By on April 30, 2009

Auburn Hills, Mich., Apr 30, 2009  –  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.

“This partnership transforms Chrysler into a vibrant new company with a wealth of strategic advantages,” said Bob Nardelli, Chairman and CEO of Chrysler. “It enables us to better serve our customers and dealers with a broader and more competitive line-up of environmentally friendly, fuel-efficient high-quality vehicles. Benefits to the new company include access to exciting products that complement our current portfolio, technology cooperation and stronger global distribution.”

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.

“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. 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,” explained Nardelli.

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.

“Even though total agreement was not possible, I am truly grateful for all that has been sacrificed, on the part of many of Chrysler’s stakeholders to reach an agreement in principle with Fiat,” said Nardelli. “My number one priority has been to preserve Chrysler and the thousands of people who depend on its success. While I am excited about the creation of the global alliance, I am personally disappointed that today Chrysler has filed for Chapter 11. This was not my first choice. “

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. “Now is an appropriate time to let others take the lead in the transformation of Chrysler with Fiat,” said Nardelli. “I will work closely with all of our stakeholders to see that this new company swiftly emerges with a successful closing of the alliance.”

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.

“To create this vibrant new company, we are using this structured bankruptcy to rapidly implement tough but necessary changes, including: the agreed upon wage and benefit structure for active and retired employees that is competitive with those of transplant manufacturers; a reduction of debt and interest expense; the disposition of idle assets; a rationalized and more efficient dealer network; and sound agreements with our suppliers,” said Nardelli.

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 installment products.

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.

“We want to recognize the Administration, the U.S. Treasury, President’s Auto Task Force, as well as Members of Congress and representatives at the state and community level and Canadian Federal and Ontario Provincial governments for their energy and efforts in helping to move this new company forward,” Nardelli said. “It is also important to acknowledge Cerberus and Daimler, which provided the foundation for the alliance as well as Chrysler’s many other stakeholders including the UAW and CAW leadership, employees, dealers and suppliers. Without their deep sacrifices, unstinting loyalty and enduring belief in Chrysler, the alliance would not have been possible. We look forward to our new partnership with Fiat. 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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15 Comments on “Chrysler Suicide Watch 49: Official Statement...”


  • avatar
    JG

    Plants shut down and production will resume “when the transaction is completed.”

    Hmm. What does “business as usual” mean to you?

    Will the workers still be getting paid for the next one or two months?

    What transaction, exactly? Is FIAT going to be able to twist arms by holding out on particulars, while plants sit idle?

  • avatar
    guyincognito

    Um, isn’t it now the Chrysler Suicide Witness? I can’t even wrap my mind around how this is actually going to pan out.

  • avatar
    TexN

    A press release? How pedestrian! I would have thought Chrysler would have done something creative like….uummmmmmm…….I don’t know…….maybe some full page ads in various newspapers! Now THAT would have been something to see!

  • avatar

    Chrysler’s surprisingly efficient – it only took 49 “suicide watches” to put the fork in ’em, versus GM’s 500+.

  • avatar
    rpol35

    I am assumming that Cerberus is out of this thing now, yes? So Chrysler, LLC remains a privately held company with ownership as follows:

    UAW: 55%
    Treasury: 10% (US & Canada)
    Fiat: 20%
    ???: 15%

    Who owns the remaining 15% that Fiat will eventually want to buy?

  • avatar
    toxicroach

    “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.”

    The only way they are going to get these assets out in 30 days is if no creditor objects to the sale. The only way to have that happen is to solidly overpay for the assets. So new Chrysler is going to have more debt load than it should from the get go. Well positioned indeed.

  • avatar
    toxicroach

    Jgh: Cerebrus will play a bad hand, but it knows when to stop playing.

  • avatar
    Mr. Sparky

    Is it time for Fi-sler Birth Watch No. 1?

  • avatar

    Coming soon: the new, new, new Chrysler.

    “Meet the old boss, same as the old boss.”

    John

  • avatar
    superbadd75

    “It enables us to better serve our customers and dealers with a broader and more competitive line-up of environmentally friendly, fuel-efficient high-quality vehicles.”

    How does Fiat + Chrysler = high quality vehicles?

  • avatar
    Gary Numan

    To superbadd75

    How does Fiat + Chrysler = high quality vehicles?

    Good one! Perhaps they hope two negatives added together actually result in a positive.

    Me, I’m not betting on that math to actually work out…..

  • avatar
    Johnny Canada

    Did Cerberus just walk away with our money?

  • avatar
    NickR

    All vehicle warranties will be honored without interruption

    That will make for a nice change.

    He will return to Cerberus Capital Management LP as an advisor.

    It gladdens my heart to see him land on his feet.

    Chrysler’s Mexican, Canadian and other international operations are not part of any bankruptcy filing.

    Huh? The whole company is so intertwined how can they be seperated out and be considered going concerns in their own right? I really don’t get that.

    There are mystery novelists sitting wishing they could come up with plots full of so many twists and turns.

  • avatar
    ihatetrees

    If there are lenders whose debt is shorted by this process (compared to government and union debt), could they eventually have recourse in Italian courts against Fiat?

    Or will that be fixed too?

  • avatar
    CPTG

    Don’t Take my Disillusionment away from me else will have nothing to live for!!!

    Let me see if I got this right? ‘Fiasco’ (FIAT and CRYCO), a subsiderary of FIAT INC, will be owned by 55% of Union ‘Geezerees’ Retirees who will want to protect their pension payments by cutting the hours/benefits/pay/healthcare costs of the Fiasco line workers, thus causing the UAW to go on strike against…wait for it…THE UAW!!

    FIAT will be permitted to own the company in degrees, once the government gets its money back–and if FIAT screams ‘IMPOSSCEBLIE”, FIAT can gut the company of its valuable assets (Jeep) and load the rest back on the Government as it pockets what is left of Obama’s new bail out monies. DIE FIASCO, DIE!!!


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