Post Tagged with: "Sergio Marchionne"

New Chrysler Takes Shape As Fiat Alliance Formalized; New CEO Marchionne starts to spin his magic immediately

June 10, 2009 at 5:09 pm

(Source: Dow Jones via Wall Street Journal & LeftLane News.com, WTOP)

Italy’s Fiat is the new owner of most of Chrysler’s assets, closing a deal Wednesday that saves the troubled U.S. automaker from liquidation and places a new company in the hands of Fiat’s CEO.  The deal creates a leaner company known as Chrysler Group LLC, which is not in bankruptcy protection and is free of billions in debt, 789 underperforming dealerships and burdensome labor costs that hobbled the old Chrysler LLC.   The future of Chrysler Group LLC began to take shape Wednesday as its new leadership announced sweeping management and organizational changes.

The announcements came as Chrysler merged its assets with Fiat SpA (FIATY), following a six-week bankruptcy process for the U.S. auto maker. The last hurdle to the sale of Chrysler assets to Fiat was cleared late Tuesday when the U.S. Supreme Court rejected creditors’ objections to the deal.

The completion of the Chrysler deal bolsters President Barack Obama’s administration, which guided Chrysler through bankruptcy and hopes that a concurrent restructuring at General Motors Corp. (GM), which filed for Chapter 11 on June 1, will also be completed quickly.

Chrysler confirmed that its new Chief Executive is Sergio Marchionne, who also serves as Fiat’s CEO. Marchionne replaces Robert Nardelli, who served as Chrysler’s chief for the past 20 months. As reported, Robert Kidder, the lead independent director at Morgan Stanley, will become chairman of Chrysler’s new board of directors. Current Vice Chairman Jim Press will be appointed deputy CEO and special advisor, the company said.

Marchionne said in a letter to Chrysler employees that the company will be more focused and nimble, benefiting significantly from its global alliance with the Italian auto maker.   The new Chrysler Group LLC noted that it would soon reopen Chrysler factories that were idled during the bankruptcy process, costing the automaker $100 million per day.

Under the old Chrysler, the automaker’s three brands – Chrysler, Dodge and Jeep – were all vertically integrated. However, Fiat has now separate all parts of Chrysler—including its Mopar parts division – with executives heading up each division. The new setup largely mirrors Fiat’s management style with its Fiat, Alfa Romeoand Lancia brands.

“The new company moves forward with significant strategic advantages, including a healthy balance sheet, a competitive cost structure, a leaner and more efficient dealer network, sound supplier agreements and significantly improved product quality and operational efficiency,” he said in the letter.

Chrysler, the smallest of the three U.S. auto makers, sought emergency government aid and was forced to file for bankruptcy in recent months owing to a steep decline in sales that drained the company’s cash. Chrysler enters this new chapter of its storied history at a time when the outlook for the auto industry remains bleak, amid continued economic weakness and tight credit conditions. Jim Press – Chrysler’s former co-president – might have been questioning his decision to move from Toyota to Chrysler in 2007 in recent weeks, but the automotive exec’s career is safe as Fiat CEO Sergio Marchionne has named Press the deputy CEO of the reborn Chrysler.

Michael Manley, Michale Accavitti and Peter Fong, all of whom were previously with Chrysler, will run Jeep, Dodge and Chrysler, respectively. Pietro Gorlier, who joins Chrysler from Fiat, will head Mopar.

Chrysler’s swift passage through about six weeks of bankruptcy proceedings was helped by the involvement of the Obama administration’s auto task force, which provided billions in financing and helped negotiate a deal with the company’s stakeholders.

As part of the reorganization plan, the new Chrysler will be 20% owned by Fiat, while more than 55% will be controlled by the United Auto Workers union. Fiat’s stake could increase to 35% if the new company meets benchmarks intended to insure the development of fuel-efficient vehicles in the U.S., and it has the option to become the majority stakeholder once U.S. loans have been repaid. The U.S. and Canadian governments also have minority stakes.

The sale to Fiat SpA marks a victory for the Obama administration, which shepherded Chrysler LLC into Chapter 11 protection on April 30 with the hope that the company would emerge in a matter of months with a new partner.

