to finalise its restructuring plans by 17 February. The plan will include a decision over the future of the Hummer, Saturn and Saab brands.

Hilton Holloway

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