Chrysler bankrupt – Fiat merger going ahead

Chrysler bankrupt – Fiat merger going ahead

Fiat logo

Chrysler is officially bankrupt but there is still hope for the flailing automaker. Chrysler’s bankruptcy process is being pushed forward quickly to eliminate the remaining obstacles between Chrysler’s and Fiat’s planned merger. American President Obama’s made a speech yesterday reflecting this path, confirming both that bankruptcy is the only way forward, and that his task force finds a joined Fiat-Chrysler alliance to be viable.

“Over the past month, seemingly insurmountable obstacles have been overcome,” the President said during his speech. “Chrysler and Fiat have formed a partnership that has a strong chance of success.”

The combination of Fiat’s alliance and a speedy bankruptcy means that sales won’t be interrupted. Warranty service will continue now with a guarantee by the U.S. government. The Treasury will also be lending Chrysler an additional $7.5 billion to help it negotiate the waters of bankruptcy.

Between $3-$3.5 billion will come in the form of ‘debtor-in-possesion’ (DIP) financing, and another $4.5 billion will come as ‘exit financing’ to enable Chrysler to continue operation post-bankruptcy. Fiat will only be able to take control of Chrysler after the $7.5-$8 billion in loans have been repaid.

The Fiat-Chrysler alliance could be worth more than $10 billion for the struggling Detroit company and could potentially save more than 5,000 North American manufacturing jobs.

“This partnership transforms Chrysler into a vibrant new company with a wealth of strategic advantages,” said Chrysler boss Bob Nardelli. “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.”

Fiat will initially hold a 20% ownership stake in Chrysler. Fiat will have the right to increase its ownership stake an additional 15% in three increments as it meets the following criteria: 5% for bringing a 40mpg vehicle platform to Chrysler to be domestically produced 5% for providing a fuel-efficient engine family to be made in the U.S. for use in Chrysler vehicles; and 5% for providing Chrysler access to its vast global distribution network to facilitate the export of Chrysler vehicles.

“To be sure, there will be many changes as we move forward to implement our plans,” said Nardelli. “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.”

Fiat logo

Chrysler is officially bankrupt but there is still hope for the flailing automaker. Chrysler’s bankruptcy process is being pushed forward quickly to eliminate the remaining obstacles between Chrysler’s and Fiat’s planned merger. American President Obama’s made a speech yesterday reflecting this path, confirming both that bankruptcy is the only way forward, and that his task force finds a joined Fiat-Chrysler alliance to be viable.

“Over the past month, seemingly insurmountable obstacles have been overcome,” the President said during his speech. “Chrysler and Fiat have formed a partnership that has a strong chance of success.”

The combination of Fiat’s alliance and a speedy bankruptcy means that sales won’t be interrupted. Warranty service will continue now with a guarantee by the U.S. government. The Treasury will also be lending Chrysler an additional $7.5 billion to help it negotiate the waters of bankruptcy.

Between $3-$3.5 billion will come in the form of ‘debtor-in-possesion’ (DIP) financing, and another $4.5 billion will come as ‘exit financing’ to enable Chrysler to continue operation post-bankruptcy. Fiat will only be able to take control of Chrysler after the $7.5-$8 billion in loans have been repaid.

The Fiat-Chrysler alliance could be worth more than $10 billion for the struggling Detroit company and could potentially save more than 5,000 North American manufacturing jobs.

“This partnership transforms Chrysler into a vibrant new company with a wealth of strategic advantages,” said Chrysler boss Bob Nardelli. “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.”

Fiat will initially hold a 20% ownership stake in Chrysler. Fiat will have the right to increase its ownership stake an additional 15% in three increments as it meets the following criteria: 5% for bringing a 40mpg vehicle platform to Chrysler to be domestically produced 5% for providing a fuel-efficient engine family to be made in the U.S. for use in Chrysler vehicles; and 5% for providing Chrysler access to its vast global distribution network to facilitate the export of Chrysler vehicles.

“To be sure, there will be many changes as we move forward to implement our plans,” said Nardelli. “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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