Fiat Completes Acquisition of Chrysler Assets
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06-10-2009, 10:08 AM
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Fiat Completes Acquisition of Chrysler Assets
http://www.nytimes.com/2009/06/11/bu...rysler.html?hp
Fiat Completes Acquisition of Chrysler Assets
Published: June 10, 2009
With the touch of pen to paper and a simple wire transfer, Chrysler completed its deal with Fiat on Wednesday morning, largely ending its quick trip through bankruptcy.
The last obstacle to an exit — a temporary stay imposed by the Supreme Court — was lifted late Tuesday, after the nine justices declined to hear a challenge of the deal by three Indiana state funds and several consumer groups.
The wire transfer, from the federal government, gives Chrysler $6.6 billion in exit financing.
A two-page order from the Supreme Court made it clear that it was not ruling on the merits of the Indiana funds’ case. But the justices wrote that the funds, which represent teachers and police officers, “have not carried the burden” of proving that the Supreme Court needed to intervene.
After more than a month of sometimes dramatic court hearings, Chrysler sold the bulk of its assets to Fiat in almost anticlimactic fashion: in the offices of the Cadwalader, Wickersham & Taft, the law firm that is advising the Treasury Department’s auto task force. The sale was completed at about 9 a.m.
The speed with which Chrysler’s restructuring plan swept through the court system was an important victory for the Obama administration, which is seeking to remake the American auto industry after years of declining sales. When Chrysler filed for bankruptcy on April 30, President Obama promised its restructuring would be “efficient” and “controlled.” Company and government officials repeatedly exhorted the courts to approve the restructuring swiftly, citing the $100 million a day that Chrysler was consuming as it idled its plants and paid other overhead costs.
Chrysler was openly acknowledged as a test case for General Motors, a far larger and more complex company only in the early stages of its bankruptcy case.
As envisioned by Chrysler, Fiat and the government, Wednesday’s sale will create a new carmaker freed from old Chrysler’s crushing labor costs and debt levels. It will have gained in Fiat, which will run the company, a partner skilled in making and selling small, fuel-efficient cars around the world.
Under the plan, the carmaker would emerge from bankruptcy with a union retiree trust owning 55 percent, Fiat owning a 20 percent share that could eventually grow to 35 percent, and the United States and Canadian governments holding minority stakes.
But the hardest part for Chrysler begins now. Stung by the recession, Americans have shown relatively little appetite for buying new cars.
Chrysler has been hit hardest among the three Detroit companies by the slump which began last year and which has resulted in the worst sales in more than a quarter century.
Through May, Chrysler sales were down 46.3 percent, and it held just 10 percent of the car and truck market, down from nearly 15 percent a few years ago. It ranks only fifth in the American market, behind G.M., Toyota, Ford and Honda.
Chrysler employees, who were once considered among the industry’s most energetic and innovative, now face the prospect of adjusting to their third set of owners in less than two years. In recent weeks, teams from Fiat have been going over the company’s operations in Auburn Hills, Mich., much as teams from Cerberus Capital Management did in 2007, when the investment group bought the company from DaimlerChrysler.
Likewise, employees can expect new management at Chrysler, much as Cerberus brought in Robert L. Nardelli, the former Home Depot chief executive, and James Press from Toyota’s American operations. Sergio Marchionne, the chief executive of Fiat, has said he would run Chrysler, but he, too, is likely to bring in some managers.
The impact on Chrysler’s lineup will take longer to be felt. Chrysler, more than any other American player, depends heavily on Jeeps, minivans and pickups as the bulk of its lineup, even after gas prices rose above $4 last year. Small Fiats are expected to be sold at Chrysler dealers, such as the Fiat 500, the latest version of the perennial Italian favorite. But it could take months or years to adapt them to emissions and safety requirements in the United States.
For the moment, Chrysler dealers will have to rely on many of the same vehicles sold by Chrysler before it entered bankruptcy. And there will be far fewer of those dealers: hundreds closed Tuesday night, and their cars and trucks will be redistributed among remaining showrooms.
