The long-awaited tie-up between Chrysler LLC and Fiat SpA has been finalized, and now the company must get back to the business of building and selling cars and trucks.
The two sides signed off on a partnership this morning that creates a new automaker to be known as Chrysler Group LLC, allowing the new company to emerge after a 40-day stay in bankruptcy.
It begins operations immediately under new chairman Robert Kidder and Chief Executive Officer Sergio Marchionne, who is also CEO of Fiat. The vice chairman of the former Chrysler, Jim Press, has been appointed Deputy CEO and Special Adviser, reporting to Marchionne and responsible for restructuring the company to create a "new leaner, flatter" organization, Chrysler said.Former Chrysler chairman and CEO Robert Nardelli returns to former employer Cerberus Capital Management LP and sent employees a farewell letter Wednesday.
"I am pleased to report that we have closed the alliance agreement between Chrysler Group LLC and Fiat SpA and have emerged from bankruptcy in record time," Nardelli wrote. "Chrysler Group now is a leaner, healthier and more robust company ready to compete in the challenging economy as an important player in the global automotive industry."
Marchionne in a statement said today was "a very significant day" for Chrysler and its employees, but also "for the global automotive industry as a whole.
"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."
The White House also praised the deal.
"This morning's closing represents a proud moment in Chrysler's storied history. The Chrysler-Fiat alliance has now exited the bankruptcy process and is poised to emerge as a competitive, viable automaker," the White House said in a statement.
The way for the deal was cleared when the U.S. Supreme Court put an end to the appeals of a group of Indiana pensioners late Tuesday.
Chrysler and Fiat wasted no time consummating the deal to get the new company up and running.
The new Chrysler combines the most valuable assets of the bankrupt automaker with small-car and engine technology from Fiat, which is not putting cash into the deal.
Fiat has an initial 20 percent stake in the company, which will grow to 35 percent if Fiat meets three benchmarks. Fiat can buy a majority stake in Chrysler -- only after $6 billion in government exit financing loans are repaid. But Chrysler isn't required to pay back the more than $7 billion that Chrysler received earlier.
Some of the bad Chrysler assets remain under Chapter 11 protection pending liquidation.
"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.
The new CEO said the Chrysler plants, which have been idled since Chrysler filed for bankruptcy April 30, "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."
Most Chrysler plants are expected to resume operations later this month. Chrysler has been burning through $100 million a day while in bankruptcy.Marchionne will bring Fiat management style to Chrysler, and the Italian automaker also offers its international distribution network to sell Chrysler vehicles in Europe, Latin America and Russia.
From the start, the company is being reorganized around the four key brands: Chrysler, Jeep, Dodge and Mopar parts, and each division is accountable for its own profits and losses, with back office functions being put in place to support this new way of doing business. The changes will also affect how the new automaker develops, builds and sells vehicles.
Among the personnel announcements for day one: Michael Manley is appointed president and CEO of the Jeep brand; Michael Accavitti heads up Dodge; Peter Fong will oversee Chrysler; Pietro Gorlier will be the Mopar chief; Joe ChamaSrour will continue to lead Chrysler de Mexico; and Reid Bigland will continue to lead the new company's operations in Canada. Peter Grady is appointed to lead the Network Development & Fleet organization, which means continued oversight over dealers whose ranks were thinned by 789 as of today.
Steven Landry, head of sales, service and marketing, is retiring, as is head of product development Frank Klegon.
Overseeing product engineering will be Scott Kunselman.
The heads of design, manufacturing, quality, suppliers and human relations remain unchanged.
The new company will be governed by a nine-member board including Marchionne and two more Fiat appointees. Four directors will be appointed by the U.S. government; one will come from the Canadian government and one from the United Auto Workers' retiree health trust fund.
U.S. Rep. Sander Levin, D-Royal Oak, said he is pleased the deal is done.
"Now this new company can get about the business of selling cars and stepping up a full alliance of advanced technologies essential to the future of the auto industry," Levin said in a statement. "The completion of the restructuring in just over 40 days while difficult was a much preferable outcome than liquidation of this iconic company, which would have had devastating impact on jobs, our communities, and among the entire auto supply and industrial base of our country."
Chrysler has a history of bailouts, mergers and assorted owners. This latest reincarnation is likely its final chance to succeed.
Nardelli said he thinks it has the wherewithal to do so.
"What I have learned along the way is that Chrysler people also have the resolute heart of a scrappy underdog. This is a company that has been knocked down many times, but never knocked out," the outgoing CEO told employees in his farewell letter.
He also praised the community.
"I also want to express my deep appreciation to the entire Detroit-area community for welcoming and accepting me during my time with Chrysler. In my many years in business, I have worked in 14 different cities," he said. "Detroit and the auto industry have done so much to shape our country's history, and I feel tremendously proud to have been a part of this dynamic community and a company so committed to its revitalization."
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