Chrysler battles to keep suppliers

17 May 2009

18 May 2009 | Jake Kanter

Struggling carmaker Chrysler has outlined a plan to pay certain suppliers for claims that pre-date its bankruptcy protection filing.

In a statement the US company said it would aim to assign the "overwhelming majority" of its supplier contracts over to a new company to be formed if its proposed sale to Fiat goes ahead.

It wrote to 1,200 of its vendors last week as part of the sale plans, detailing how and when it will pay invoices pre-dating its Chapter 11 bankruptcy filing on 30 April.

Chrysler said the step would "cure" the contracts and it was "important" in its plans to restart operations.

Scott Garberding, senior vice-president and chief procurement officer at Chrysler, said in a statement: "Our supplier partners will be critical to the success of the new Chrysler that emerges from Chapter 11. This should be a great relief. The terms are fair and far better than the treatment trade creditors usually get in a bankruptcy case, and provide a mechanism for quick resolution of all open issues."

Chrysler did not confirm exactly how many suppliers would be asked sign up with the new company or how much money would be used to settle invoices.

Earlier this month the New York Bankruptcy Court approved a $4.5 billion (£2.9 billion) loan to the Detroit-based carmaker to support suppliers (Web news, 6 May 2009).

* Starting today consumers in the UK can claim a £2,000 discount on a new car in exchange for scrapping an "old banger". Announced in last month's Budget, the £300 million scheme aims to "kick start" demand for new cars.

SMmay2009

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