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American car and jeep giant Chrysler formally went bankrupt today as part of a Washington rescue plan which it is hoped will be a template to save General Motors.
With GM set to file for bankruptcy protection today, thousands of GM workers in the UK at Vauxhall returned to work today on Merseyside after a week-long shutdown still uncertain as to their future.
Business Secretary Lord Mandelson said he had received assurances that Vauxhall production would continue in the UK but conceded that he did not know whether UK plants would stay open indefinitely.
In Manhattan in the early hours of this morning, Judge Arthur Gonzalez formally placed Chrysler into bankruptcy.
The company, founded in the Twenties and most recently belonging to the Cerberus private equity house - after an unhappy time in German hands as DaimlerChrysler - has been formally bankrupted to enable a new era of ownership.
It is being sold to a new entity which will be 68%-controlled by the healthcare trust of the United Auto Workers union in the US.
Italian carmaker Fiat will take a 20% stake which it could yet walk away from if a fast-track sale is not completed. The remaining 12% will be controlled by the US and Canadian governments who have made funding commitments of $13 billion (£7.9 billion).
In his judgment, Judge Gonzalez ruled the US and Canadian administrations "have made the determination that it is in their respective national interests to save the automobile industry in the same way that the US Treasury concluded that it was in the national interest to protect financial institutions."
Chrysler closed down its factories on 1 May - a day after the company filed for bankruptcy protection.
GM - whose downfall is indicative of the decline in America's industrial might - will follow a similar path but with much larger intervention by Washington and will make its bankruptcy filings in the US courts today.
Washington has pledged $30 billion of financing and the US and Canadian governments are to take a 72.5% stake with 17.5% in the hands of the union's healthcare fund and the remaining 10% owned by bondholders.
Ahead of a statement from President Obama on the wreckage of the US automotive industry, treasury secretary Tim Geithner said: "We want a quick clean exit as soon as conditions permit. We're very optimistic these firms will emerge without further government assistance."
At GM's European arm, Germany's Opel is set to be saved with the help of Russian bank Sberbank and Canadian automotive group Magna.
It is as yet uncertain what that means for the up to 5000 workers at GM's UK arm at Ellesmere Port making the Vauxhall Astra and at GM's van-making plant in Luton.
Reader views (1)
No matter what people think of america or its corporations, its a shame to see great institutions like chrysler and GM being put into bankruptcy. I personally think it should be a wake up call to unions that they can go to far sometimes and make conditions worse for their members in the long run.
- Damien Crossling, Naracoorte, South Australia, 01/06/2009 10:43
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