Fiat Completes Acquisition of Chrysler Assets
Published: June 10, 2009
With the touch of pen to paper and a simple wire transfer, Chrysler completed its deal with Fiat on Wednesday morning, largely ending its quick trip through bankruptcy.
The last obstacle to an exit — a temporary stay imposed by the Supreme Court — was lifted late Tuesday, after the nine justices declined to hear a challenge of the deal by three Indiana state funds and several consumer groups.
The wire transfer, from the federal government, gives Chrysler $6.6 billion in exit financing.
A two-page order from the Supreme Court made it clear that it was not ruling on the merits of the Indiana funds’ case. But the justices wrote that the funds, which represent teachers and police officers, “have not carried the burden” of proving that the Supreme Court needed to intervene.
After more than a month of sometimes dramatic court hearings, Chrysler sold the bulk of its assets to Fiat in almost anticlimactic fashion: in the offices of the Cadwalader, Wickersham & Taft, the law firm that is advising the Treasury Department’s auto task force. The sale was completed at about 9 a.m.
The speed with which Chrysler’s restructuring plan swept through the court system was an important victory for the Obama administration, which is seeking to remake the American auto industry after years of declining sales. When Chrysler filed for bankruptcy on April 30, President Obama promised its restructuring would be “efficient” and “controlled.” Company and government officials repeatedly exhorted the courts to approve the restructuring swiftly, citing the $100 million a day that Chrysler was consuming as it idled its plants and paid other overhead costs.
Chrysler was openly acknowledged as a test case for General Motors, a far larger and more complex company only in the early stages of its bankruptcy case.
As envisioned by Chrysler, Fiat and the government, Wednesday’s sale will create a new carmaker freed from old Chrysler’s crushing labor costs and debt levels. It will have gained in Fiat, which will run the company, a partner skilled in making and selling small, fuel-efficient cars around the world.
Under the plan, the carmaker would emerge from bankruptcy with a union retiree trust owning 55 percent, Fiat owning a 20 percent share that could eventually grow to 35 percent, and the United States and Canadian governments holding minority stakes.
But the hardest part for Chrysler begins now. Stung by the recession, Americans have shown relatively little appetite for buying new cars.
Chrysler has been hit hardest among the three Detroit companies by the slump which began last year and which has resulted in the worst sales in more than a quarter century.
Through May, Chrysler sales were down 46.3 percent, and it held just 10 percent of the car and truck market, down from nearly 15 percent a few years ago. It ranks only fifth in the American market, behind G.M., Toyota, Ford and Honda.
Chrysler employees, who were once considered among the industry’s most energetic and innovative, now face the prospect of adjusting to their third set of owners in less than two years. In recent weeks, teams from Fiat have been going over the company’s operations in Auburn Hills, Mich., much as teams from Cerberus Capital Management did in 2007, when the investment group bought the company from DaimlerChrysler.
Likewise, employees can expect new management at Chrysler, much as Cerberus brought in Robert L. Nardelli, the former Home Depot chief executive, and James Press from Toyota’s American operations. Sergio Marchionne, the chief executive of Fiat, has said he would run Chrysler, but he, too, is likely to bring in some managers.
The impact on Chrysler’s lineup will take longer to be felt. Chrysler, more than any other American player, depends heavily on Jeeps, minivans and pickups as the bulk of its lineup, even after gas prices rose above $4 last year. Small Fiats are expected to be sold at Chrysler dealers, such as the Fiat 500, the latest version of the perennial Italian favorite. But it could take months or years to adapt them to emissions and safety requirements in the United States.
For the moment, Chrysler dealers will have to rely on many of the same vehicles sold by Chrysler before it entered bankruptcy. And there will be far fewer of those dealers: hundreds closed Tuesday night, and their cars and trucks will be redistributed among remaining showrooms.
