Officially Official: Chrysler exiting bankruptcy, Fiat steps in and makes changes immediately
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]
PRESS RELEASES:
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.
Sincerely,
Sergio Marchionne
Nardelli congratulates employees on Fiat closing
Dear Employees,
Congratulations!
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.
Sincerely,
Bob
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Reader Comments (Page 1 of 2)
zamafir 1:35PM (6/10/2009)
wow, that was fast, i wish bush had just let GM go bankrupt so we'd be on the path to recovery for the last couple of months.
Reply
Mr.Oak 2:07PM (6/10/2009)
WTF? Recovery? try adding 1 or 2 million to the ranks of the unemployed, more foreclosures, more personal bankruptcies etc. What an idiotic statement.
ronEbear 2:37PM (6/10/2009)
Recovery of the auto sector dickface.
ij70 2:39PM (6/10/2009)
Bush did by not bailing out GM.
TARP is different story.
zamafir 2:44PM (6/10/2009)
Mr. Oak, I'm a little confused. GM's going ch11 now. Bush knew they'd need to and deliberately handed the potato to the next administration (right or wrong). So, faced with reality, you have two choices, ch11 back then, or ch11 now. Had they gone into ch 11 back then, focusing on the recovery, they'd be further along now then they currently are. Care to elaborate on the idiocy of restating the obvious?
*grabs popcorn*
your reply should be entertaining to say the least, if not as hypocritical as the one I’m replying to.
Chet 2:56PM (6/10/2009)
It is an idiotic statement because if the gov didn't support GM in December, GM wouldn't have gone into CH11 - it would have gone to CH7. Same with Chrysler. A GM and Chrysler CH7 would have also dragged down many suppliers, as well as Ford. Possibly also done massive damage to Asian and Euro automakers as well.
The continued help for the last 6 months has allowed GM and Chrysler to prepare for Bankruptcy. It has also allowed other companies to make contingency plans for when the two automakers entered bankruptcy.
Cougs 4:15PM (6/10/2009)
Why Ch. 7? Who said that? Ch.11 is able to be entered into assuming that you can continue to pay your bills, which is exactly what would have happened since GM has enough clout to continue to sell cars. The concern would be that if they went into bankruptcy in a Ch 11 filing, they would lose too many customers and not be able to meet creditors demands and then be forced to file for Ch 7.
So the only thing that changed (because the outcomes of either a self imposed or gov't imposed bankruptcy have been the same) is that there might be some people who are willing to support GM during the tough times because they have the Federal Government on their side...of course, there are others who won't purchase for the same reason and you are back at square one. Except in the former case, no government (read: our) money would have been spent.
Cougs 4:22PM (6/10/2009)
Not to mention the fact that the loss of those jobs, painful as they may be, are necessary in the natural contraction process of a recession. Recessions clear up overcrowding of work forces, over-inflation of prices, and slow unchecked growth. If anything, you can blame the government for making it worse through the following:
1) Foolish policies that led to excessive profit seeking behaviors of businesses in heavily regulated industries.
2) Interventionism during the onset of the recession to attempt to stop something that is a natural part of business, thereby creating unnecessary externalities like government growth, future inflation, a decrease in the credit standing of the U.S, and depression of normal market forces that would have already adapted to the current situation and brought us out of the trough.
3) Expansion into the private sector, forcing investors away from companies rather than to them.
Ray 4:22PM (6/10/2009)
@Chet,
So what's the banks excuse?
Mr.Oak 4:36PM (6/10/2009)
Zamfair: I think that GWB (though not intentionally) did the right thing. I'll put up $100 to $1 that if had touched it he would have handed it off to one of that hacks that he palled around with (Brownie) and they would have EFFed it up royally.
That was my point. The company would not have had a "quick-rinse" bankruptcy, they would have languished in the courts for years. That would have spelled certain doom for both GM & Chrysler.
So, atta-boy George you actually did the right think.
