Bad week for automakers continues

Jeremy Elwood, SBJ ReporterOn the heels of General Motors’ announcement that it is shutting down the Pontiac brand, Chrysler made the sad – but not unexpected – announcement today that it is filing for Chapter 11 bankruptcy.

The announcement paves the way – pardon the pun – for a deal to merge with Italian automaker Fiat.

President Barack Obama tells the Associated Press that the company was unable to convince a few of the company’s creditors to take a reduced payout on Chrysler’s $6.9 billion in secured debt, which was a necessary step for the company to restructure by today’s government-imposed deadline.

Chrysler hopes to emerge from bankruptcy in as little as 60 days, and the government would provide up to $8 billion to carry the company through the process on top of the $4 billion the company has already received in loans. The government will also help appoint a new board of directors.

In another unfortunate car pun, Obama called the plan “a new lease on life” for Chrysler.

Once the bankruptcy is complete, the country’s third-largest auto manufacturer would be owned by the United Auto Workers union, the U.S. government and Fiat. The company would stop making cars during the legal proceedings but resume once bankruptcy is complete.

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