By Dave Guilford and David Barkholz, Automotive News
New York -- Chrysler llc, which went into Chapter 11 bankruptcy protection 30 April, intends to use money and bankruptcy court authority to keep its supplier base together during two months in which it is not likely to produce vehicles.
In a motion during the first day of bankruptcy court pleadings, Chrysler asked court permission to pay select, "essential" suppliers right away for bills that normally would be locked in bankruptcy court for weeks or months.
Chrysler entered Chapter 11 owing its direct parts suppliers $1710 million for parts already delivered, its filing said.
The carmaker also asked to extend a troubled supplier programme and continue its participation in a federal supplier bailout programme.
Taking a page from Delphi Corp.'s bankruptcy playbook, Chrysler also asked for permission and set up a pool of money to get money upfront to suppliers threatening to interrupt shipments over non-payment of parts delivered before the bankruptcy filing. That behaviour, however, could result in supplier punishment for violating a court order requiring suppliers to continue shipping parts in bankruptcy whether they've been paid for pre-petition claims or not.
In the filing on 1 May, Chrysler said it is worried that its extended plant shutdown, coupled with a rolling shutdown by General Motors, could contribute to the failure of possibly "hundreds of suppliers."
Chrysler said 30 April in announcing its Chapter 11 filing that it would not operate its plants during the bankruptcy. Chrysler lead bankruptcy attorney Corinne Ball of the firm Jones Day said all of Chrysler's plants in North America have been idled.
Chrysler wants to be allowed to enter into new agreements to help its troubled essential suppliers "up to a maximum aggregate amount of $550 million."
The Supplier Support Program allows US suppliers chosen by General Motors or Chrysler to tap into $5000 million in federal funds in two ways:
1. By paying a fee to the government totaling 2 percent of the amount they are owed by the automaker, suppliers can secure a government guarantee of the funds owed. They then can use that guarantee to back a loan request to a private lender.
2. They can pay a fee of 3 percent and the government will pay them the amount owed immediately from the $5000 million fund. Then the automaker will pay the government.
In its filing, Chrysler says the US Treasury Department may terminate Chrysler's participation because of its bankruptcy filing. The company asks that it be allowed to continue in the programme.
Chrysler filed for reorganisation under Chapter 11 yesterday. It seeks to move its assets to a new company in exchange for $2000 million in payments to Chrysler llc, which would remain in bankruptcy.