Chrysler Bankruptcy Gives Employee Health Trust Majority Stake
On Thursday, Chrysler Group filed for bankruptcy under a plan developed by the Obama administration that grants a 55% stake in the restructured firm to a health care trust fund for retired auto workers, the Washington Post reports.
The plan will allow the company to:
- Relieve its debt;
- Receive about $10 billion in new government aid; and
- Be merged with Italian automaker Fiat.
Fiat would have a 20% stake in the firm, with that share potentially rising to 35% over time.Â
The federal government would have an 8% stake, and the Canadian government would have a 2% stake (Whoriskey et al., Washington Post, 5/1).
The equity share represents about half of the firm's $10.6 billion obligation to the voluntary employees' beneficiary association, operated by United Auto Workers, that will pay for health benefits for retirees and their spouses starting in 2010.
Short-term loans granted in December 2008 by then-President George W. Bush carried a caveat that the automakers ask UAW to accept half of their obligations to the VEBA in the form of company stock (American Healthline, 4/28).
Chrysler also has agreed to issue a $4.6 billion note to the fund, payable over 13 years with an interest rate of 9%.
The trust also will be able to name one member to the Chrysler board of directors (Reuters/USA Today graphic, 5/1).President Obama said the plan would give the automaker a "new lease on life" (Washington Post, 5/1). This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.