NEW YORK -- Chrylser LLC intends to use money and bankruptcy court authority to keep its supplier base together during two months in which it likely will not 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 on Thursday owing its direct parts suppliers $1.71 billion for parts already delivered, its filing said.
The carmaker also asked to extend a troubled supplier program and continue its participation in a federal supplier bailout program.
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 behavior, however, could result in supplier punishment for violating a court order requiring suppliers to continue shipping parts in bankruptcy whether theyve been paid for pre-petition claims or not.
In the filing today, 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 Thursday 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 Chryslers 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 U.S. suppliers chosen by General Motors or Chrysler to tap into $5 billion 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 $5 billion fund. Then the automaker will pay the government.
In its filing, Chrysler says the U.S. Treasury Department may terminate Chryslers participation because of its bankruptcy filing. The company asks that it be allowed to continue in the program.
Chrysler filed for reorganization under Chapter 11 yesterday. It seeks to move its assets to a new company in exchange for $2 billion in payments to Chrysler LLC, which would remain in bankruptcy.