Fiat closes Chrysler deal; new management team named
DETROIT/MILAN (Reuters) - Fiat SpA closed its acquisition of Chrysler's strongest assets on Wednesday, a key step in the Italian carmaker's ambitious plan to create a global player to ride out the worldwide auto sales downturn.
The Fiat and Chrysler announced deal revives the 84-year old U.S. automaker that had been down to its last dollars before government intervention in late 2008 and completes an Obama administration-directed fast-track reorganization for Chrysler.
Other parts of Chrysler will remain in bankruptcy to be sold or closed.
Fiat Chief Executive Sergio Marchionne became CEO of the new Chrysler Group LLC on Wednesday. The automaker's former CEO, Bob Nardelli, will return to Cerberus Capital, the former majority owner of Chrysler, as an adviser.
Chrysler's former vice chairman and president, Jim Press, has been named Marchionne's deputy chief executive, and Fiat's chief financial officer, Richard Palmer, has been named CFO of the new company.
In a memo to employees, Marchionne voiced optimism about the new company's outlook.
"There is no doubt in my mind that we will get the job done," he said. He called the alliance a "bold first step to implement" lessons learned.
Marchionne added that Fiat will begin the process of transferring Fiat's technology, platforms and powertrains to Chrysler plants in the next few months.
In addition to Fiat, Chrysler Group LLC is owned by a union-aligned trust and the U.S. and Canadian governments in taking over the best parts of Chrysler.
The White House welcomed the completion of the deal and said the new alliance was "poised to emerge as a competitive, viable automaker."
The Canadian government said a restructured Chrysler is good for the Canadian auto parts supply chain and for Canadian consumers.
The completion of the Chrysler sale in roughly the time frame planned has been seen by analysts as a good omen for the prospects of completing a similar process for General Motors Corp, which filed for bankruptcy on June 1.
The GM sale is expected to take longer due to the size and complexity of the No. 1 U.S. based automaker. GM will be majority owned by the U.S. government when its sale is completed.
Chrysler filed for bankruptcy on April 30 and halted production to work through the sale to Fiat, heightening pressure on auto parts suppliers that already had sustained losses due to production cuts at automakers in North America.
Chrysler said it would resume production soon, but did not give a time frame. GM also halted significant production starting in mid May for several weeks.
U.S. and Canadian auto suppliers are under heightened pressure as U.S. auto sales remain at their lowest level in 27 years. U.S. sales are down 36.5 percent in the first five months of 2009.
The Obama administration's autos task force was meeting with parts suppliers on Wednesday as part of its effort to monitor the auto supply base, a Treasury spokesperson said.
"Today's meeting is part of our ongoing commitment to work with the companies and monitor the auto supply base going forward," the spokesperson said.
U.S. suppliers had submitted a formal request to the U.S. Treasury for $18.5 billion in emergency funding, saying they have been shut off from credit at a time when payments from automakers are declining rapidly.
Shares of several large U.S. auto parts makers rose sharply on Wednesday after the Chrysler deal completion erased fears that it could face liquidation if the deal did not go through and eased concerns over whether some auto suppliers could survive the current downturn.
Separately, a senior member of the Treasury task force responsible for overhauling the auto industry, Ron Bloom, was asked to explain to Congress its rationale for decisions that lead to bankruptcies at both GM and Chrysler.
The Obama administration must provide a clear explanation of how it plans to extricate the government from ownership stakes in GM and Chrysler, Senate Banking Committee Chairman Christopher Dodd said on Wednesday.
U.S. Senator Richard Shelby, a persistent critic of the auto bailouts and the top Republican on the Senate Banking Committee, said he was not sure government could remain a silent partner in GM and Chrysler and protect taxpayers.
Shelby also said that Treasury needed to be thinking about an exit strategy from its GM and Chrysler ownership stakes.
Meanwhile, Several lenders that provided bankruptcy funding to auto parts supplier Delphi Corp are seeking to make their own competing offer for the company, their lawyers told a U.S. bankruptcy court on Wednesday.
Delphi, which was spun off from GM in 1999 and filed for bankruptcy in 2005, said last week it reached a deal to sell most of its global operations to private equity firm Platinum Equity, allowing the car parts supplier to emerge from Chapter 11 bankruptcy protection.