The president of the United Automobile Workers union, Ron Gettelfinger, said Monday evening that concessions granted to Chrysler would leave the U.A.W.’s new retiree health care fund “on life support initially.”þþSeparately, Chrysler won interim approval in federal bankruptcy court in Manhattan to access a $4.5 billion loan from the United States and Canadian governments. The ruling by the federal bankruptcy court judge, Arthur J. Gonzalez, overruled objections by some Chrysler lenders and staved off what Judge Gonzalez described as certain and immediate liquidation.þþMr. Gettelfinger, in his first public comments since Chrysler filed for bankruptcy protection last week, said the equity that Chrysler was substituting for $5.1 billion in cash was worth “zero today,” and added that the U.A.W. planned on selling its stock as soon as doing so was financially feasible. þþHe dismissed criticism from some Chrysler lenders, who have accused the U.A.W. of getting preferential treatment from the Treasury Department as it mediated the union’s talks with Chrysler. “We took a lot of risk here,” Mr. Gettelfinger said.þþThe equity stake was part of a reorganization of Chrysler supported by the federal government, in which many of the company’s assets would be sold to Fiat, the Italian carmaker. As part of that deal, a new Chrysler would be set up in which the U.A.W. would hold a 55 percent stake through its health care fund, while Fiat would hold up to 35 percent and the United States and Canadian governments would hold the balance.þþAn analysis by the Capstone Advisory group, a restructuring adviser to Chrysler, that was submitted to the bankruptcy court said that while Chrysler lost nearly $17 billion in 2008, it was on track to be profitable by 2012. That analysis assumes certain sales increases and the timely completion of the Fiat deal.þþChrysler expects to emerge from bankruptcy in early July. It does not expect to receive dealer orders or reopen its plants until the bankruptcy is concluded.þþMr. Gettelfinger said he had thought that the union’s deal with Chrysler, which workers ratified by a 4-to-1 margin one day before Chrysler filed for bankruptcy, would be enough to let the company restructure outside of court.þþBut he said workers did not approve the deal in vain: “The fact that we do have ratified agreements puts us in a better position.” And he was thankful that Chrysler filed for Chapter 11 protection, rather than liquidating as executives had warned.þþ“Of all the alternatives that were out there,” he said, “clearly this is head and shoulders above anything else.”þþYet that reorganization plan came under fire from some dissident Chrysler lenders in Monday’s hearing, and clashes between lawyers for the company and for that group of about 20 investment firms foreshadowed a battle in court on Tuesday. That is when Judge Gonzalez is scheduled to hear arguments about the proposed Fiat deal. The group of dissident lenders have filed a motion to halt the reorganization plan, claiming it runs afoul of federal law.The lawyer for that group, Thomas E. Lauria of White & Case, objected on Monday that the $4.5 billion debtor-in-possession loan was too closely linked to the Fiat proposal. þþMr. Lauria argued before a packed audience — one that spilled into two overflow rooms at the Manhattan courthouse — that approving the loan would have set Chrysler on an irreversible course, one that his clients said would violate their lending contracts with the carmaker.þþJudge Gonzalez pointed out that to have rejected the loan would have consigned Chrysler to certain liquidation. Several company executives testified on Monday that Chrysler needed the money to pay its parts suppliers and its dealers, many of whom are themselves on the brink of shutting down.þþEarlier in the day, an adviser to Chrysler, Robert Manzo, a Capstone executive director, said that he failed to find alternatives to the $4.5 billion government loan. Judge Gonzalez’s ruling late Monday lets Chrysler access about $1.8 billion of that money.þþIn a court filing, Mr. Manzo projected that Chrysler would need about $4.1 billion in bankruptcy financing for a nine-week period. The loan from the governments, which is set to mature in 60 days, is unlikely to be repaid, Mr. Manzo said. It would fall behind Chrysler’s secured lenders, who hold what is called “first-lien” debt and are supposed to be first in line for repayment.þþMr. Manzo also conducted a liquidation analysis of Chrysler and concluded that selling the company’s assets, including its various brands and warehouses, would cost $1.9 billion to $2.7 billion. þþThe first-lien lenders, who hold claims totaling $6.9 billion, would most likely recover 9 to 38 percent, or $654 million to $2.6 billion, of their claims, according to the analysis.þþMr. Lauria, the lawyer for the Chrysler debtholder group, disagreed with the analysis, saying that his clients would probably recover more money in a liquidation. He argued that many of his clients were being coerced into accepting a Chrysler reorganization plan that would give them about 29 cents on the dollar for their holdings.þþMr. Lauria criticized President Obama for derisory remarks he made last week calling his clients speculators. In the wake of those comments, two members of the dissident group, Perella Weinberg Partners and Oaktree Capital Management, signed on to the government’s plan, joining the four major banks that hold about 70 percent of the $6.9 billion in secured debt. Lawyers representing Chrysler and JPMorgan Chase, the company’s agent bank, said holders of about 90 percent of that debt had agreed to the Fiat deal.þþWhen pressed to submit a list of his clients, Mr. Lauria asked to do so under seal, saying that some of them had received death threats. Judge Gonzalez is scheduled to rule on that motion on Tuesday as well. þþMicheline Maynard and Zachery Kouwe contributed reportingþ
Source: NY Times
