Court asked to stop Chrysler sale

Pension funds opposed to Chrysler's sale to Fiat have asked the US Supreme Court to block the deal immediately.

Three Indiana state pension and construction funds filed papers at the court on Sunday calling for the sale to be halted so they can pursue an appeal.
It comes after a US appeals court approved Chrysler's sale to a group led by Fiat, a union-aligned trust and the US and Canadian governments.

Chrysler entered bankruptcy protection in April after falling vehicle sales.

US carmakers have suffered from a massive slump in sales during the recession.

Fund assets

The US government has backed its sale to the Fiat-led consortium, which would see it emerge from bankruptcy.

Fiat would control 20% of Chrysler, while 68% would be owned by a union trust, and the two governments would share 12%.

However, the pension funds, which hold about $42m (£26.3m) of Chrysler's $6.9bn in secured loans, are opposed to the sale.

They say it inverts usual bankruptcy practice and unlawfully rewards unsecured creditors, such as the union, ahead of secured lenders.

'Critical issues'

The emergency legal request from the Indiana State Police Pension Fund, the Indiana Teacher's Retirement Fund and the state's Major Moves Construction Fund goes before Justice Ruth Bader Ginsburg.

It calls for a block on the sale until 1600 local time in New York (2100 BST) on Monday.

The judge can act on her own or refer the matter to the full court, when a vote from five of the nine Supreme Court members would be needed to put the Chrysler sale on hold.

The legal filings call on the court to "decide critical, nationally significant legal issues relating to management of the economy by the United States government".

"The public is watching and needs to see that, particularly, when the system is under stress, the rule of law will be honoured and an independent judiciary will properly scrutinise the actions of the massively powerful executive branch," lawyers for the funds and the Indiana attorney general wrote in their filing.

"The issues presented by this case are of immediate, and enduring, national significance."

If the sale is put on hold by the court, the Indiana funds would then pursue a full appeal.

If the deal is not completed by 15 June then Fiat, which is not paying anything for its 20% stake, has the option of pulling out.

UK new car sales 25% lower in May

UK car sales fell by 24.8% in May compared with the same month last year, the latest industry figures have shown.

The number of new cars sold in the UK during the month was 134,858, said the Society of Motor Manufacturers and Traders (SMMT).

The fall is the 13th consecutive monthly decline in new car sales.

The figures do not capture the impact of the car scrappage incentive scheme, worth £2,000, which only came into effect on 18 May.

June's figures could see an improvement, said Paul Everitt, chief executive of the SMMT.

"We have seen an encouraging start to the scrappage incentive scheme with 35,000 orders being placed since it was announced, although it will take time to feed into registration figures," he said.

Carmakers across the world are struggling with a massive drop in sales during the economic downturn.

A total of 748,691 vehicles have been sold in the UK so far in 2009, down 27.9% from last year.

The Ford Fiesta is the most popular model, with 48,182 sold in the year-to-date

Budding recovery?

Under the scrappage scheme, a £2,000 incentive will be paid to motorists who scrap cars registered before 31 August 1999 to buy a new car.

Half of the money will be paid by the government and half by the car industry.

Similar schemes introduced in Europe have succeeded in boosting sales and there are signs of a similar impact in the UK.

Hyundai, which has 2% of the UK market, said sales in May rose 36.6% to 3,325 and new orders totalled 9,000.

In an average month, it would take 1,200 to 1,600 orders, said Tony Whitehorn, managing director of Hyundai Motor UK.

But he said it was too early to say whether there had been a genuine turnaround in the market.

"The scrappage scheme has given an incentive but there's still an underlying problem in confidence. It's hard to say whether there really are green shoots of recovery," he said.

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Fiat to acquire Chrysler assets

US car group Chrysler has secured court approval to sell most of its assets to a consortium led by Italy's Fiat.

The move, which is backed by both the US and Canadian governments, should enable Chrysler to exit bankruptcy protection in the near future.

Under the terms of the deal, Fiat will control 20% of Chrysler, while 68% will be owned by a union trust, and the two governments will share 12%.

It comes as General Motors is about to file for its own bankruptcy protection.

Government loans

Under the terms of the Fiat-led deal, creditors holding $6.9bn (£4.3bn) of Chrysler debt will receive only $2bn. However, 90% of them backed the deal.

Meanwhile, the two governments have agreed to provide about $8bn in loans to the new Chrysler.

Fiat is not paying anything for its 20% stake, which will give it access to the US car market. It has the option to increase its shareholding in Chrysler in the future.

In return, Chrysler will be able to take advantage of Fiat's expertise in making smaller, more fuel-efficient cars in its existing US factories.

