Chrysler Announces Merger with FiatPosted on April 30th, 2009
Automaker will file for Chapter 11 to hasten return to profitability
Chrysler announced today that it is going ahead with a global strategic alliance with Fiat SpA. The Big Three automaker also confirmed that it is filing for Chapter 11 of the US Bankruptcy Code, to hasten its return to profitability.
“My number one priority has been to preserve Chrysler and the thousands of people who depend on its success,” said chairman and CEO, Bob Nardelli. “While I am excited by the creation of the global alliance, I am personally disappointed that today Chrysler has filed for Chapter 11. This was not my first choice.”
Nardelli also announced his plans to leave Chrysler following the emergence of the new company from Chapter 11, and the completion of the alliance with Fiat. He will return to Cerberus Capital Management LP as an advisor.
What does this mean to current owners of Chrysler vehicles? According to Nardelli, it will be business as usual through the restructuring.
“We want to personally assure everyone that the new company will produce and support quality vehicles under the Jeep, Dodge and Chrysler brands as well as parts under the Mopar brand,” said Nardelli. “Chrysler employees will become employees of the new company. Chrysler dealerships remain open for business serving our customers. All vehicle warranties will be honored without interruption, and consumers can continue to purchase our vehicles with complete confidence.”
During the restructuring, the US government will provide the financing necessary for Chrysler to continue to conduct business. Chrysler’s Mexican, Canadian and other international operations are not part of the bankruptcy filing.
Following the restructuring, Fiat will hold a twenty percent ownership stake in Chrysler. Fiat has the right to increase its ownership stake an additional fifteen percent in three increments as it meets the following criteria: five percent for bringing a 40 mpg vehicle platform to Chrysler to be produced in the US; five percent for a fuel-efficient engine family to produced in the US for use in Chrysler cars; and five percent for providing Chrysler access to its global distribution network. Fiat cannot become a majority owner until after all US government loans have been repaid.
Chrysler has reached an agreement in principle with GMAC to become the preferred lender for Chrysler dealer and consumer business. As part of the restructuring, Chrysler will temporarily halt most of its manufacturing operations, to resume within thirty to sixty days.
“We look forward to our new partnership with Fiat,” Nardelli concluded. “To be sure, there will be many changes as we move forward to implement our plans. But today, from many great parts, we begin to build a vibrant new company with less debt, a stronger balance sheet, richer product portfolio, supported by a well-positioned finance company.”
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