April 26, 2009 / 2:10 AM / 9 years ago

Chrysler creditors urged to make concessions

DETROIT (Reuters) - With just days to go for Chrysler LLC to reach agreements to cut labor and debt costs or face bankruptcy, members of Michigan’s Democratic congressional delegation said on Saturday the onus was now on the U.S. automaker’s creditors to make concessions.

Vehicles for sale are lined up at a Chrysler dealership in Glendale, California April 24, 2009. REUTERS/Mario Anzuoni

“The unions have come to the table over and over and over again and have taken huge cuts,” said Senator Debbie Stabenow on the sidelines of a Michigan Democratic Party fundraising event in Detroit, the heart of the beleaguered U.S. auto industry.

“It is now incumbent on the creditors, in particular those that have taken public funds, to make some concessions and be a part of the solution,” Stabenow said.

Chrysler, which is about 80 percent-controlled by private-equity firm Cerberus Capital Management LP , faces a Thursday deadline by the Obama administration to reach cost-cutting deals and cement an alliance with Italian carmaker Fiat SpA.

If the automaker fails to do that, Chrysler could see further U.S. government support withheld and face potential liquidation.

Michigan Democrats said the announcement on Friday of a tentative concession deal between the Canadian Auto Workers union and Chrysler showed the unions were acting in good faith and it was now up to the creditors to follow suit.

The CAW deal would reduce hourly labor costs by C$19 ($15.70) and save Chrysler about C$240 million annually in benefits, time off, “legacy costs” and improved productivity, but not through lower base wages or reduced pensions.

That deal will be put to CAW-represented workers for ratification this weekend.

Talks on concessions between the United Auto Workers union and Chrysler continued on Saturday. UAW President Ron Gettelfinger had been due to attend the fundraising event, but canceled his appearance because of the talks with Chrysler.

‘NEW BATTLE LINES’

The U.S. auto industry has suffered from its worst sales in decades, with the recession and the credit crunch taking a heavy toll. Like Chrysler, General Motors Corp has received government aid. Ford Motor Co, the third member of the storied Big Three U.S. auto makers, has said it can restructure its business without government help.

“The unions have made a number of concessions to ensure the survival of Chrysler,” said Representative Mark Schauer. “The question now is what the company’s creditors will do.”

“They have to look at the broad economic impact (of Chrysler collapsing) and not just their own short-term financial interest,” he said.

In an impassioned speech to cheering attendees at the fundraising dinner, Michigan Democratic Governor Jennifer Granholm criticized Chrysler creditors that had received bailout money as part of the U.S. government’s efforts to prevent a collapse of the financial system.

Those same banks and hedge funds have reported profits for the past few months, she said.

“This is going to be a tough week and new battle lines have been drawn,” Granholm said. “Who knew they (Chrysler’s creditors) would take that bailout money and then kill this great industry?”

Although Senator Carl Levin promised the audience that “we’re doing everything we can to make sure they (auto workers) don’t get sold out, Michigan Democrats said bankruptcy for the automaker could not be ruled out.

“If it comes to the liquidation of Chrysler as we know it, then we will push urgently for a rapid restructuring of the company,” Schauer said. “There are too many jobs at stake.”

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