Bankruptcy judge Arthur Gonzalez said in his written ruling that the only alternative to the sale would have been the "immediate liquidation" of Chrysler.

He added that the deal best protected the "public interest", and that the involvement of the two governments was necessary because "the marketplace alone could not offer" an alternative.

Judge Gonzalez turned down hundreds of objections to the deal, including one from a group of Chrysler dealerships who fear they will now be shut down.

Chrysler, which is the smallest of the three US carmakers after General Motors (GM) and Ford, filed for bankruptcy protection on 30 April. It could now emerge from bankruptcy protection as early as later this week.

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Germany picks Magna to save Opel

Germany has agreed a deal with Magna International, a Canadian car parts maker, to take over Opel, part of the European wing of US carmaker GM.

Talks in Berlin continued into early Saturday before Germany's finance minister announced the rescue deal.

The German government is expected to provide an immediate loan facility of 1.5bn euros ($2.1bn, £1.3bn).

The Magna deal should protect Opel if GM files for bankruptcy protection in the US on Monday, as is expected.

The Canadian company has said it will put more than 500m euros ($700m; £435m) into Opel, which employs more than 25,000 people in Germany.

Significant numbers of workers are also spread around Spain, Belgium, Poland and the UK, where Opel cars are branded as Vauxhall for British customers.

Magna's bid was backed by Russia's state-run bank Sberbank and Russian magnate Oleg Deripaska's truck firm Gaz. The consortium hopes to see GM expand its reach into the Russian market.

Opel ring-fenced

German Finance Minister Peer Steinbrueck told journalists outside the chancellery shortly after 0200 local time on Saturday that a deal had been agreed.

"A solution has been found to keep Opel running," said Mr Steinbrueck, after six hours of talks between German politicians, US government officials and executives from General Motors and Magna.

Mr Steinbrueck said that although it was impossible to exclude all risk, the deal agreed would safeguard Opel's sites in Germany and preserve "the highest possible numbers of jobs" there.

Before the announcement of the deal, Magna said it planned to cut 2,500 jobs in Germany, about 10% of Opel's workforce in that country. Italy's Fiat, a former potential bidder, had said it would cut 10,000 jobs.

GM operations in Europe will now be placed under the care of a trustee to shield them from the parent company's filing for bankruptcy protection in the US.

The BBC's Steve Rosenberg, in Berlin, says the Germans wanted to ringfence Opel from the mother company and this has been achieved.

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Honda's production line restarts

Production at Honda's car factory in Swindon has restarted after a four-month shutdown but at about half its full capacity.

Thousands of workers have agreed to a 3% pay cut for the next 10 months with managers taking a 5% drop, after sales were hit by the economic downturn.

Some 1,300 people took voluntary redundancy, reducing the workforce to about 3,400.

Staff got full pay for two months of the shutdown and 60% for the remainder.

David Hodgetts, director of manufacturing at Honda UK, said tough decisions had been taken to try to ensure the plant's long term future.

"We'll only be working about 50% of our full capacity.

"We have tried our best to protect jobs. There's been no compulsory redundancies at all at Honda, and that's the biggest objective we had throughout this period.

"And hopefully that's what we're going to try and maintain through that action we've taken," he said.

Dr Peter Wells, a motor industry expert from Cardiff Business School, said the resumption of production was good for workers.

"It's a very good message in some respects for the nature of British worker relations with management in the car industry," he told BBC Radio Five Live.

"Both sides have been patient and both sides have tried to see this problem through.

"On the other hand, Honda is not going back into full production.

"They're going to start up the lines, but in this year they'll probably only produce half of what they really anticipated producing."

'Stuck to their word'

Mr Hodgetts added: "I think for most people it's the fact they've got a job, secure employment and that's what we've been trying to work for over the past few months.

"It's really important to Honda that we keep car manufacturing in the UK as we want to."

Andy Conlon has worked at the Honda plant in Swindon for the past 13 years.

"They've stuck to their word, there's been no (compulsory) redundancies so I'm very happy.

"The uncertainty was difficult to deal with but good information came out so I was confident of what they were telling us and I think they've done what they could for us.

"I think most people will be happy to put down the DIY and start building cars," he said.

Another worker who returned to the factory on Monday said: "When we left in January, we wondered what was going on, but now we've gone through that period, hopefully we can push on. Let's hope we can get through this."

The plant will turn to producing the Honda Jazz from September.

The firm had hoped to produce 228,000 vehicles at Swindon this year.

Last November that projected figure was reduced to 175,000 when it was decided production would stop in February and March this year.

In mid-January, Honda said the shutdown would last through April and May as well, and the 2009 production figure has now been set at just under 113,000.

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