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Supreme Court Allows Transaction With Fiat To Close
Chrysler Group LLC Set To Emerge As A Stronger, More Competitive Global Company Auburn Hills, Mich. , Jun 9, 2009 - Chrysler LLC said today the Supreme Court of the United States has lifted the stay on its transaction with Fiat, enabling the previously announced global strategic alliance, forming a vibrant new car company, to proceed. The transaction is expected to close very shortly.
The new company will build upon Chrysler’s proud history of innovation and Fiat’s complementary technology and expertise to expand Chrysler’s product portfolio in the U.S., Canada and overseas. As the new company restarts operations in its facilities, it will continue work already underway on new environmentally friendly, fuel-efficient, high-quality vehicles that will become Chrysler's hallmark going forward.
If you were wondering "what now"
A Fiat 500 built in Canada, Mexico or the United States may be the first product of the newly minted Chrysler LLC-Fiat Auto alliance. Chrysler LLC filed for bankruptcy and completed its deal with Fiat after the United Auto Workers agreed to concessions and four major banks agreed to cut debt to one third of current value in exchange for 15 percent of the new company. Only one group held out for more. "Investment firms and hedge funds decided to wait for an unjustified government bailout," President Obama said. "Some demanded twice what others were getting." Obama's hope is that Chrysler will emerge in 30 to 60 days a financially healthier company. The UAW gets 55 percent of Chrysler, Fiat gets 20 percent, the U.S. government gets eight percent, and the governments of Canada and Ontario split two percent.
CEO Bob Nardelli leaves Chrysler after the bankruptcy is completed, but expects to remain in Cerberus's employ. Co-president Tom LaSorda will retire, probably before the bankruptcy process concludes. Co-president Jim Press, the Toyota veteran, is considered likely to stay on. There's speculation that Fiat chairman Sergio Marchionne will replace Nardelli, serving as a Carlos Ghosn-like two-company chief. Marchionne can run an American automaker, goes the speculation, because he was trained -- as an accountant -- in Canada. As for the Fiat 500, co-president Tom LaSorda said, "it is a product highly considered to be built in the NAFTA region."
WHAT CHRYSLER GETS: "Billions of dollars in advanced technology and intellectual property" plus Fiat's global distribution network. UAW concessions on wages, benefits, and retiree health, four large creditors taking $2 billion for their $6.9 billion in secured claims. Daimler gives up its 19.9-percent share of Chrysler and contributes $600 million to pensions. A new board, with the Treasury department picking four directors and Fiat choosing three, one of them a Fiat employee.
WHAT FIAT GETS: Manufacturing, distribution of Fiats and Alfa Romeos in the U.S., the Fiats probably as Chrysler and/or Dodge models, the Alfas as Alfas, within 18 months. 20 percent of Chrysler initially. It can earn up to 35 percent in five-point increments if it meets such performance metrics as introducing a Chrysler factory-produced vehicle that gets 40 mpg, provides Chrysler with distribution in various foreign markets and manufactures state-of-the-art, next-generation engines at a Chrysler factory. The U.S. will loan what it calls New Chrysler an additional $4.7 billion, the final payment due in eight years.
Fiat cannot take majority stake in Chrysler until the federal loans are paid off. Call it good, call it bad, call it what ever you like. Chrysler will stick around and as long as cars like the Viper, Charger and Challenger continue to hold a place on the showroom floor.
