Valley dealer: Chrysler will rebound from bankruptcy

Chrysler will shut down all of its plants during its bankruptcy proceedings.

STAFF/WIRE REPORT

Car dealer Chuck Eddy is putting his money where his mouth is.

As Chrysler was teetering on the edge of bankruptcy for months, he told everyone that the troubled automaker would survive.

And now that Chrysler has filed for bankruptcy, Eddy has increased his inventory of vehicles by 50 percent. A year ago, Bob & Chuck Eddy Chrysler Dodge Jeep in Austintown had 400 new vehicles on its lot or in transit. Now it has 600.

“If I thought Chrysler was going to shut down, I wouldn’t have done that. I would have focused on increasing my used-car sales and my service business,” he said.

Part of his reason for adding vehicles is that Chrysler will be shutting down its assembly plants temporarily as the bankruptcy case gets organized. But he’s also convinced the dealership’s strong sales pace will continue despite the bankruptcy filing.

The dealership’s new vehicle sales increased 14 percent in the first three months of this year compared with last year, and Eddy said sales were up again in April.

He said he was happy to hear President Barack Obama say at a news conference Thursday that he would “stand with” Chrysler and that he thought the company could reorganize.

“That was a relief,” said Eddy, who represents Chrysler on the National Automobile Dealers Association board and has been lobbying in Washington D.C.

“My people now know what I said is true. We will come out of this on the other side.”

The bankruptcy became necessary when a holdout group of creditors wouldn’t budge on proposals to reduce Chrysler’s $6.9 billion in secured debt.

“No one should be confused about what a bankruptcy process means,” Obama said. “This is not a sign of weakness but rather one more step on a clearly chartered path to Chrysler’s revival.”

About the bankruptcy

Chrysler LLC filed for Chapter 11 bankruptcy protection in New York with the hopes of emerging in as little as 60 days under the new partnership with Fiat, the Italian automaker.

The government, which has already poured $4 billion in loans into Chrysler, would provide up to $8 billion more to carry the company through bankruptcy, said senior administration officials speaking on condition of anonymity. The government will also help appoint a new board of directors.

The deals give Chrysler “a new lease on life,” Obama said. “I have every confidence that Chrysler will emerge from this process stronger and more competitive.”

Under bankruptcy, Chrysler would still sell cars, and the government would back its auto warranties. But Chrysler said Thursday that it will idle its plants during the legal proceedings. The company’s chief executive, Robert Nardelli, said in an e-mail to employees that he will leave when the bankruptcy is complete.

When that occurs, the United Auto Workers union would own 55 percent of the Auburn Hills, Mich.-based automaker, and the U.S. government would own 8 percent. The Canadian and Ontario governments, which are also contributing financing, would share a 2 percent stake.

Fiat, which the Obama administration hopes can jump start Chrysler with its fuel-efficient and lower-emission technology, would initially get 20 percent of the company but could end up the majority stakeholder. Fiat’s share could rise to 35 percent if certain benchmarks are met, and Fiat said Thursday it could get an additional 16 percent by 2016 if Chrysler’s U.S. government loans are fully repaid.

Obama said Chrysler Financial, the arm of the company that makes loans to buyers and to dealers to finance their inventories, will be merged into GMAC Financial Services, once General Motors Corp.’s finance arm. The new GMAC will get government support. Chrysler’s base of dealers would also be pared down.

The Treasury Department reached a deal earlier this week with four banks that hold the majority of Chrysler’s debt in return for $2 billion in cash. But the administration said about 40 hedge funds that hold roughly 30 percent of that debt is also needed to sign on for the deal to go through. Those creditors said the proposal was unfair and they were holding out for a better deal.

“I don’t stand with them,” Obama said.

A person briefed on Wednesday night’s events said the Treasury Department and the four banks tried to persuade the hedge funds to take a sweetened deal of $2.25 billion in cash. But in the end, this person said most thought they could recover more if Chrysler went into bankruptcy and some of its assets were sold to satisfy creditors. This person asked not to be identified because details of the negotiations have not been made public.