Chrysler LLC Chief Executive Officer Robert Nardelli hasn’t been asked to step down ahead of today’s US government announcement about plans for the automaker, people familiar with the discussions said.
General Motors Corp CEO Rick Wagoner will leave at the request of the Obama administration, said the people, who asked not to be identified because the matter is private. The companies are surviving with a combined $17.4 billion in US aid, $4 billion of which went to Chrysler.
Chrysler will be told today that it must complete a planned alliance with Italy’s Fiat SpA to gain access to small-car technology in exchange for giving up a 35 per cent equity stake, according to a government official.
With the US not seeking a management change, Nardelli, will get a chance to continue efforts to return Chrysler to profit. Chrysler owner Cerberus Capital Management LP hired the former Home Depot Inc CEO in August 2007 after buying 80 per cent of the third-largest US automaker.
Chrysler said it lost $8 billion in 2008 as the US auto market sank to a 16-year low.
The Auburn Hills, Michigan-based automaker’s domestic sales tumbled 55 per cent in January and 44 per cent in February and asked for $5 billion more in U.S. aid. Chrysler Corp., as it was known then, took out $1.2 billion in government-backed loans in 1980 and repaid the money in 1983.
Changes Made
Fiat has made changes to the proposed alliance at the request of President Barack Obama’s automotive task force, CEO Sergio Marchionne said March 27 at the company’s annual shareholder meeting.
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The Turin-based automaker’s nonbinding agreement with Chrysler expires April 30, spokesman Gualberto Ranieri said in an interview yesterday.
Chrysler values the proposed technology sharing with Fiat at $8 billion to $10 billion. Assuming the accord between the two companies is approved, Fiat will produce its first model with Chrysler in 2011, Marchionne said.
Chrysler has made little progress getting its bank lenders to agree to take a stake in the company in exchange for reducing its debt by $5 billion, a pivotal step in meeting the government’s deadline tomorrow for the automaker to show it can remain viable.
Nardelli told CNBC on March 17 that the U.S. Treasury is now leading efforts to talk to the banks.
As of yesterday, Chrysler hasn’t had any negotiations with the banks holding $6.9 billion in debt, which include JPMorgan Chase & Co., Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley, said people familiar with the company’s efforts.
The lack of progress with the lenders also has held up Chrysler’s efforts to reach a deal with the United Auto Workers union over its retiree health-care trust fund. Chrysler is asking the union to trade 50 percent of the obligation to the fund for an ownership stake in the company.
Without knowing how much of a stake the banks would take, that deal can’t be finished, Chief Financial Officer Ron Kolka said in an interview March 18.