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April 27, 2009
Autos
Chrysler,
UAW Amend Labor Pact to Cut Costs
Chrysler LLC has reached an
agreement with the United Auto Workers union to cut the company's labor
costs, a key victory for the automaker in its battle to avoid filing for
bankruptcy protection, the Wall
Street Journal reported today. The U.S.
Treasury, which has kept Chrysler afloat with more than $4 billion in
bailout loans, has given the company until the end of the month to
restructure its labor costs, reduce its debt and finalize a planned
alliance with Italy's Fiat SpA. Fiat, which has been positioning itself
as a potential equity-alliance partner with Chrysler, had demanded that
the UAW make significant concessions before agreeing to a deal. The
Treasury Department, which has pumped $4.5 billion into the automaker,
also demanded union givebacks. The deal with the UAW, announced by the
union and Chrysler late Sunday, was agreed to by the Treasury, the union
said. The agreement would alter the terms of its 2007 labor contract,
the union said, without releasing details. It hopes to have the changes
ratified by Chrysler's UAW workforce by April 29.
href='http://online.wsj.com/article/SB124079160897657795.html'>Read
more. (Subscription required.)
In related news, the U.S. Government
Accountability Office (GAO) released a study detailing the federal
government’s efforts to date in trying to restructure and assist
GM and Chrysler. To read the GAO’s report, titled “Summary
of Government Efforts and Automakers’ Restructuring to
Date,” please
href='http://www.gao.gov/new.items/d09553.pdf'>click
here.
GM
Continues Efforts to Stay Out of Bankruptcy
General Motors Corp. said today
that it will continue to reduce its workforce and dealer network and
eliminate its Pontiac brand by the end of next year as the automaker
works furiously to survive, the
size='3'>Wall Street Journal reported. GM is
also starting an exchange offer for $27 billion of its unsecured public
notes as part of its restructuring plan, saying that a successful
exchange offer would allow it to restructure out of bankruptcy court.
The company is offering to exchange 225 common shares for each $1,000
principal amount of outstanding notes. The exchange will commence only
if 90 percent of bondholders agree to the terms. Under the plan, GM
would file for bankruptcy protection if it fails to get adequate
participation from the bondholders.
href='http://online.wsj.com/article/SB124083476254259049.html'>Read
more. (Subscription required.)
Car
Dealers' Brace for Possible Calls on Inventory Loans
Chrysler LLC and General Motors
Corp. dealerships are bracing for possible automaker bankruptcy filings
that could trigger repayment of their inventory loans, the
Wall Street Journal
size='3'>reported today. The two automakers have about 10,000 dealers in
the United States with the bulk of them carrying considerable debt,
mainly from the money they borrow to buy cars that are currently sitting
on their lots. At issue are loans for inventory, known as 'wholesale'
loans or 'floorplan' financing, that are primarily given by GMAC LLC and
Chrysler Financial to dealers so they can buy vehicles to stock their
showrooms. These loans are typically backed by the vehicles that are
being financed by the dealer and paid back when the vehicles are sold.
Chrysler Financial and GMAC have clawback provisions that allow the
finance companies to demand at least partial payment of the loans in the
event of a bankruptcy because the value of the vehicles being used as
collateral would plummet. Other lenders are believed to have similar
provisions.
href='http://online.wsj.com/article/SB124078863198457471.html'>Read
more. (Subscription required.)
Analysis:
Tax Credit Is Possible to Aid Auto Retirees
Labor leaders and U.S. officials
seeking a way to pay for Chrysler LLC's and General Motors Corp.'s
benefit programs for retirees might find an important source of aid in
an obscure federal subsidy covering certain retiree health care costs,
the Wall Street
Journal reported today. Under a provision
known as the health-coverage tax credit, the federal government can pay
health-insurance premium costs for early retirees between 55 and 65
years old if their former employer runs into financial problems and
can't pay promised benefits. In recent years, some early retirees from
the troubled U.S. steel industry have used the tax credit, which was
created by Congress in 2002. Now some retirees from auto-parts makers
also want to take advantage of it. Up to now, only a fraction of the
people eligible for the health-coverage subsidy have received it,
because the subsidy has been little known and the procedure for securing
it is complex. The recent stimulus legislation passed by Congress
expanded the subsidy and streamlined the process, so now it covers 80
percent of eligible retirees' health-care premiums, up from 65
percent.
href='http://online.wsj.com/article/SB124078354649857123.html#mod=article-outset-box'>Read
more. (Subscription required.)
