Chrysler, General Motors Work to Escape Crushing Debt
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This is the VOA Special English ECONOMICS REPORT.
The race to save two of America's big three carmakers is entering a new and intense period.
In March, the government ordered Chrysler to cut costs and form an alliance with Italian carmaker Fiat by April thirtieth. The actions were conditions for additional government aid of up to six billion dollars. The company received four billion in federal loans in December.
On Wednesday, Chrysler members of the United Auto Workers approved cost cutting measures. Under the plan, Chrysler will be able to change terms of an agreement with the labor union. In return, the U.A.W. would own fifty-five percent of the company.
The Treasury Department has also been pressing Chrysler's creditors. The government wants forty-six creditors to accept two billion dollars instead of the seven billion dollars the company owes. Four big banks have agreed. They hold seventy percent of Chrysler's debt. But other creditors have refused the terms.
The government has also been urging Chrysler to join with Fiat. On Thursday, President Obama announced that the companies have agreed to become partners. He said the government will make additional loans to support the partnership. All government loans are to be repaid before Fiat could take majority ownership of Chrysler in the future.
Mr. Obama also said Chrysler will seek bankruptcy protection in court. Bankruptcy laws will protect the company from legal action while it continues operations and reorganizes its finances. The President said the government will provide about eight billion dollars in additional loans to the company during this period.
No one knows if all this will work. But if the plan succeeds, it could serve as a model for America's biggest carmaker, General Motors. G.M. has until June first to offer a plan to the government if it is to receive new government loans. This week, the company proposed cutting twenty-one thousand more factory jobs. It will also sell fewer kinds of vehicles.
Like Chrysler, G.M. is attempting to reduce its debt. The carmaker plans to do this by offering company stock in exchange for twenty-seven billion dollars in G.M. bonds. It also wants to make the government a majority shareholder in return for part of the emergency loans it has received.
And that's the VOA Special English ECONOMICS REPORT, written by Mario Ritter. I'm Steve Ember.