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| Version 1 | Version 2 |
|---|---|
| Chrysler 'to file for bankruptcy' | Chrysler 'to file for bankruptcy' |
| (10 minutes later) | |
| Chrysler is to enter bankruptcy protection after failing to persuade its main lenders to write off its debts, a White House official has said. | Chrysler is to enter bankruptcy protection after failing to persuade its main lenders to write off its debts, a White House official has said. |
| President Barack Obama is now due to make a statement later on the future of the struggling US carmaker. | President Barack Obama is now due to make a statement later on the future of the struggling US carmaker. |
| The news comes as Chrysler had been in last minute talks to restructure the business before a midnight deadline. | The news comes as Chrysler had been in last minute talks to restructure the business before a midnight deadline. |
| President Obama has already said that Chrysler would emerge stronger after any move into bankruptcy protection. | President Obama has already said that Chrysler would emerge stronger after any move into bankruptcy protection. |
| 'Hedge fund block' | 'Hedge fund block' |
| The US government had told Chrysler it would be given a further $6bn (£4bn) of vital state loans if it had successfully restructured the business by midnight. | The US government had told Chrysler it would be given a further $6bn (£4bn) of vital state loans if it had successfully restructured the business by midnight. |
| This included trying to persuade the firm's main lenders to accept $2bn in cash, in exchange for writing off all of Chrysler's $6.9bn secured debt. | This included trying to persuade the firm's main lenders to accept $2bn in cash, in exchange for writing off all of Chrysler's $6.9bn secured debt. |
| Reports have said that while Chrysler's banks accepted this proposal, it was rejected by hedge funds that also hold a sizeable proportion of its debt. | Reports have said that while Chrysler's banks accepted this proposal, it was rejected by hedge funds that also hold a sizeable proportion of its debt. |
| However, some analysts had speculated that Chrysler may prefer to go into bankruptcy protection as a means to give its lenders even less. | |
| US Chapter 11 bankruptcy protection gives a US firm time to rearrange its finances under a court-supervised procedure, while continuing to trade, protected from its creditors. | |
| Chrysler is owned by private equity firm Cerberus Capital Management, which bought an 80.1% stake from Germany's Daimler for 7.4bn euros ($9.9bn; £6.6bn) in 2007. | Chrysler is owned by private equity firm Cerberus Capital Management, which bought an 80.1% stake from Germany's Daimler for 7.4bn euros ($9.9bn; £6.6bn) in 2007. |
| Fiat talks | Fiat talks |
| The US government gave Chrysler three key restructuring demands. | The US government gave Chrysler three key restructuring demands. |
| BANKRUPTCY PROTECTION US bankruptcy protection is called Chapter 11It gives US businesses time to rearrange their finances while continuing to trade, protected from their creditors History of Chrysler | |
| In addition to lenders writing off the carmaker's debts, it was asked to secure a cost-cutting deal with its main union, and establish an alliance with Italian car firm Fiat. | In addition to lenders writing off the carmaker's debts, it was asked to secure a cost-cutting deal with its main union, and establish an alliance with Italian car firm Fiat. |
| While Chrysler appears to have failed to reach agreement with its lenders, it has gained an agreement with the union, and talks with Fiat are said to be near a successful conclusion. | While Chrysler appears to have failed to reach agreement with its lenders, it has gained an agreement with the union, and talks with Fiat are said to be near a successful conclusion. |
| Fiat is seeking an initial 20% stake in Chrysler, which would then rise to 35% and could even reach 51%. | Fiat is seeking an initial 20% stake in Chrysler, which would then rise to 35% and could even reach 51%. |
| The Italian firm will not have to pay anything for the share, which will give it access to the North American marketplace. | The Italian firm will not have to pay anything for the share, which will give it access to the North American marketplace. |
| In return, Chrysler will be able to take advantage of Fiat's expertise in making smaller, more fuel efficient cars. | In return, Chrysler will be able to take advantage of Fiat's expertise in making smaller, more fuel efficient cars. |
| Sector-wide woes | Sector-wide woes |
| Chrysler, the smallest of the US "Big Three" carmakers after General Motors (GM) and Ford, secured a $4bn loan from the US government at the start of the year, and has since gained $500m more. | Chrysler, the smallest of the US "Big Three" carmakers after General Motors (GM) and Ford, secured a $4bn loan from the US government at the start of the year, and has since gained $500m more. |
| GM has also received multi-billion government loans. While Ford has yet to require any money, the government has agreed to give it financial support, should it be needed. | GM has also received multi-billion government loans. While Ford has yet to require any money, the government has agreed to give it financial support, should it be needed. |
| All three firms have seen sales slump dramatically in their home market as the recession has intensified. | All three firms have seen sales slump dramatically in their home market as the recession has intensified. |
| GM has its own deadline of 1 June to restructure the business to receive additional state aid, and avoid needing bankruptcy protection. | GM has its own deadline of 1 June to restructure the business to receive additional state aid, and avoid needing bankruptcy protection. |
| Daimler said earlier this week that it would now be giving up its remaining 19.9% stake in Chrysler. | Daimler said earlier this week that it would now be giving up its remaining 19.9% stake in Chrysler. |
| Under the deal, Daimler said it will also write off Chrysler's outstanding loans, and make three annual payments of $200m into the Chrysler's pension plans. | |
| Daimler said it marked the final separation of the two firms. | Daimler said it marked the final separation of the two firms. |
| The German firm bought Chrysler in 1998 for $38bn. | The German firm bought Chrysler in 1998 for $38bn. |
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