President Barack Obama said Thursday a deal brokered by the White House for Chrysler to enter bankruptcy and then team with Fiat will give the troubled automaker “a new lease on life.”
“We simply cannot keep this company, or any company, afloat on an endless supply of tax dollars,” the president said.
Chrysler filed for bankruptcy protection and announced a partnership agreement with Italian automaker Fiat. The White House pushed for the deal after rejecting Chrysler’s latest restructuring proposal and concurrent request for more bailout funds.
The Obama administration, which initially supported the bailout for automakers, has grown less enthusiastic — as public opinion also soured on taxpayer-funded safety nets.
“My job as president is to ensure that if tax dollars are being put on the line, they are being invested in a real fix that will make Chrysler more competitive,” Obama said. “That’s why I rejected the original restructuring plans Chrysler offered last month.”
The White House said the new arrangement would save 30,000 jobs at Chrysler, and more among suppliers, dealers and related industries.
But the president had harsh words for a group of investment firms and hedge funds he described as holding out for a taxpayer-funded bailout, demanding twice the return other creditors were willing to accept in a proposed debt restructuring.
“I don’t stand with them,” Obama said.
There is still taxpayer money in the deal, however. The new arrangement calls for the Treasury Department to give Chrysler up to $3.3 billion in bridge financing. The Canadian government and the province of Ontario will step up with a combined $2.4 billion in exchange for 2 percent of equity. Treasury will own 8 percent of the company, and Fiat will own 20 percent.
Once the bankruptcy is concluded — ideally within 60 days, the U.S. government hopes to work toward getting out of the deal and shedding its equity in the company, which will be run by Fiat.
Several Michigan lawmakers objected to the bankruptcy move, saying it created too much uncertainty about the future of the car company, a major employer in the state.
“The fate of Chrysler now rests in court proceedings of an unpredictable duration and ultimate determination,” said Rep. Thaddeus McCotter, a Republican from Michigan.
House Minority Leader John Boehner, R-Ohio, took a different view, saying it was important to resolve the matter without more taxpayer bailouts.
“In the case of Chrysler, if that takes actually filing a bankruptcy proceeding, then so be it,” Boehner said. “I would hope, though, at the end of the day, that all our stakeholders can come together to save these important companies.”
