Fiat's Chrysler deal finally gets motoring
Thursday 11 June 2009
Fiat's takeover of Chrysler finally went ahead yesterday after the US Supreme Court dismissed an appeal from angry creditors opposed to the deal.
The Italian car maker, under chief executive Sergio Marchionne, will hold 20 per cent of the new company in return for a transfer of technology, with the stake expanding to 35 per cent if targets are met. The United Auto Workers union is to hold 55 per cent of the group, the US government 8 per cent and the Canadian government 2 per cent.
The beleaguered US behemoth – propped up by $15.5bn (£9.5bn) in Treasury loans between January and May – entered Chapter 11 bankruptcy protection in April. Mr Marchionne hopes that the tie-up will give the new, combined company sufficient scale to compete in the increasingly hostile global car industry. But progress looked rocky when three Indiana pension funds holding about $42m of Chrysler's $6.9bn debt appealed to the courts on the ground that the scheme rewarded unsecured creditors ahead of secured lenders. But in line with the US President's desire for a quick turnaround for Chrysler the appeal was denied, and the deal – lubricated with $2bn of government finance – was completed.
Mr Marchionne said: "This is a very significant day, not only for Chrysler and its dedicated employees, who have persevered through a great deal of uncertainty during the past year, but for the global automotive industry as a whole."
Chrysler's sales have plummeted by 46 per cent this year, after last year's 30 per cent drop pushed it to a $16.8bn loss, and the company was losing $100m a day, according to court documents. With the Fiat deal done, factories closed during the bankruptcy process will re-start, and a new management team will be put in place.
Mr 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 under way on developing new, environmentally friendly, fuel-efficient, high-quality vehicles that we intend to become Chrysler's hallmark going forward."
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