Auto Task Force Saved Chrysler-Now Fiat Takes Control

Fiat takes the wheel at troubled Chrysler
The Associated Press

DETROIT — Italy’s Fiat is the new owner of most of Chrysler’s assets, closing a deal Wednesday that saves the troubled U.S. automaker from liquidation and places a new company in the hands of Fiat’s CEO.

The deal clears the way for a new, leaner Chrysler Group LLC to emerge from bankruptcy protection minus billions in debt, 789 underperforming dealerships and burdensome labour costs that nearly sank the storied automaker.

Fiat CEO Sergio Marchionne immediately was named CEO of the new company, which said in a statement that it would soon reopen Chrysler factories in the United States and Canada that were idled during the bankruptcy process, costing the automaker US$100 million per day.

The new company will focus on smaller vehicles, areas in which Chrysler was weak.

"Work is already under way on developing new environmentally friendly, fuel-efficient, high-quality vehicles that we intend to become Chrysler’s hallmark going forward," the new company said in a statement.

The Italian automaker won’t put any money into the deal but will give Chrysler billions of dollars worth of small car and engine technology.

"We intend to build on Chrysler’s culture of innovation and Fiat’s complementary technology and expertise to expand Chrysler’s product portfolio both in North America and overseas," Marchionne said in a statement.

The Chrysler restructuring involved billions of dollars in financial aid from the U.S., Canadian and Ontario governments as well as labour, pension and other cost concessions from the United Auto Workers and Canadian Auto Workers unions.

In Ottawa, Canadian Industry Minister Tony Clement welcomed the sale and emergence of Chrysler from bankruptcy restructuring "in a timely and efficient manner."

"The government of Canada is confident that we will see a competitive Chrysler Canada Inc. that will produce and sell Canadian-made cars and will continue to play an important role in the company’s North American operations," Clement said in a release.

"A restructured Chrysler is good news for the Canadian auto parts supply chain and for Canadian consumers. The company can now focus on producing top quality vehicles that consumers want.

"Moving forward, the government of Canada will continue to work toward strengthening our country’s auto industry, while exercising rigorous oversight over the use of taxpayer money."

The sale to Fiat SpA marks a victory for the Obama administration, which shepherded Chrysler into bankruptcy protection April 30 with the hope that the company would emerge in a matter of months with a new partner.

Marchionne immediately made management changes, including the appointment of vice-chairman and president Jim Press as deputy CEO and adviser to help with the management transition.

Press, formerly top U.S. executive for Toyota Motor Corp., joined Chrysler shortly after it was taken over in 2007 by private equity firm Cerberus Capital Management LP.

In a statement, Marchionne said the organization will be designed to give leaders broad control and increase the speed of decision making.

Chrysler CEO Bob Nardelli bid employees farewell in an email obtained by The Associated Press, while vice-chairman Tom LaSorda already has retired.

Marchionne, in an email to Chrysler employees Wednesday, expressed confidence that Fiat will be able to turn Chrysler around.

He wrote that he stepped into a similar situation five years ago at Fiat, which at the time was perceived as a failing, bureaucratic automaker that made low-quality cars.

Yet most of the people capable of remaking Fiat were there all the time, he wrote.

"We have remade Fiat into a profitable company that produces some of the most popular, reliable and environmentally friendly cars in the world," he wrote.

"We created a far more efficient company while investing heavily in our technologies and platforms. And, importantly, we created a culture where everyone is expected to lead. We can and will accomplish the same results here."

On Tuesday, Chrysler won its battle to erase its secured debt after the Supreme Court declined to rule on objections to the sale to Fiat from a trio of Indiana pension and construction funds.

The Indiana funds, which hold less than one per cent of Chrysler’s US$6.9 billion in secured debt, claimed the sale unfairly favours Chrysler’s unsecured stakeholders such as the union ahead of secured debtholders like themselves.

