Fiat now owns a big chunk of Chrysler. Officially. Soon after the Supreme Court gave it the go-ahead, the sale of Chrysler to Fiat was complete. Altogether, the deal took just 42 days. With a couple of signatures and a wire transfer Wednesday morning, the sale was official. Fiat gets most of Chrysler's assets and $6.6 billion in "exit financing" from the federal government.
This can be seen as a victory of sorts for the Obama Administration, which had hoped to get Chrysler reorganized quickly and efficiently. Supporters say that the new Chrysler Group LLC has a good chance of being more competitive out of the box, having shed much of its legacy labor costs and debt, and Fiat's expertise with small cars shouldn't hurt either.
Official statements by current Chrysler CEO Bob Nardelli and Fiat's Sergio Marchionne are pasted in after the jump. Nardelli congratulates employees on being a part of "a leaner, healthier and more robust company," and says goodbye at the same time. He will return to a position with Cerberus. Marchionne introduces himself as the new CEO, former Toyota exec Jim Press as Deputy CEO, and Robert Kidder as board chairman. He also promises that the world's sixth largest automaker will begin to show signs of improvement immediately.
In related news, the Obama Administration has announced the appointment of a new 'Compensation Czar' to oversee the salaries and benefits packages awarded to 175 major executives at seven of America's biggest companies that receive federal aid. According to the New York Times, Washington attorney Kenneth R. Feinberg will have "broad discretion" in determining what compensation packages executives are awarded, including the top 25 decision makers at General Motors, GMAC, Chrysler, and Chrysler Finance.
For its part, as it emerges from bankruptcy, Chrysler's union retiree trust (VEBA) will own 55% of the company, with Fiat getting a 20% share that can grow to a max of 35%. The U.S. and Canadian governments split the rest. If the Fiat-Chrysler deal is any indication, General Motors may see a quick exit from bankruptcy as well, even without a Fiat of its own to step in and help. Now they just need to get people into showrooms with cash in hand.
[Sources: Chrysler, The New York Times | Photo by Sean Gallup/Getty]
CEO Marchionne outlines Chrysler Group's future
To the Men and Women of the New Chrysler:
Today marks a new beginning for Chrysler and the North American automotive industry, as Chrysler Group LLC, a new company formed in alliance with Fiat Group, has completed its acquisition of substantially all of Chrysler LLC's assets and will begin operations immediately.
It is my great privilege to greet you as your new chief executive officer and to join all of you in building a great future for the new Chrysler. Although we have many challenges yet to overcome, there is no doubt in my mind that we will get the job done. Chrysler will be back-strong and competitive and a rewarding place to work.
You have been through a great deal of hardship and uncertainty over the recent past and I want to start by recognizing your commitment to Chrysler and acknowledge the many sacrifices you have made to help get an American icon back on its feet. Because of your commitment, and the hard work of a range of interested parties, including President Obama and his Automotive Task Force, Chrysler is now a more focused and nimble company that will benefit greatly from its new global strategic alliance with Fiat. The new company moves forward with significant strategic advantages, including a healthy balance sheet, a competitive cost structure, a leaner and more efficient dealer network, sound supplier agreements and significantly improved product quality and operational efficiency.
For those reasons, today is a day for optimism. Chrysler, Jeep and Dodge vehicles will once again roll out of our plants, into our dealers' showrooms, and soon thereafter onto America's roads and highways. We have much to look forward to. But we must also not forget what we have learned. The past few years have offered several painful lessons on what it will take to survive in the modern-day automotive industry. The alliance is a bold first step to implement those lessons we've learned, but it is only a first step. Now we must prove we can make it work.
We are already moving in that direction. Over the next several months, we will begin the process of transferring Fiat's technology, platforms and powertrains for small- and medium-sized cars into Chrysler's manufacturing facilities. This award-winning technology will be critical to helping Chrysler round out its product line and give the company a strategic advantage in many markets around the world. Work is already underway to develop new environmentally friendly, fuel-efficient, high-quality vehicles, including Chrysler's electric-vehicle program. In the meantime, we will begin working together to find the most effective ways to combine our R&D and distribution networks so that we can begin to reap the many benefits this alliance will provide.
On the leadership side, we are very fortunate that Bob Kidder has agreed to serve as our board chairman. Bob is an experienced executive with a great track record of helping grow companies, and I'm looking forward to working with him. Several other Board seats will be filled in the coming weeks. We will keep you updated as appropriate.
As you know, Chrysler is now majority owned by the Voluntary Employee Beneficiary Association (VEBA). Fiat will initially hold a 20 percent ownership stake in Chrysler, with the ability to increase its ownership stake an additional 15 percent over time by delivering on its commitments to the company. The U.S. and Canadian governments own the rest.
Combined, Chrysler and Fiat today rank as the world's sixth largest automaker, giving us the scale to compete and win in nearly every market in the world. But while this scale is critical, events have proven that only size managed well will be effective. I ask each one of you to take on a leadership role and work with me to restore Chrysler to being a fully competitive and profitable company once again. Numbers are important in assessing performance, but more important in my mind is how we lead people and lead change..
Five years ago, I stepped into a very similar situation at Fiat. It was perceived by many as a failing, lethargic automaker that produced low-quality cars and was stymied by endless bureaucracies. But most of the people capable of remaking Fiat had been there all the time. Through hard work and tough choices, we have remade Fiat into a profitable company that produces some of the most popular, reliable and environmentally friendly cars in the world. 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. The people who will lead that charge are for the most part already at Chrysler. We plan to bring that same drive and commitment to innovation to Chrysler as we look to make it one of the driving forces again in our industry.