to Rule on Whether U.S. Treasury Can Shield National Banks from State
Laws
The U.S. Supreme Court on Tuesday
will hear New York's appeal in a lawsuit that was filed four years ago
against the New York attorney general’s office when it requested
an explanation as to why several national banks were disproportionately
charging blacks and Hispanics high interest rates, the
face='Cambria' size='3'>Wall Street Journal
size='3'>reported today. A Supreme Court case could open the door for
state regulators, such as New York Attorney General Andrew Cuomo, to
play a bigger role in regulating banks. Under both Democratic and
Republican administrations, the Treasury regulator, the Office of the
Comptroller of the Currency, has allied with the banks it supervises to
set aside state laws ranging from disclosure requirements on loans to
limits on surcharges at automated teller machines. The comptroller's
office argues that the National Bank Act, first adopted in 1863,
envisions a system where national banks operate efficiently across state
lines without regard to a patchwork of local regulations and
authorities. The Supreme Court almost always has agreed. Just two years
ago, the justices blocked states from supervising state-chartered
mortgage subsidiaries owned by national banks.
href='http://online.wsj.com/article/SB124078827601457447.html'>Read
more. (Subscription required.)
U.S. Trustee
Objects to Charter's Disclosure Statement
U.S. Trustee
face='Cambria' size='3'>Diana Adams filed an
objection on Thursday to Charter Communications Inc.’s disclosure
statement and reorganization plan, saying that the disclosure statement
contained an overly broad nondebtor release provision with no apparent
justification, Bankruptcy
Law360 reported on Friday. Under the nondebtor
release provision of Charter’s plan, holders of claims and
interests are deemed to have fully discharged and released Charter's
members, officers, directors, employees, affiliates, attorneys and
representatives from any and all causes of legal action. However, Adams
argued that the disclosure statement contains inadequate details about
the release, in breach of the Bankruptcy Code.
href='http://bankruptcy.law360.com/articles/98447'>Read
more. (Subscription required.)
Lawmakers
Demand Records on BoA-Merrill Lynch Deal
Two House Democrats have issued a
warning to two federal agencies, threatening to exercise the Oversight
and Government Reform Committee's subpoena power to obtain documents
about Bank of America's acquisition of Merrill Lynch,
face='Cambria' size='3'>CongressDaily reported
on Friday. In a letter Thursday to Federal Reserve Chairman Ben Bernanke
and Treasury Secretary Timothy Geithner, Oversight and Government Reform
Chairman Edolphus Towns (D-N.Y.) and Oversight and Government Reform
Domestic Policy Subcommittee Chairman Dennis Kucinich (D-Ohio) said that
the Fed and Treasury failed to meet a deadline to submit requested
documents outlined by committee investigators on March 30. They also
expressed concern over Bank of America CEO Ken Lewis's recent reported
testimony to the New York attorney general, and they expanded their
original request for documents to include communication between the
agencies and the bank regarding public disclosure of compensation and
other financial data in advance of the merger. The new deadline for the
agencies' submission of documents is May 4.
Sallie Mae
Battles for Federal Lifeline
The country's largest student
lender is bringing a heavy lobbying push to Democratic lawmakers to keep
a major federal student lending program the Obama administration wants
to eliminate,
size='3'>CongressDaily reported today.
President Obama's FY10 budget would end the Federal Family Education
Loan program (FFEL) -- shifting all federally backed student loans into
the government-funded Direct Loan Program -- and use the savings to make
funding for Pell Grants mandatory. His budget estimated $48 billion in
savings over 10 years, and CBO estimated $94 billion in savings over the
same time period. Sallie Mae could lose much of its
government-subsidized lending business under Obama’s plan. Sallie
Mae is countering with a proposal that looks a lot like legislation
passed last year, the Ensuring Continued Access to Student Loans Act of
2008. Under Sallie's plan, private lenders would provide the initial
capital to make loans but would sell them to the federal government
within 120 days of the loan's full disbursement. Initially, lenders
would receive $75 for every loan title they transfer to the government
-- the fee they currently receive when they sell a loan to the
government under last year's legislation. Lenders would also receive an
annualized spread payment equal to 0.6 percent of the loan's principal
for the time between the first disbursement of the loan and its sale to
the government. After two academic years, the payment amounts would be
set annually by the government using a competitive bidding
process.
Monaco Says
Navistar to Buy Most of Its Assets
RV maker Monaco Coach Corp. said Friday
that Navistar International Corp. will buy most of its assets for about
$52 million, the Associated Press reported on Friday. Monaco said that
the transaction includes manufacturing facilities in Indiana and Oregon
and other assets, but not Monaco's Motorhome Resorts segment, a cargo
trailer business and several industrial properties. Navistar, based in
Warrenville, Ill., builds engines, school buses, trucks and diesel
engines.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/04/25/AR2009042501334_pf.html'>Read
more.
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