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Heaven, again? Chrysler LLC and Fiat Group Announce Global Strategic
Chrysler LLC today announced that, as a result of the
comprehensive restructuring plan agreed to by many of its stakeholders,
it has reached an agreement in principle to establish a global strategic
alliance with Fiat SpA to form a vibrant new company. It will allow
Chrysler and Fiat to fully optimize their respective manufacturing
footprints and the global supplier base, while providing each with
access to additional markets. Fiat powertrains and components will also
be produced at Chrysler manufacturing sites.
Chrysler initiated discussions
with Fiat more than a year ago to develop plans for a global product
alliance. Over the past several months, these discussions have evolved
and expanded. Chrysler and many of its stakeholders worked tirelessly to
agree upon concessions that will result in a significantly lower cost
base and enable fulfillment of a broader strategic alliance.
Despite substantial progress on
many fronts, Chrysler was not able to obtain the necessary concessions
from all of its lenders, which would have avoided the need for a
bankruptcy proceeding. As a result, under the direction of the U.S.
Treasury, Chrysler LLC and 24 of its wholly owned U.S. subsidiaries
today filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy
Code in U.S. Bankruptcy Court for the Southern District of New York.
Chrysler also will file a motion
under Section 363 of the Bankruptcy Code requesting the swift approval
by the Court of the agreement with Fiat and the sale of Chrysler’s
principal assets to the new company. The benefit of this type of filing
is speed. It should allow a leaner new company to emerge in a matter of
30 to 60 days, well positioned for long-term viability.
Nardelli, who has been leading
Chrysler since August 2007, also announced to Chrysler LLC’s Board
of Management and the U.S. Treasury his plan to leave the
company 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.
During the restructuring
process, the government will provide sufficient debtor-in-possession
(DIP) financing to allow continuation of “business as usual.” The
company will seamlessly honor warranty claims, pay suppliers and keep
our dealer body operating to continue to serve our valued customers.
Chrysler’s Mexican, Canadian and
other international operations are not part of any bankruptcy filing.
As part of the restructuring and
with the backing of the U.S. Treasury, we have reached an agreement in
principle with GMAC to become the preferred lender for Chrysler dealer
and consumer business. GMAC will be able to offer the best long-term
finance options for Chrysler dealers and customers with standard rate
When the transaction is
completed, the Voluntary Employee Beneficiary Association (VEBA) will
own 55 percent of the new company and the U.S. and Canadian governments
will own proportionate shares of a 10 percent stake. Fiat will initially
hold a 20 percent ownership stake in Chrysler. Fiat will have the right
to increase its ownership stake an additional 15 percent in three
increments as it meets the following criteria: 5 percent for bringing a
40 mpg vehicle platform to Chrysler to be produced in the U.S.; 5
percent for providing a fuel-efficient engine family to be produced in
the U.S. for use in Chrysler vehicles; and 5 percent for providing
Chrysler access to its vast global distribution network to facilitate
the export of Chrysler vehicles. Fiat cannot become a majority owner
until after all U.S. government loans have been completely repaid.
As a part of the restructuring,
most manufacturing operations will be temporarily idled effective
Monday, May 4, 2009. Normal production schedules will resume when the
transaction is completed, which is anticipated within 30 to 60 days.
(May 2, 2009)