“This morning’s closing represents a proud moment in Chrysler’s storied history,” said the Treasury Department in a written statement. “The Chrysler-Fiat Alliance has now exited the bankruptcy process and is poised to emerge as a competitive, viable automaker.”

The government will loan the new company $4.7 billion, to be repaid within eight years along with interest and $288 million in fees.

The Treasury had given Chrysler LLC $3.3 billion in debtor-in-possession financing to support the company throughout the bankruptcy process. Chrysler LLC remains in bankruptcy court, as it winds down operations, selling plants it doesn’t want, dispersing payments to debtholders and settling any other claims that were not transferred to the new company. Those actions could linger until next year, if not longer.

As part of the alliance, Fiat will contribute to Chrysler technology, platforms and powertrains for small- and medium-sized cars.
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Supreme Court clears the way for Chrysler-Fiat deal

June 9, 2009 at 8:45 pm

(Source:  AP via Yahoo)

The Supreme Court on Tuesday cleared the way for Chrysler LLC’s sale to Fiat, turning down a last-ditch appeal by opponents that included consumer groups and three Indiana pension plans.

The court rejected a plea to block the sale of most of Chrysler’s assets to the Italian automaker. Chrysler, Fiat and the Obama administration had warned that the high court’s intervention could have scuttled the sale.

A federal appeals court in New York had earlier approved the sale, but gave opponents until Monday afternoon to try to get the Supreme Court to intervene.

Justice Ruth Bader Ginsburg ordered a temporary delay just before a 4 p.m. deadline on Monday. A little more than 24 hours later, the court freed the automakers to complete their deal.

The opponents include a trio of Indiana pension plans, consumer groups and individuals with product-related lawsuits.

The court issued a brief, unsigned opinion explaining its action. To obtain a delay, or stay, someone must show that at least four of the nine justices find that the issue raised is serious enough to warrant hearing a full appeal and that a majority of the court will conclude the lower court decision was wrong.

“The applicants have not carried that burden,” the court said.

Indiana Treasurer Richard Mourdock expressed disappointment with the decision and said options seem limited for opponents of the sale. “Obviously the supreme court of the land is the supreme court of the land,” Mourdock said. “The United States government has, I continue to believe, acted egregiously by taking away the traditional rights held by secured creditors.”

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Fiat pulls out of Opel talks with German government over funding

May 29, 2009 at 1:01 pm

(Source: Times Online, UK)

Fiat has pulled out of talks with the German Government about Opel, blaming “unreasonable” funding demands, but emphasised that it was not withdrawing its bid for General Motors’ European unit, which owns Opel and Vauxhall.

Sergio Marchionne, Fiat’s chief executive, said that Germany had asked his car group to provide emergency funds for Opel, which would expose it to “extravagant risks”.

Mr Marchionne said “The last round of requests which would require Fiat, among other things, to fund Opel on an emergency basis while the German Government determines the exact timing and conditions of interim financing, would expose Fiat to unnecessary and unwarranted risks.”

Mr Marchionne said that he had not been granted full access to Opel’s financial records and so it was unreasonable to ask Fiat to provide emergency funds. Because today’s meeting will focus specifically on Opel, Fiat would not be attending, he said. However, he said that Fiat remained interested in a potential deal with GM.

“We remain committed to finding ways to bridge the expectations of both General Motors and the German Government, but the emergency nature of the situation cannot put Fiat in a position to take extravagant risks,” he said.

Gareth Thomas, the Trade Minister, will attend the emergency talks in Brussels today. A Commission spokeswoman said: “The aim of the meeting is to exchange information and ensure a level playing field for co-ordination.”

GM is heading for what would be the biggest bankruptcy by an American industrial company after bondholders owning about 20 per cent of its $27.2 billion (£17 billion) unsecured debt agreed to accept a 10 per cent stake in a restructured company and warrants to buy a further 15 per cent in return for forgiving its debt.

A news report from Reuters indicates that top ministers from the German government will meet in Berlin to discuss the future of the Opel unit of General Motors (GM.N) on Friday but no U.S. government officials or representatives from GM will join in, a German government official said on Friday.

Potential bidders Magna and Fiat will not participate in the meeting either, said the official who requested anonymity.

