Bankrupt Chrysler has a clear path to an alliance with Italy's Fiat SpA, the U.S. company's chief executive said while rival Ford Motor Co reported on Wednesday it has sufficient liquidity and its restructuring remains on track, boosting its shares.
The White House also expressed growing confidence Chrysler would restructure quickly and Wall Street put new pressure on shares of General Motors Corp, which faces a June 1 deadline to turn itself around or face probable bankruptcy.
Analysts, on average, expect GM on Thursday to report a first-quarter loss of $11.05 per share before items, compared with a loss of 62 cents a year earlier. Revenue is expected to fall by about half to $21 billion, reflecting lower production with sales off sharply, according to Reuters Estimates.
In a memo to employees obtained by Reuters on Wednesday, Chrysler CEO Robert Nardelli hailed a ruling on Tuesday by U.S. Judge Arthur Gonzalez of the New York bankruptcy court that upheld the company's plan for selling virtually all of its assets, a step necessary for it to complete the Fiat alliance.
This is a major step forward as it sets out a swift, clear path, Nardelli said. It is crucial that this transaction be completed in a timely manner in order to secure maximum value for our stakeholders.
But Chrysler still faces objections from nine lenders, who say the proposed bidding process for assets would be non-competitive and would not maximize the sale price.
Lawyers said the hold-out creditors have the law on their side in their opposition to the current plan, which proposes making Chrysler's union the largest shareholder.
FORD ON TRACK, GM SHARES FALL
Ford Motor Co remains on track in its restructuring and has sufficient liquidity to fund the plan which includes conversion of plants and investment in future products, company executives said.
Ford, the only U.S. automaker not operating under bailout funds, also has continued to consolidate its dealer network, but sees no need for the type of aggressive culling rivals GM and Chrysler plan, Chief Executive Alan Mulally told reporters.
The automaker continues to anticipate a second-half recovery in U.S. auto industry sales, he said.
Mulally also said Chrysler's bankruptcy has not led to difficulties with the supply base so far.
Ford also announced $550 million of investments in a former truck plant near Detroit that is being converted to produce small cars with demand growing for more fuel efficient vehicles. GM and Ford are racing to develop electric cars.
The Ford investment comes at a time when restructurings by Ford's U.S. rivals GM and Chrysler include plant closings and reworked labor deals.
GM began reaching out to rivals late last year about the profitable OnStar service and talks with other automakers center on partnering mainly in the United States, OnStar President Chet Huber told Reuters in an interview.
OnStar is capable of alerting emergency services when air bags deploy, assisting authorities in locating stolen vehicles and remotely unlocking doors when keys are left inside. It was seen as a way for GM vehicles to differentiate themselves in the crowded U.S. market.
Ford shares closed up 7 percent at $6.26 on the New York Stock Exchange. GM shares were down 10 percent at $1.66, a day after it detailed proposed debt-for-equity exchanges that would nearly wipe out holdings of current stockholders and position the U.S. government as the majority shareholder of the restructured company.
A fast-moving day of automotive developments also saw Germany's Porsche abandon its goal of gaining a majority stake in Volkswagen and will instead explore a merger with Europe's biggest car maker. Details remain unclear but the two said they want to create an integrated car manufacturing group within four weeks.
With Porsche and Volkswagen possibly coming together, GM accelerated efforts to jettison Saab. GM is running due diligence on about 10 bidders, including Chinese automakers, European investor groups and private equity firms, according to a source familiar with the matter. GM has until the end of June to sell the Swedish brand, the source said.
In London, the British government said that negotiations with Jaguar Land Rover on guaranteeing financing are continuing despite reports that the talks were in trouble. The government said it was engaged in confidential talks with Jaguar Land Rover and its parent, India's Tata Motors, on short- and long-term financing.
The bankruptcy case is: Chrysler LLC, U.S. Bankruptcy Court, Southern District of New York, No. 09-50002.
(Additional reporting by Kevin Krolicki and Poornima Gupta in Detroit; Hendrik Sackmann in Frankfurt; Jui Chakravorty Das in New York; Thomas Hals, Emily Chasin and Walden Siew in New York; Jeff Mason in Washington; and Adrian Croft and Avril Ormsby in London. Writing by John Crawley in Washington; Editing Bernard Orr)