General Motors has decided to reverse its decision on closing 41 of the 2,100 dealerships it plans to close during its bankruptcy process. The move comes after a group of influential Congress members introduced a bill to try to force GM and Chrysler to keep dealers open.

Federal bankruptcy judge Arthur Gonzalez approved Chrysler’s bid to close 789 U.S. dealerships, or 25 percent. No word yet, whether Congress will be able to force the reopening of some of those closed dealerships.

GM is looking to close 3,500 of its 6,200 dealers by the Oct. 31, 2010.

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The Supreme Court has approved the U.S. government-backed sale of Chrysler to a group led by Italian carmaker Fiat SpA, a victory for the bankrupt automaker and the Obama administration. The high court rejected a request from Indiana pension funds and others of the transaction to delay the deal while they challenge the sale to a group led by Fiat, a union-aligned trust and the U.S. and Canadian governments.

The Chrysler case has been widely regarded as a model for General Motors, which also is using a similar quick-sale strategy in its bankruptcy in New York. Chrysler and the Obama administration urged the Supreme Court to allow the sale to go forward and said a long delay could kill the deal, resulting in the automaker’s liquidation and the loss of more than 38,000 jobs.

They cited Chrysler’s worsening financial situation, with $100-million-a-day losses. The sale agreement sets a June 15 deadline to close.

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The nation’s auto parts suppliers will ask President Obama’s auto task force this week to back as much as $10 billion in loan guarantees. U.S.-based automotive suppliers have already received $5 billion in federal aid, but are seeking loan guarantees to ensure production can continue uninterrupted.

In May 2009, U.S. car sales have dropped off 37 percent, but are expected to recover during the latter part of the year. However, reduced production due to bankruptcies at General Motors and Chrysler has left many suppliers low on cash, which could threaten their ability to ramp up production during the second half of the year.

“We have very good companies that can’t get financing,” Neil De Koker, president of the Original Equipment Suppliers Association (OESA), told Bloomberg. “It’s essential to provide support to suppliers in order to ensure that the money already spent on GM and Chrysler doesn’t go to waste.” De Koker warns that failure to put loan guarantees in place could disrupt production for GM and Chrysler when they finally emerge from Chapter 11 protection. Industry trade groups will meet with the President’s auto task force on Wednesday, followed by a meeting with House and Senate members later this week.

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Chrysler LLC has been scrutinized the past few years by disappearing global auto sales long with the credit crisis, filed for bankruptcy on today and announced an industry-changing deal with Fiat after talks to restructure its debt broke down.

Chrysler failed to gain the support from lenders to avoid the first-ever bankruptcy filing by a major U.S. automaker. This move was hailed by President Barack Obama as a crucial step to save over 30,000 jobs at Chrysler along with hundreds of thousands more jobs at affiliated suppliers and dealers.

The automaker as expected will enter into an alliance with Italian automaker Fiat where it sold a stake starting at 20 percent and in which Fiat can become the majority owner once the government loans are repaid. …click here to read more

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The U.S. has reached agreement with banks on terms to reduce debt of Chrysler LLC, according to a person with knowledge of the negotiations.

The banks’ representatives allegedly has agreed to forgo $6.9 billion in debt in return for $2 billion in cash, said the person, who declined to be identified discussing the private talks. The deal is one of the steps Chrysler needed to avoid a bankruptcy after April 30.

Bankruptcy remains a possibility for Chrysler, the person said. All 46 banks involved need to ratify the terms, and it isn’t likely that all would, the person said. In that case, a quick, surgical type of bankruptcy may be needed to bring any dissenting banks into an agreement, the person said.

Chrysler, operating with $4 billion in U.S. loans, faces an April 30 deadline to restructure its costs or risk losing government support. Shawn Morgan, a Chrysler spokeswoman, declined to comment.
Via: Bloomberg

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General Motors CEO Rick Wagoner announced his resignation earlier today, the latest change for the troubled automaker. Wagoner is being replaced by GM’s president and chief operating officer, Fritz Henderson. Kent Kresa will serve as interim chairman. …click here to read more

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General Motors has only five days before the March 31 deadline for restructuring comes up, but industry experts are predicting that the Detroit carmaker may be unable to meet this time frame. An analyst from the Standard & Poor’s financial ratings agency, the United Auto Workers (UAW) and GM shareholders are reluctant to accept equity rather than cash, or at least until they determine what the other shareholders get. This stance is slowing progress on GM securing a deal and putting its requested government bailouts at a risk.

This is because restructuring is a key requirement of the government’s bailout package, but without a deal with both the UAW and bondholders GM will be spinning its tires and getting nowhere. Despite their portrayal as an obstacle to GM’s recovery, shareholders are wary of accepting stock options rather than cash, a move that could possibly devalue their investments by about two-thirds and still wouldn’t guarantee a viable future.

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