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President Obama has just concluded a televised press conference where he announced that Chrysler will indeed head into Chapter 11 bankruptcy proceedings almost immediately. As part of the same announcement, he noted that the Auburn Hills automaker has reached terms with Fiat and will be headed into a partnership agreement that will include a cash infusion and technology transfers. By some estimates, the restructuring is expected to take 30-to-60 days.

The announcement came after late-night talks with a small group of creditors broke off before a restructuring plan could be reached. During the conference, Obama took pains to note the sacrifice of many players, including some in the financial sector, but he openly chastized other hedge fund operators and speculators for holding out for more debt compensation, arguing that they were looking to make money on the taxpayer dollars.

Keeping an upbeat tone in his announcement, Obama also reassured Americans that they will be repaid in full before Fiat gets any stake in the automaker, and that GMAC has agreed to step in to provide loans for Chrysler vehicles. Canada is also pitching in to make it work, but the U.S. taxpayers will be on the hook for an additional $8 billion in aid. Obama also reiterated that the government will stand behind Chrysler and General Motors vehicle warranties, and he extolled Americans to purchase new vehicles from domestic automakers.

Finally, in related news, it is being reported that Chrysler CEO Bob Nardelli (whom Obama praised during the press conference) will exit the company after the bankruptcy filing is complete.

*UPDATE: A new Chrysler press release (posted after the jump) confirms that Nardelli will leave Chrysler after it emerges from bankruptcy:

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."

The Detroit Bureau's Ken Zino has excellent analysis of the announcement here.

More details and analysis on the way...

[Image: Bill Pugliano/Getty]

PRESS RELEASE:

Chrysler LLC and Fiat Group Announce Global Strategic Alliance to Form a Vibrant New Company

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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    • 1 Second Ago
  • 71 Comments
      • 6 Years Ago
      Fiat owning Chrysler would allow platform sharing, drivetrain sharing and product development. Think of the possibilities! Ferrari, a subsidiary of Fiat, might benefit by using Chrysler engines and transmissions, perhaps a Lamborghini (another Fiat sub) will rebadge a Dodge minivan.

      The possibilities are endless!
        • 6 Years Ago
        @Wintrode

        face on my eggs, it's Maserati

        Thanks for the reality check. But, who knows what automotive Frankenstein future may befall us.
        • 6 Years Ago
        Umm, no. Lambo is part of VAG (Volkswagen-Audi Group), not FIAT
        • 6 Years Ago
        If a Maserati minivan surfaces, surely the world is at an end!
      • 6 Years Ago
      Fiat should be a much better partner than Daimler who gave Chrysler absolutely nothing!
        • 6 Years Ago
        I think that's the problem with Chrysler, and the problem with this deal. Chrysler’s not really designing new platforms, they used Daimler bits for the 300 and everything based off it, they're not doing much themselves. With fait's involvement, again, we see them using someone else's bits. Until Chrysler acts like an automaker and develops their own platforms they will continue to be the b!tch of whoever buys them out. I can't think of anyone who's under the fantasy impression Fiat wants to fix Chrysler. Like Daimler, they want a us outlet for platforms, and Chrysler’s going to provide that. And when Fiat's done, we'll probably be in the same position for one very important reason, Chrysler’s not being run like a car company.

        on a side note, is anyone sad to see nardelli leave?
      • 6 Years Ago
      Nardelli leaving will be nothing but a good thing. That guy is clueless. I still can't believe he was hired after the mess he left at Home Depot. I'm enthused about the possibilities for new Chrysler, and the ability to get some affordable fresh euro brands in the US.

        • 6 Years Ago
        How is that most in here attack Nardelli when he was a CEO for about 2 years and give Wagoner a pass when he was for 8 years and was a CFO for a good deal before that?
        • 6 Years Ago
        Oh, I don't give Wagoner a pass. He is a perfect example of the douchery that is par for the course in the illustrious history of GM's management.
      • 6 Years Ago
      After the damage he did at Home Depot (I work for them) and now Chrysler, I can't see him EVER working in this country again. I'd call him a snake but snakes do serve a purpose in the grand scheme of things.
        • 6 Years Ago
        That's really harsh man.
      • 6 Years Ago
      I just took a look at the Fiat website. Other than the 500 Id on't see anything that would sell well here in the US. Maybe the Panda. Chrysler will really need to rebody these platforms to make them palatable to US customers.
        • 6 Years Ago
        FIAT Bravo is another. Maybe a Caliber replacement.
      • 6 Years Ago
      Obama gettin these fools straight.
      • 6 Years Ago
      I hope they at least keep the Challengers with its V6 and v8 Hemi, the rest of the Chrysler line could be replaced. The Challenger SRT-8 would be the reward car you give yourself after many years of hard work, can't seeing rewarding myself with a hybrid. But as a basic runabout the the Fiat based cars would be fine, but the v8 car would be the weekend car.
      • 6 Years Ago
      Guess not too many people here remember the last time Fiats were sold here. There's a lot of good reasons why Fiat had to pull out US for nearly 30 years ago. Here are a few:
      - build quality - about what you'd expect from Italian labor unions
      - mechanical reliability - old joke:
      Q. what does FIAT stand for?
      A. Fix It Again Tony
      - electrical systems that shorted out for no reason
      - rustproofing - drive them anywhere but a desert and they dissolve

      On the other hand, they did look good. Lots of people could admire them while their owner was pushing it to the nearest garage.
      desupr97
      • 6 Years Ago
      they need to abolish all employee buyouts asap also
      • 6 Years Ago
      I was pretty positive about this deal. But the news here in St Louis last night said that after the temporary shut down for the restructing, Chrysler has already announced they will not be re-opening the truck plant here. That's pretty sad. They already shut down the mini-van plant (while full production continues in Canada) and had limited the truck plant to one shift. As far as I know, the Mexico plant is still running strong.
      • 6 Years Ago
      Please remember that Nardelli is the same person who had a $200+ million golden parachute when he took Home Depot from a productive growing company to near bankruptcy. I see he has finally succeeded at getting bankruptcy done to Chrysler, but how big is his parachute. His type of management does not work, and GE was correct in not allowing him to be CEO, Home Depot should have looked, and Cerebus knew what they had. He probably has ties that will carry him to his next victim, possibly Wal-Mart?
      • 6 Years Ago
      Oh my! What poor grammar being used in this commentary; no wonder we're dead last......JK!!! I have seen worse from other regions of the world and yes, have driven worse from said regions. As for Chrysler-Fiat, so many of you are quick to write the epilogue to these companys' storied history. Check the archives; Chrysler was far more productive when it let its factory workers (U.A.W.) get involved in all phases of product developement. It had the most promising line-up of automobiles, bar none! It can and will be done agian and soon! No new products that people want to buy? Take another look folks. Already in motion are the RAM 1500/1500 Hybrid, RAM 2500/3500, Challenger, revised Sebring/ Avenger (one of which will get an SRT-6 variant), all-new 300/Charger, all-new Penterstar V-6, revised trannys (truck/passenger cars), small car using Nissan's components, updated Journey, updated Minivans, GC/Durang/Chrysler-ute (on an all-new Unibody chasis).... They are either being built now or will be within a year; this doesn't look like a company thats fading away to me...
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