Chrysler-Fiat merger a done deal

ERJ staff report (TB)

Auburn Hills, Michigan - Chrysler LLC and Fiat Group have finalised their global strategic alliance, forming a “new” Chrysler that will hit the ground running with the “resources, technology and worldwide distribution network required to compete effectively on a global scale.”

The name of the new company, which will be based in Auburn Hills and will begin operations immediately, is Chrysler Group LLC. As part of the alliance, Turin, Italy-based Fiat will contribute to Chrysler its world-class technology, platforms and powertrains for small- and medium-sized cars, allowing the company to offer an expanded product line including environmentally friendly vehicles. Chrysler said in a press statement that it also will benefit from Fiat's management expertise in business turnaround and access to Fiat's international distribution network with particular focus on Latin America and Russia.

“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,” said Sergio Marchionne, currently the ceo of Fiat SpA who has been named ceo of Chrysler Group. “From the very beginning, we have been adamant that this alliance must be a constructive and important step towards solving the problems impacting our industry. We now look forward to establishing a new paradigm for how automotive companies can operate profitably going forward.”

Mr. Marchionne said the two car companies “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. 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.

“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 auto makers.”

With Chrysler struggling to emerge from bankruptcy, having to close a number of its dealerships, and legal hurdles thrown in the way of the merger, Mr. Marchionne acknowledged this has been “a difficult process for everyone involved, but we are ready to prove to the American consumer that Chrysler can once again be a strong, competitive company that produces a full portfolio of reliable vehicles that capture the imagination and inspire loyalty.”

Under the terms approved by the US Bankruptcy Court in New York and various regulatory and antitrust regulators, the company formerly known as Chrysler L.L.C. today formally sold substantially all of its assets, without certain debts and liabilities, to the new Chrysler Group.

Chrysler Group, in turn, issued to a subsidiary of Fiat a 20-percent equity interest on a fully diluted basis in the new company. Fiat also has entered into a series of agreements necessary to transfer certain technology, platforms and powertrains to the new Chrysler. Fiat's equity interest will increase in increments by up to a total of 35 percent in the event that certain milestones mandated by the agreement are achieved, but Fiat cannot obtain a majority stake in Chrysler until all taxpayer funds are repaid.

Similarly, Chrysler said the United Auto Workers' Retiree Medical Benefits Trust-a voluntary employees' beneficiary association trust (VEBA)-has been issued an equity interest in Chrysler Group equal to 55 percent on a fully diluted basis. The US Treasury and the Canadian Government have been issued an equity interest equal to 8 percent and 2 percent on a fully diluted basis, respectively.

These interests reflect the anticipated share dilution as a result of Fiat's incremental equity assumption once the milestones outlined in the strategic alliance agreement are achieved, the company said.

In addition to Mr. Marchionne's position with the new Chrysler, the company will be managed by a nine-member board consisting of three directors to be appointed by Fiat, four directors to be appointed by the US government, one director to be appointed by the Canadian government and one director to be appointed by the United Auto Workers' Retiree Medical Benefits Trust.

Chrysler said the board is expected to name C. Robert Kidder as chairman, and the process of determining additional board members is continuing.

As previously announced, Chrysler has entered into an agreement with GMAC Financial Services to provide automotive financing products and services to the company's North American (NAFTA) dealers and customers. GMAC Financial Services will be the preferred lender in North America for Chrysler, Jeep and Dodge dealer and consumer business, including wholesale of new and used vehicles as well as retail.

This is an external link and should open in a new window. If the window does not appear, please check your pop-up blocking software. ERJ is not responsible for the content of external sites.

Chrysler-Fiat merger a done deal from Tire Business (a Crain publication)