Chrysler-Fiat Alliance Imminent
by KBB.com Editors | April 30, 2009 9:15 AM
Chrysler, the manufacturer of Chrysler, Jeep and Dodge brand vehicles, has sought the protection of bankruptcy court as it moves to cut costs and make its operations more efficient. At the same time it filed for bankruptcy protection in the New York courts, Chrysler also announced an agreement in principle to establish a global strategic alliance with Italian-based carmaker Fiat SpA to form a "vibrant new company." According to Chrysler, the deal with Fiat, which is now subject to the approval of the bankruptcy court, "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." The federal government brokered the Chrysler-Fiat alliance and the bankruptcy filing, and it is expected to take continuing steps, including additional cash infusions, to help guarantee the continuing viability of the auto manufacturer. If the pre-bankruptcy deal survives bankruptcy court scrutiny, the United Auto Workers union will emerge with the largest ownership share in Chrysler, while Fiat will eventually have a 35-percent stake. For consumers who were shying away from Chrysler, Jeep or Dodge vehicles because of the threat that their manufacturer might go out of business, the news should be reassuring. While some commonly believe that "bankruptcy" means a company is one step from ceasing to exist, in this instance it is clear that Chrysler will continue to manufacture vehicles and Chrysler, Dodge and Jeep dealers will continue to operate. Backed, if necessary, by the continued financial support of the U.S. government, Chrysler said it "will seamlessly honor warranty claims, pay suppliers and keep our dealer body operating to continue to serve our valued customers."