Supreme Court Justice Ruth Bader Ginsburg decided Monday to delay the sale while studying the appeals.

But on Tuesday, the court turned down the opponents’ last-ditch bid by declining a hearing on the appeals.

Also on Tuesday, Judge Arthur Gonzales approved Chrysler’s motion to terminate 789 of its dealer franchises, or about 25 per cent of its dealer base.

Many of those dealers closed their doors for good on Tuesday, though some will continue to sell used cars or other brands.

Chrysler has maintained that the closures are a necessary part of its plan to cut costs.

Press told a Senate committee that the poor performance of many of the dealers slated to lose franchises costs the company $1.5 billion in lost sales each year, along with $150 million in advertising and marketing costs and $33 million in administrative costs.

The dealers had argued that they cover their own costs and little would be gained by terminating their franchises.

Chrysler lawyers said the automaker would extend until Monday its program to help the affected dealers send any unsold vehicles to stores that will remain open.

Chrysler’s swift passage through about five weeks of bankruptcy proceedings was helped by the involvement of the Obama administration’s auto task force, which provided billions in financing and helped negotiate a deal with the company’s stakeholders.

Under the agreement brokered in the days leading up to Chrysler’s Chapter 11 filing, Fiat will receive up to a 35 per cent stake in the automaker in exchange for sharing the technology Chrysler needs to create smaller, more fuel-efficient vehicles.

The United Auto Workers union will get a 55 per cent stake that will be used to fund its retiree health care obligations, while the U.S. and Canadian governments will receive a combined 10 per cent stake.

Chrysler-Fiat Will become A Global Powerhouse

J. Travis-Gm Chrysler News

As Fiat SpA CEO Sergio Marchionne is in the process of wrapping up the Fiat Chrysler deal, he is also working on purchasing GM Operations overseas, Saab, Opel(Saturn) and building a global network quickly.

If Fiat is going after GM-Opel operations, it may target some of GM's domestic brands like Saturn and Pontiac.Because the Opel vehicles and Saturn vehicles are on the same platform....?

The new Chrysler-Fiat line up of vehicle brands could be quit impressive:
Alfa Romeo,Fiat,Ferrari,Maserati,Jeep,Chrysler,Dodge,Saab,Opel(Saturn),Joint ventures with Kia,Mitsubishi,TaTa and Nissan.

By time the smoke clears Chrysler-Fiat will be larger than GM and only second in the World to Toyota! Which they could easily surpass Toyota if the auto markets pick up around the world.

I would guess Sergio believes in go big or go home.....

Chrysler expected to sell assets to Fiat

NEW YORK – Chrysler LLC is expected to file a motion Saturday to sell substantially all of its assets to Italian automaker Fiat Group SpA, but the ailing automaker must still deal with creditors who refused to come to a deal to erase the company's debt.

Attorneys for Chrysler say eight plants will not be affected by the sale, including five that the automaker revealed it will shutter by the end of next year.

While Chrysler faced its first hearing Friday in Manhattan bankruptcy court, court documents showed the Big Three automaker planned to close plants in Michigan, Missouri, Ohio and Wisconsin that employ about 4,800 people. Chrysler said they will be offered jobs at other plants.

The company also announced President and Vice Chairman Tom LaSorda is retiring effective immediately.

Judge Arthur Gonzalez approved a series of motions at Friday's hearing, launching a chain of events designed to ensure Chrysler's bankruptcy process is the quick and "surgical" one the company and the U.S. government have promised.

But what could prove to be the case's biggest challenge still lies ahead. Chrysler must eventually deal with creditors who defied government pressure to wipe out the automaker's debt and might have helped the company avoid a bankruptcy filing in the first place.

Another hearing was scheduled for Monday, where Chrysler attorneys will ask Gonzalez to let the company start using $4.5 billion in loans from the U.S. and Canadian governments to keep operating under bankruptcy protection.

