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New Day, New Chrysler

By KBB.com Editors on June 11, 2009 2:45 PM
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With the final legal hurdles to resolving its Chapter 11 bankruptcy now successfully overcome, Chrysler LLC and the Fiat Group S.p.A. have officially formed a new entity that will immediately begin operations under the Chrysler Group LLC banner. In creating this "global strategic alliance," Fiat purchased virtually all of the existing Chrysler LLC's assets and received a 20 percent equity position in return for agreeing to share its technology, platforms and powertrains for small and medium-size vehicles. It also will provide ancillary assistance in managing the turnaround process. While the master plan calls for a full spectrum of unique products to be designed specifically for U.S. consumers, it also envisions focusing on quality, fuel-efficiency and innovation in ways that will expand the market penetration of the Chrysler Group abroad as well as in America. The first tangible result we're likely to see is a U.S.-spec version of the diminutive Fiat 500, which will retain its original badging but be sold through select Chrysler Group dealers at some point within the next 18 months.

Under terms of this historic agreement, the United Auto Worker's Retiree Medical Benefits Trust will initially hold nearly 68 percent of the outstanding stock with the U.S. government owning just below 10 percent and the Canadian government roughly 2.5 percent. As certain financial stipulations are met, Fiat could see its position in the new company grow to 35 percent, but it would not be permitted to become the majority shareholder until all of the government loans -- including the $2 billion used to help finance the sale -- were fully repaid.

As expected, Fiat boss Sergio Marchionne was immediately named CEO of the reconstituted Chrysler Group. In addition to confirming that former President Jim Press will now serve as his deputy CEO and special advisor to assist in the transition process, Marchionne also appointed individual CEOs for each of the firm's Chrysler, Dodge and Jeep vehicle brands as well as for its Mopar Service and Parts operation.

While fully recognizing the challenges ahead, Marchionne nonetheless characterized the Fiat-Chrysler match as one loaded with long-run potential. "The same attributes that first attracted us to this alliance -- a global automotive company with first-class technology, a devoted workforce, improved efficiency, a strong, global distribution network and an unyielding passion for building great cars that consumers want -- are even more true today. While it does not solve every issue faced by the automotive industry today, this alliance, established with the full support of President Obama's Administration, is a very significant step toward positioning Fiat and Chrysler to be leaders among the next breed of global automakers."

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