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Chrysler’s 42-day bankruptcy ends in the arms of Fiat

Exiting what is being termed a very swift bankruptcy proceeding, Chrysler LLC quietly sold most of its assets to Italian carmaker Fiat on June 10, creating a company that, in terms of 2008 sales, would have annual vehicle sales of about 4.5 million vehicles, placing it just behind Ford. Some Chrysler operations not wanted by the new management are still in bankruptcy.


In exchange for loans to Chrysler of about $9 billion, the U.S. government owns a bit less than 10% of the reorganized company, while Canada owns nearly 2.5%. A United Auto Workers union retiree healthcare trust fund holds nearly 68% of the company, and Fiat, which will provide Chrysler with designs and engines for small cars, owns 20%, with the potential to increase that to 51% when U.S. loans are repaid.

Fiat CEO Sergio Marchionne, who will hold the same title at Chrysler, is reported as telling Chrysler employees that part of his plan for the company is identical to what he did in turning around Fiat—leaner management and an overhaul of manufacturing. He is also reported as telling them that the company had to make the most of this latest comeback try. He added that second chances are rare enough in the car business, and that there would not be a third chance.

Marchionne said he hopes to change the company culture at Chrysler, and that inside of 90 days the company will have a new product plan that includes some Fiat-developed models. His more immediate challenges will be restarting factories that were closed when Chrysler entered bankruptcy. Given the bankruptcies already declared among the auto supplier community, and the precarious financial position of some others, that will be no short order.

Marchionne has said he is pursuing consolidation because he expects only six global producers to survive the current recession. Buying Chrysler is a first step toward selling 6 million cars a year, which he has said is the minimum needed to be profitable through this down worldwide economy. Chrysler received no other offers while it was under bankruptcy protection. He had made an offer for GM’s European brands Opel and Vauxhall recently, but Canadian Tier One auto supplier Magna International was chosen as the top bidder and is negotiating a takeover at present. [email protected]

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