I am confident that we can get there together.
Thank you again for your commitment to Chrysler. I look forward to meeting and working with all of you in the months and years ahead.
Nardelli congratulates employees on Fiat closing
I am pleased to report that we have closed the alliance agreement between Chrysler Group LLC and Fiat S.p.A. and have emerged from bankruptcy in record time. Chrysler Group now is a leaner, healthier and more robust company ready to compete in the challenging economy as an important player in the global automotive industry. As I announced on April 30, the completion of this alliance agreement is an appropriate time for me to step aside and return to Cerberus Capital Management. But in leaving, I want to share some parting thoughts with you and express my everlasting appreciation for the work you have done, the sacrifices you have made and the support you have shown me during my time as Chairman and CEO of Chrysler LLC.
This is my farewell message to you.
When I joined Chrysler 20 months ago, I was immediately impressed by the deep intellect of Chrysler people, by your dedication and loyalty to the company and by your passion for innovation, design and great products. All of my experiences since then have reinforced those initial impressions.
What I have learned along the way is that Chrysler people also have the resolute heart of a scrappy underdog. This is a company that has been knocked down many times, but never knocked out. The global economic downturn and the credit crisis have severely tested Chrysler's ability to survive. But our employees, retirees, the UAW, CAW, dealers, suppliers, lenders, our owners Cerberus and Daimler, and other stakeholders have rallied together and made the sacrifices necessary to restructure and reposition Chrysler and give it a new lease on life and the opportunity for long-term success. No one should ever doubt the tenacity of the Chrysler spirit and its rich legacy.
During the darkest hour of the American Revolution, Thomas Paine wrote of the "sunshine patriot" who disappears when the going gets tough. I have found there are no sunshine patriots at Chrysler-just men and women who stand tall and persevere, who never lose hope or faith despite adversity and the negativism from this great industry's detractors. You are men and women who believe in the company, in each other and in a better future.
During my 38 years in business, I've never faced a tougher challenge. Even with our early and aggressive restructuring efforts, we could not offset the negative impact of the financial crisis and the severe economic recession. However, because of those efforts, we gained credibility and the support of the U.S. Treasury, which provided funds to assist us through this transitional period. The global automotive industry is fiercely competitive, and international economic forces have left even the largest automakers awash in red ink. At Chrysler, we have had to take significant restructuring actions to adjust to the new market realities. From August of 2007 through May 2008, we saw the impact of the declining SAAR on our current market share result in the loss of 610,000 units of production, or about $14 billion in revenue.
At the same time, we continued to invest in the restructuring of the company, including $7 billion in 2008 alone. We took important steps to improve quality, which resulted in the lowest warranty cost in the company's history and the lowest recall rate in the industry in 2008. These efforts will pay off even more in the years to come. We strengthened our commitment to a customer-focused culture. We maintained our commitment to a strong product pipeline, with 24 new vehicles planned during a period of 48 months. For 2009, 73 percent of our product lineup offers greater fuel economy than last year's models and, going forward, our robust electric-vehicle strategy will help meet national concerns about energy security and climate change.
The newly signed alliance with Fiat is a direct result of our strategy to pursue partnerships to drive growth. Chrysler and Fiat will be an excellent fit in terms of product, geographical strengths and culture. Using Fiat's distribution system, Chrysler will be able to substantially increase the global reach for the Chrysler, Dodge and iconic Jeep® brands in markets outside of North America. Fiat will bring vitally important small platforms and advanced powertrain technology, broadening our portfolio of offerings and providing customers with exciting fuel-efficient products that they will want to buy. This alliance also will significantly enhance our ability to compete and comply with the new CAFE standards.
I want to express my deep gratitude to my staff at Chrysler as well as to our owners at Cerberus and Daimler, who provided steady and unstinting support throughout our efforts to revitalize the company and enable it to survive. I'd also like to thank President Obama's administration, the U.S. Treasury Department, the President's Automotive Task Force, the Canadian government and the province of Ontario, as well as our partners at the UAW and the CAW, for their continuing support in helping us complete this alliance. Their efforts will help to protect the livelihoods of many thousands of people in the Chrysler work force and the many others who depend upon those workers.
With the appointment of a new board of directors and the selection of Bob Kidder as Chairman and Sergio Marchionne as CEO, I am confident that Chrysler will continue to build on its proud 85-year heritage and remain an integral part of American life for many years to come. The road ahead will always have hurdles, but I strongly believe that Chrysler will meet every challenge and will build a bright future as part of a vibrant new company.
It has been my privilege to share in the rich Chrysler legacy and to serve as your Chairman and CEO. I've never been involved with a more talented, passionate and committed group of men and women. The dedication you have shown to your company and to each another has been truly remarkable.
I also want to express my deep appreciation to the entire Detroit-area community for welcoming and accepting me during my time with Chrysler. In my many years in business, I have worked in 14 different cities. Detroit and the auto industry have done so much to shape our country's history, and I feel tremendously proud to have been a part of this dynamic community and a company so committed to its revitalization.
I thank you from my heart, and I hope that the coming years bring good fortune and prosperity to each of you, your families and to everyone associated with the great Chrysler team.