Michigan: Settlement with 'New Chrysler' ensures solvency of state comp fund
The agreement with the new, yet-to-be-named entity commonly referred to as "New Chrysler," narrowly averted a court fight over the company's workers' comp obligations.
In early May, Michigan Attorney General Mike Cox filed an objection in Chrysler's bankruptcy proceeding to sell the company's assets to Fiat, an Italian automaker. Cox said that Chrysler should not be allowed to abandon its obligation to the state's workers' compensation funds as a result of the bankruptcy. The car giant pays an estimated $25 million annually in workers' comp benefits to its injured employees.
State officials defended their opposition to the sale by arguing that Michigan's guarantee fund for self-insured companies would become insolvent if Fiat didn't assume the company's workers' comp liabilities. Fiat agreed and the state dropped its objections to the sale. The effect of "New Chrysler" assuming these obligations is estimated to be worth nearly $174 million.
Cox and Jack A. Nolish, director of the state's Workers' Compensation Agency, said the settlement will protect the benefits due to Chrysler's injured workers and help ensure the continued viability of Michigan's workers' comp funds.
"Today's settlement will secure the workers' compensation funds which assist all workers across Michigan," Cox said. "Chrysler and ?New Chrysler' are to be commended for their willingness to resolve this issue, protect workers who are injured, and help ensure the financial viability of the fund."
The settlement was reached following lengthy negotiations with Chrysler and "New Chrysler" attorneys. The agreement will become effective when the bankruptcy court approves the sale of Chrysler's assets to "New Chrysler."
July 6, 2009
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