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Chrysler to File for Bankruptcy Following Collapse of Negotiations; President Obama to address the nation

April 30, 2009 at 9:45 am

(Source: Washington Post)

Chrysler, one of the three pillars of the American auto industry, will file for bankruptcy today after last-minute negotiations between the government and the automaker’s creditors broke down last night, an Obama administration official said.

 U.S. officials had offered Chrysler’s secured lenders $2.25 billion in cash if they would agree to writedown the $6.9 in secured debt that the company owed. But a small group of hedge funds refused the 11th-hour deal, forcing an imminent bankruptcy.

An administration official this morning expressed disappointment, saying the holdouts had failed to “do the right thing,” but that “their failure to act in either their own economic interest or the national interest does not diminish the accomplishments made by Chrysler, Fiat and its stakeholders, nor will it impede the new opportunity Chrysler now has to restructure and emerge stronger going forward.”

President Obama is scheduled to address the issue at noon today at the White House.

As talks broke down late last night, it became near certainty that the Obama administration would send Chrysler into bankruptcy under a plan that would replace chief executive Robert L. Nardelli and pump billions of dollars more into the effort, all in hopes that the company could emerge from court proceedings as a re-energized competitor in the global economy.

The U.S. government’s attempt to save the automaker amounts to another extraordinary intervention in the economy and a landmark event in the history of the American auto industry.

Under the administration’s detailed plan for a “surgical bankruptcy,” ownership of Chrysler would be dramatically reorganized, the leadership of Italian automaker Fiat would take over company management and the U.S. and Canadian governments would contribute more than $10 billion in additional funding.

Negotiations between the government and the company’s stakeholders — Chrysler’s lenders, the union and proposed merger partner Fiat — went well into the night, as dealmakers rushed to meet President Obama’s April 30 deadline.

Last night, the United Auto Workers union overwhelmingly ratified the administration proposal to give its retiree health fund the 55 percent equity stake in Chrysler. In exchange, the health fund must give up its claim to much of the $10 billion that Chrysler owes it. Eighty-two percent of production workers and 80 percent of skilled-trades workers voted for the agreement.

While four of Chrysler’s major creditors — J.P. Morgan Chase, Citigroup, Goldman Sachs and Morgan Stanley — have agreed to the Treasury’s plan, other lenders, mainly hedge funds, had held out. The holdouts included Oppenheimer Funds, Perella Weinberg Partners and Stairway Capital, two sources said. The last two have funds that invest in “distressed” companies. It is not known what companies ultimately failed to reach agreement with the government.

The hedge funds likely think they could get a better return in a bankruptcy filing or in a sale of Chrysler’s assets, said Sheldon Stone, a turnaround expert at Amherst Partners. The government offer made yesterday would represent a recovery of about 32 cents on the dollar. A recent Standard & Poor’s analysis said the lenders could recover 30 to 50 cents on the dollar.

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Put a fork in it? Obama planning to announce Chrysler bankruptcy tomorrow

April 29, 2009 at 6:35 pm
According to a report by Bloomberg citing the usual unnamed sources, President Obama will announce tomorrow that Chrysler will file for Chapter 11 bankruptcy while continuing to work on its alliance with Fiat.

Bloomberg‘s source made it clear that the there are still several loose ends and the plan “is not finished yet,” but it will likely involve Chrysler’s strongest assets being bundled and sold to a new entity. In that scenario, Fiat would become a 20% owner of the Auburn Hills-based automaker, the UAW retiree health-care trust would take a 55% percent stake and the government would gobble up the rest. Essentially, it’s the same out-of-court deal initially proposed, but now, with all the benefits (and hurdles) of bankruptcy protection. 

As part of ongoing negotiations, the U.S. Treasury raised its offer to Chrysler’s lenders, offering them $2.25 billion in cash to forgive $6.9 billion in secured debt, two other people familiar with the matter said. The previous offer had been for $2 billion in cash.

One issue remaining is the U.S. government’s effort to combine Chrysler Financial and GMAC LLC, the lending units affiliated with Chrysler and General Motors Corp.

The idea is to ensure that Chrysler has a well-capitalized credit arm, as required by Obama’s automotive task force, said people familiar with the situation.

Sheila Bair, chairman of the Federal Deposit Insurance Corp., has expressed concern that such a combination would involve her agency guaranteeing its debt, according to two people familiar with her views.

(Source: Bloomberg & Autoblog)

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