Chrysler, the nation's third-largest car manufacturer, filed for bankruptcy protection Thursday. The company plans to emerge in as little as 30 days as a leaner, more nimble company, with Fiat potentially becoming the majority owner.

In return, the federal government agreed to give Chrysler up to $8 billion in additional financing, on top of the $4 billion the company already has received.

Chrysler attorney Corinne Ball said that lawyers on Monday would ask to set a date for the first hearing on the sale of its assets to the "new Chrysler." In bankruptcy, assets are sold in a two-part process during which the court asks for competing bids. None are expected in Chrysler's case, since documents show the company already tried to form alliances with dozens of companies, including Nissan-Renault, Toyota, Honda, Volkswagen and even rival General Motors Corp.

Heidi Sorvino, bankruptcy partner at Smith, Gambrell & Russell LLP, said a sale could be completed in 30 to 60 days.

"I think the sale will happen quickly," she said. "The actual proceeding is going to take a long time."

Until the deal with Fiat closes, the automaker plans to idle all of its plants in the U.S. Chrysler's Canadian assembly plants also halted production Friday because of parts shortages stemming from the U.S. shutdown.

In court documents, Chrysler said it won't keep its Sterling Heights, Mich., plant that makes Chrysler Sebrings and Dodge Avengers, and the Conner Avenue plant in Detroit that makes Dodge Vipers. The St. Louis North plant that makes Dodge Ram pickups would also close.

Chrysler's Twinsburg, Ohio, parts stamping plant and Kenosha, Wis., engine plant will also be shuttered.

Two other plants that will be left out of the Fiat sale are the St. Louis South plant and an assembly plant in Newark, Del., that were idled last year. Another facility, Chrysler's Detroit Axle plant, is already scheduled to be replaced by a new factory near Port Huron, Mich.

The "new Chrysler" would lease the eight plants, then shutter them by December 2010.

"While some facilities may close, substantially all Chrysler employees will be offered employment with the new company," Chrysler spokeswoman Dianna Gutierrez said. "Employees currently located at a facility identified for disposition will be offered a position at one of the facilities sold to the new company."

Gonzalez approved Chrysler's motion to allow the automaker to pay $48.8 million in employee and contract worker pre-bankruptcy wages, benefits and businesses expenses. The motion also references an estimated $86 million in employee vacation benefits that it may not ultimately have to pay.

The judge also approved Chrysler's motions that will let it continue to honor its warranties and continue its current banking practices.

It's uncertain when Gonzalez will face objections from the creditors that hold $6.9 billion of the automaker's debt.

Four banks holding 70 percent of the debt agreed to a deal that would give the lenders 29 cents on the dollar. But a collection of hedge funds refused to budge, saying the deal was unfair because they deserve to recover more than other creditors like the United Auto Workers.

President Barack Obama on Thursday chastised the funds for seeking an "unjustified taxpayer-funded bailout" after Chrysler and his auto task force cleared the company's other hurdles, including the Fiat deal and a cost-cutting pact that the UAW ratified this week.

Chrysler's bankruptcy filing is the latest step in a drastic reordering of the American auto industry, which has been crushed by higher fuel prices, the recession and customer tastes that are moving away from the gas-guzzling SUVs that were once big money makers.

The government already has sunk about $25 billion in aid into Chrysler and GM.

GM faces its own day of reckoning on June 1, a date the administration has set for it to come up with its own restructuring plan. GM has announced thousands of job cuts, plans to idle factories for weeks this summer and has even offered the federal government a majority stake in the company as it races to meet the deadline.

Like at Chrysler, debt may be the stumbling block. GM has asked its unsecured bondholders to exchange $27 billion of debt for a 10 percent stake in the automaker. The creditors balked, saying that would leave them with just pennies on the dollar and that they deserve a majority stake if they give up their claims.

