Bondholders starting to squeeze GM

The Detroit News is reporting the GM bondholers are driving a hard bargain and threatening to push GM into bankruptcy.

General Motors Corp. bondholders want more money in exchange for forgiving billions in debt and are threatening to push the struggling automaker into bankruptcy if they don’t get it, The Detroit News has learned.

GM has been negotiating with bondholders this week on a complicated debt exchange that would cut the automaker’s unsecured debt by two-thirds to $9.2 billion. To get there, bondholders would have to accept about 30 cents on the dollar, which is a requirement of the automaker’s $13.4 billion federal loan package.

But bondholders are demanding 50 cents on the dollar, which they say mirrors the value of concessions being negotiated with the United Auto Workers, said people familiar with the talks.

The demands illustrate the challenges GM is facing in its talks with bondholders and raise doubts about whether the company will succeed in cutting its debt and convincing the government it can repay the loans. If GM cannot reach a deal on concessions with bondholders, as well as with the UAW, the government could recall the $9.4 billion GM has already received and effectively force the automaker into bankruptcy.

  

Fiat will take stake in Chrysler

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Fiat might be throwing Chrysler a lifeline.

Fiat SpA and Chrysler LLC on Tuesday confirmed the Italian auto maker will take at least a 35% stake in Chrysler as part of a deal to share technology and bring small cars developed by Fiat to the U.S.

The move is an attempt to revive two of the world’s storied auto makers and is likely to eventually give Fiat control of Chrysler’s operations, people familiar with the matter said. Under terms of the deal, Fiat has the option of increasing that to as much as 55%, these people said.

Fiat, the stronger of the two car makers, wouldn’t immediately put cash into Chrysler. Instead, it would obtain its stake mainly in exchange for covering the cost of retooling a Chrysler plant to produce one or more Fiat models to be sold in the U.S., these people said. Fiat would also provide engine and transmission technology to help Chrysler introduce new, fuel-efficient small cars.

The deal is the latest maneuver by Fiat’s chief, Sergio Marchionne, who has pulled the Italian company back from the brink collapse since taking over in 2004.

This might be a great combination. We’ll see how it plays out.

  

Welcome to Dashboard News

We are launching this car blog at a time of great turmoil and uncertainty in the auto business. With the economic crisis, the United States has had to bail out banks and auto companies just to prevent the economy fm collapsing.

Apart from this crisis, the auto industry is facing challenges rearding energy as well. Summer gas prices convinced many that our addiction to oil must be addressed, and looming climate change is also driving policy changes. Fortunately, significant progress has been made on hybrids, including plug-in hybrids, that might change the auto industry in ways not imagined just several years ago.

Yet even with all these problems, many of us still love cars. We’ll be addressing the tough issues facing the auto industry, but we’ll also bring you reviews and stories covering the great new vehicles being produced around the world.

  

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