Chrysler files for bankruptcy, Fiat Group SpA to run company
Friday, May 1, 2009
The American auto company Chrysler filed for bankruptcy Thursday, however a deal with European auto maker Fiat went through. The emerging Chrysler will be owned 55 percent by the United Auto Workers, eight percent by the United States Government, two percent by the Canadian Government and Fiat would begin with a 20 percent share.
Chrysler Chief Executive Robert Nardelli will step down when the bankruptcy proceedings are finalized.
Initially, the Italian company, Fiat, will appoint three members on the emerging Chrysler’s new board, and the United States government will appoint six. Fiat can assume the majority of the ownership upon repayment of American loans.
Chrysler administrators expect that the bankruptcy should take a couple of months.
“We expect this to be a very short, 30-to-60-day bankruptcy process, during which the company will function normally,” a top administration official said, “People will be able to buy cars, they will have their warranties honored, and everything should go on normally.”
The bankruptcy filing indicated that Chrysler was in debt to 20 creditors to a tune of more than $10 million each.
Meanwhile, the deal with Fiat did go through, and Chrysler should have cars designed by Fiat out on the market by 2011.
“It’s a partnership that will give Chrysler a chance not only to survive, but to thrive in a global auto industry,” said American president Obama, “Fiat has demonstrated that it can build the clean, fuel-efficient cars that are the future of the industry.”
However, automotive analyst Erich Merkle has hesitations.
“History would show that alliances really don’t work that well,” Merkle said, “even though, no matter how good they may look on paper.”
The restructuring has been managed by Steve Rattner, a former investment banker, and the U.S. Government auto task force.
Obama has set three ultimatums before Fiat. Fiat should produce a 40 mile per gallon vehicle while managing the new Chrysler, transfer fuel efficient Fiat technology to Chrysler factories in the United States, and produce cars in Chrysler factories and distribute them in Europe.