Chrysler, Fiat finalize alliance; new Chrysler launches operations

By Caroline Salls

Pittsburgh, June 10 - Chrysler Group LLC and Fiat Group have finalized their global strategic alliance, forming a new Chrysler that will begin operations immediately, according to a news release.

As part of the alliance, Fiat said it will contribute its technology, platforms and powertrains for small- and medium-sized cars to Chrysler, allowing the company to offer an expanded product line including environmentally friendly vehicles.

According to the release, Chrysler will also 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," Chrysler Group's newly named chief executive officer, Sergio Marchionne, said in the release.

"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.

"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.

"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."

Sale terms

Under the terms approved by the U.S. Bankruptcy Court for the Southern District of New York and various regulators, the company formerly known as Chrysler LLC today formally sold substantially all of its assets to a new company that will operate as Chrysler Group LLC.

Chrysler Group, in turn, issued a 20% equity interest in the new company to a subsidiary of Fiat. Fiat's equity interest will increase in increments by up to a total of 35% if milestones mandated by the agreement are achieved.

However, Fiat said it cannot obtain a majority interest in Chrysler until all taxpayer funds are repaid.

Fiat said it has also entered into a series of agreements necessary to transfer technology, platforms and powertrains to the new Chrysler.

In addition, the United Auto Workers' Retiree Medical Benefits Trust, a voluntary employees' beneficiary association trust (VEBA), has been issued a 55% equity interest in Chrysler Group, and the U.S. Treasury and the Canadian government have been issued an equity interest equal to 8% and 2%, respectively.

New board

The new Chrysler will be managed by a nine-member board of directors, in addition to Marchionne, consisting of three directors to be appointed by Fiat, four directors to be appointed by the U.S. 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.

The board is expected to name C. Robert Kidder as chairman, according to the release.

Marchionne is the CEO of Fiat SpA.

As previously reported, Chrysler has entered into an agreement with GMAC Financial Services to provide automotive financing products and services to the company's North American dealers and customers.

The companies said GMAC Financial Services will be the preferred lender in North America for Chrysler, Jeep and Dodge dealer and consumer business.

Chrysler, an Auburn Hills, Mich.-based automotive company, filed for bankruptcy on April 30. Its Chapter 11 case number is 09-50002.

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