Chet 5:00PM (6/10/2009)
@Cougs
If the gov didn't provide assistance, they would have gone to liquidation. Who would have given financing to GM for restructuring? Nobody!
Assuming the government would have paid for that in December, as you have done, we still have problems. There was ZERO planning for a GM bankruptcy in December, by GM or anyone else. We wouldn't have what is almost a pre-packaged bankruptcy. GM would be like Delphi... in Bankruptcy for years.
The big difference continues to be that the delay allowed all parties involved to prepare.
To be clear, I'm not defending the government's decision, I'm just explaining why this was done and why there is a difference between bankruptcy 6 months ago vs. now.
@ Ray:
Huh? What does this have to do with this topic?
jsjs 3:43AM (6/12/2009)
Bush didn't want GM to go into bankruptcy on his "watch" so he punted the responsibility to Obama (what great leadership).
And Bush/Treasury Secretary Paulson set up the plan to pump $13.4 Billion into GM and Chrysler to keep them continuing as going concerns (w/o the funds, GM and Chrysler would have gone into Ch.7 since they didn't have the cash on hand to pay their bills and couldn't get any more lines of credit).
Redeemed 1:40PM (6/10/2009)
"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."
You forgot to add "the bondholders get the shaft, and bankruptcy laws regarding payment to secured debt holders get thrown out the window".
Reply
FousString85 1:50PM (6/10/2009)
No, Frank didn't forget. So many people have just said it OVER and OVER so many times that he felt it didn't need repeating...again
I guess you didn't see it that way.
Redeemed 4:55PM (6/10/2009)
So when something is wrong, the laws are being broke, and you have cronyism at it's worst with Obama carving off the largest piece of the company to his UAW supporters we are just supposed to shut up and go away?
It's attitudes like yours that put people like Stalin and Hitler into power.
artso06 1:50PM (6/10/2009)
Here we go.........
Im pullin for them. But there def are some crucial steps to get these companies movin. Better cars is the start but also the American companies need to focus on there dealer public relations. Make the show rooms places i wanna go. Give the impression to the people that you've changed. Don't let old hole in the walls be acceptable to sell your product, and make it a user experience cuz that is all the public sees......for better or for worse
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viper GTS-R 1:58PM (6/10/2009)
yup here we go, the long awaited fail I've been dying to see. Would someone please tell me what good is Fiat for in the US? So far from what I've heard people only want the little 500, which will be exciting at first and get dumped with terrible slow sales like the Smart a few months after. Is Fiat gonna offer the 789 or whatever Chrysler, Dodge and Jeep dealers that are closing, franchises? I never liked the idea of it, yes it saved jobs of the plant workers and such, but it all smells fishy to me.
--RS
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Jared 2:01PM (6/10/2009)
In its defense, the Fiat 500 is actually a good little car. The Smart car is simply little, with nothing good about it.
That said, it will be at least 18 months before we see a Chrysler/Fiat 500 here in the US, and Chrysler dealers need something to sell between now and then. While I hope Chrysler will succeed, I am skeptical.
viper GTS-R 2:08PM (6/10/2009)
Oh I totally agree, but still what about the rest of Fiat? No one's get all hot and bothered over a Fiat Panda. The 500 is the only car that seems to get a huge amount of praise from our countries population! We are not at all crazy about small cars and if we are it's a very select few and most are performance related, Lotus, Miata, Mini, etc...
--RS
Dave 2:25PM (6/10/2009)
"Oh I totally agree, but still what about the rest of Fiat? No one's get all hot and bothered over a Fiat Panda."
No one gets hot and bothered over a Honda Fit or Toyota Yaris or Ford Focus either.
But Chysler definitely NEEDS an entry level model. And the Panda was the European Car of the Year a few years back.
It takes years to change brand perception. It starts with cheap cars that run forever, then brand loyal buyers move up. So lets hope Chrysler can build a reliable federalized Panda. Cuz the Caliber ain't cutting it.
Chrysler makes some good trucks, SUVs, and large cars. Merging with a company that specializes in small and midsize cars makes sense.