Chrysler and Fiat must merge or Face Liquidation

From The Ap
Chrysler and Fiat must merge to get more help for the Auto Task Force

Frustrated administration officials, speaking on condition of anonymity ahead of Obama's announcement, said Chrysler has been given a 30-day window to complete a proposed partnership with Italian automaker Fiat SpA. The government will offer up to $6 billion to the companies if they can negotiate a deal before time runs out. If a Chrysler-Fiat union cannot be completed, Washington plans to walk away, leaving Chrysler destined for a complete sell-off....More

Chrysler’s Nardelli Is Said to Have Been Allowed to Stay in Job

March 30 (Bloomberg) -- Chrysler LLC Chief Executive Officer Robert Nardelli hasn’t been asked to step down ahead of today’s U.S. government announcement about plans for the automaker, people familiar with the discussions said.

General Motors Corp. CEO Rick Wagoner will leave at the request of the Obama administration, said the people, who asked not to be identified because the matter is private. The companies are surviving with a combined $17.4 billion in U.S. aid, $4 billion of which went to Chrysler.

Chrysler will be told today that it must complete a planned alliance with Italy’s Fiat SpA to gain access to small-car technology in exchange for giving up a 35 percent equity stake, according to a government official.

With the U.S. not seeking a management change, Nardelli, 60, will get a chance to continue efforts to return Chrysler to profit. Chrysler owner Cerberus Capital Management LP hired the former Home Depot Inc. CEO in August 2007 after buying 80 percent of the third-largest U.S. automaker.

Chrysler said it lost $8 billion in 2008 as the U.S. auto market sank to a 16-year low. The Auburn Hills, Michigan-based automaker’s domestic sales tumbled 55 percent in January and 44 percent in February and asked for $5 billion more in U.S. aid. Chrysler Corp., as it was known then, took out $1.2 billion in government-backed loans in 1980 and repaid the money in 1983.....More

Chrysler News:Chrysler and Fiat sign merger agreement

Italian carmaker Fiat and US car concern Chrysler have signed an agreement to merge their companies, Chrysler disclosed.

Chrysler, at its Auburn Hills, Michigan headquarters, said that the agreement is still preliminary and not yet binding.

Further details were not immediately disclosed. Earlier on Tuesday, Fiat deputy chairman John Elkann said that the Turin-based carmaker is in talks with Chrysler amid reports of a possible purchase by the Italian company of a majority stake in the ailing US producer.

"It is no secret that we are talking. It has been a while that we are in talks," Elkann, a heir of the Agnelli family which controls Fiat, was quoted as saying by the ANSA news agency.

Elkann indicated more details on a possible deal would be available following a Fiat statement later on Tuesday and a meeting of the company's board scheduled for Thursday.

Earlier on Tuesday, Milan's Bourse announced trading in Fiat stocks had been suspended pending the statement's release.

The Wall Street Journal reported on Monday that Fiat was considering acquiring a 35 per cent ownership in Chrysler by mid-year as the first step towards the acquisition of a possible majority stake in the US company.

The deal would give Fiat long-sought access to the US market for its small and mid-sized cars, with the Fiat 500 and Alfa Romeo reported to be at the top of the list.

Under the deal, Fiat could build its own small cars in the US and use the Chrysler distribution network. In exchange, Chrysler would tap Fiat's expertise building small and medium-sized cars to advance its own plans for new, front-wheel-drive models with lower emissions.

As petrol prices soared and the economy stalled, sales of Chrysler's mostly large, fuel-inefficient cars and trucks fell 30 per cent in 2008.

With auto sales at a 27-year low, Chrysler has laid off tens of thousands of workers and had to beg for government rescue financing of $US5.5 billion ($A8.21 billion) just to stay afloat for the next few months.

The loan terms require Chrysler to deliver a credible survival strategy by March, and an alliance with Fiat would be a tangible new strategy.

Fiat, which exclusively makes small cars with narrow profit margins, is struggling to keep its own head above water in Europe's expensive labour market.