Chrysler, Fiat create new world auto giant
The move completes a quick restructuring of the number three US automaker in a plan orchestrated and backed financially by the US and Canadian governments.Milan -- Chrysler and Fiat on Wednesday created a new global auto giant after the US Supreme Court cleared the way for their alliance in a milestone for the world auto industry.
"Chrysler Group LLC and Fiat Group announced today that they have finalised their previously announced global strategic alliance.... The new Chrysler will begin operations immediately," the two companies said in a statement.
"This is a very significant day, not only for Chrysler and its dedicated employees... but for the global automotive industry as a whole," Fiat chief Sergio Marchionne, named head of Chrysler on Wednesday, said in the statement.
The move completes a quick restructuring of the number three US automaker in a plan orchestrated and backed financially by the US and Canadian governments after the world economic crisis sped up a decline in the US auto industry.
The US Supreme Court on Tuesday lifted the last legal obstacles to the deal despite opposition from disgruntled investors, affirming the plan approved by a US bankruptcy judge following Chrysler's April 30 bankruptcy filing.
Fiat will hold an initial 20 percent of Chrysler Group, with its equity stake rising up to 35 percent and eventually to a majority stake as long as targets mandated by the deal are achieved and taxpayer funds are repaid.
"We intend to build on Chrysler's culture of innovation and Fiat's complementary technology and expertise to expand Chrysler's product portfolio both in North America and overseas," Marchionne said.
"Those Chrysler operations assumed by the new company that were idled during this process will soon be back up and running, and work is already underway on developing new environmentally friendly, fuel-efficient, high-quality vehicles that we intend to become Chrysler's hallmark going forward."
US President Barack Obama's administration, which had extended emergency loans to Chrysler offered by the administration of his predecessor George W. Bush, insisted on the alliance as a way to keeping Chrysler viable.
Obama's auto task force argued that Chrysler was shedding 100 million dollars (71 million euros) a day and had rapidly lost market share since its separation from Germany's Daimler and could therefore not survive on its own.
Fiat, which has not provided any cash for the alliance, will bring new technology to help Chrysler develop more fuel-efficient vehicles needed in the US and other markets and use Chrysler's sales network in exchange.
The new Chrysler will be managed by a nine-member board, with three directors to be appointed by Fiat, four by the US government, one by Canada and one by the United Auto Workers' Retiree Medical Benefits Trust.
Robert Kidder, a veteran of US industry, is expected to be named chairman.
The Supreme Court on Tuesday refused to extend a stay on the plan to weigh complaints from Chrysler investors who argued they would be short-changed and have their rights trampled by the Fiat deal.
In a two-page order, the court said the disgruntled investors -- a group of Indiana pension funds -- failed to show "that the circumstances justify" the stay placed on a lower court's approval of the deal.
The case was watched closely as a possible precedent for bankruptcy proceedings against General Motors, which the US government has also bailed out and ushered toward bankruptcy to allow a quick restructuring.
The new Chrysler will initially be majority-owned by the United Auto Workers (UAW) union, with small stakes held by the US and Canadian governments, which would contribute some 10.5 billion dollars to the venture.
Chrysler's dealership network will be cut by a quarter to 2,400 under the plan approved Tuesday allowing for the immediate elimination of 789 dealers.