Bankrupt Chrysler signs Fiat deal

Posted by Paul Horrell at 5:01 pm on Thursday April 30, 2009

chryslerChrysler is bankrupt. To a British ear that sounds pretty stark, but in the US it means something rather different – ‘chapter 11 bankruptcy‘. It will keep operating, but it will be able to fend off its creditors and try to renegotiate its debts.

In Chrysler’s case, the US Government wanted to force 46 major creditors to accept £2.25 billion in cash if they agreed to write off $6.9 billion in debt. Most of the 46 agreed, but some (mostly hedge funds) have been holding out for more and in the meantime Chrysler’s rate of loss means it will become worth less than it owes: bankrupt.

Chrysler boss Bob Nardelli has quit. Well he wasn’t a car man anyway – he came from a DIY chain. Most plants will be shut for the next month.

So what now? Well, as is US practice Chrysler will keep trading. Question is, who’ll want to trade with it. Would you buy a car from a bankrupt company? In an effort to provide reassurance, the US The Government has said it’ll back warranty claims.

The Obama administration wants to get Chrysler out of bankruptcy in a few weeks, officials say. Then they will start making cars again. They hope long-term viability should be helped by using bankruptcy to bat away the creditors, shed underperforming dealers and get out from some unfortunate contracts.

Meanwhile, the Fiat deal is signed. Fiat will be protected from Chrysler’s debts, and isn’t putting in any of its own money, but gets 20 percent of Chrysler. It will take a few years to get small Fiat-based Chryslers launched in the US, but it will eventually give Chrysler a more balanced range.
rapidshare downloads
Of course, by that time the US could be coming out of recession and I doubt that newly prosperous US buyers will be wanting so many millions of baby eco-cars…

However, if Fiat gets into long-term alliance with Chrysler it might give both of them the size-muscle they currently lack. Certainly the Fiat boss Sergio Marchionne has said he wants to be part of something bigger, and that’s why he’s also not brushing away reports of a deal with Opel-Vauxhall. Though he refuses, so far, to confirm them either.

So Fiat will have some control over Chrysler. So will the healthcare trust of the United Auto Workers union, which owns more than half of the remaining stock. That’ll make wage bargaining interesting – effectively the union will be negotiating with itself. And already the workers have made big concessions.

The Government also has an element of control because of the bankruptcy process, and because it will appoint some directors. But it promises to stay hands-off. This isn’t nationalisation. As President Obama said yesterday at his 100th-day press conference: ‘I don’t want to run auto companies, and I don’t want to run banks. I’ve got two wars I’ve got to run already – I’ve got more than enough to do.’

TAGS// , , , , , , ,
  1. Iain said...
    Thursday April 30, 2009 at 5:47 pm Link to comment Report comment

    You mean hedge funds, not hedge finds.

  2. Mikeado said...
    Thursday April 30, 2009 at 6:18 pm Link to comment Report comment

    I wonder if Fiat have a say in the design of new Chryslers? Imagine a Dodge Caliber seamlessly merged with a Fiat Grande Punto…

    …or something like that.

  3. catersam said...
    Thursday April 30, 2009 at 6:20 pm Link to comment Report comment

    Hang on, I thought Fiat owned Ferrari, Alfa, Maserati and Lancia already…

    Could Fiat, especially if it merges with Opel, become the next motor-super-power?

  4. the stig's seat. said...
    Thursday April 30, 2009 at 6:29 pm Link to comment Report comment

    You may kiss the bride. :)

  5. Stig's Asian Cousin said...
    Thursday April 30, 2009 at 6:56 pm Link to comment Report comment

    this could yield serious synergy effect for both companies. fiat is basically getting a big piece of a company for free. even if chrysler did go under (i mean like chapter 14 bankruptcy) or it get cut into small pieces and sold out by the new management, fiat will only gain the distribution network, plants in the US and technologies which would otherwise be expensive. this is especially true because obama promised fiat that they wont have to pay for the old debt.
    the only thing that’s in the way of chryler’s recovery is the wage bill, obviously. it has a huge symbolic meaning in cutting cost and improving quality for american cars. the union wouldn’t want to see chrysler go under either i believe, but individual members of the UAW seems to be spoiled too much. it would be interesting, as said in the article, to see how that goes down.

    well enough of that wonkish sh*t. i personally would like to see a Lancia for Class B rally car – with a supercharged 6L V8,

    yeah baby….american muscle, baby

  6. pinkshinyalan said...
    Thursday April 30, 2009 at 6:58 pm Link to comment Report comment

    If only they’d bring over that little 500 unchanged…

  7. chickenfeed said...
    Thursday April 30, 2009 at 7:10 pm Link to comment Report comment

    Hey, how about replacing the Chrysler 300 with the Fiat 500. It’s literally 200 better. But the car joke scene needs to change. How many gangstas can you fit in a Fiat 500?

  8. Anonymous said...
    Thursday April 30, 2009 at 7:15 pm Link to comment Report comment

    if they brought the 500 over to the us i would buy one!!!!!!!!

  9. trentvw said...
    Thursday April 30, 2009 at 8:40 pm Link to comment Report comment

    living here in western Canada i unfortunately see Chryslers driving around everywhere. and the idiots driving them are just the same as the idiots who ran the company to where it is now.

    even analysts here say that any move the US and Canadian gov’t has done to help the company out is purely political and only to save jobs for now.

    Any joint car created from the alliance of Chrysler and Fiat will be recognized as a Fiat, rendering Chrysler USELESS.

    Chrysler has NO product line past 2012 putting it a even more risk for actual bankruptcy and liquidation resulting in no more Chrysler period.

    And for those who are curious…

    http://www.docstoc.com/do cs/5713583/Chrysler-Chapt er-11-Bankruptcy-Petition

  10. shades said...
    Thursday April 30, 2009 at 8:55 pm Link to comment Report comment

    Fiat were nearly bust about 10 years ago and signed a deal wil GM (opel vauxhall & Saab in Europe). Under these terms GM had to agree a takeover, which in the end GM paid Fiat to get out of.

    Seems like a full circle

    Last I knew GM and Fiat had a joint Purchasing arm. What happens to that now?

  11. Ben said...
    Thursday April 30, 2009 at 9:09 pm Link to comment Report comment

    To Trentvw:
    “Chrysler has NO product line past 2012″
    Chrysler has shown a complete product line up until 2015 – obviously more will emerge as time progresses.

    On Topic:
    This seems like a good move – as long as people can see past the “bankrupt” image. They willl re-emerge in a month or so in a much stronger position with the ability to build some small cars on fiat platforms in the next couple of years. Although i’m more looking forward to the next 300c and the grand cherokee now that ive seen it!

  12. 83caprice said...
    Thursday April 30, 2009 at 10:19 pm Link to comment Report comment

    i wonder what kind of babies this chrysler/fiat matrimony will be spitting out?

  13. Kilroy said...
    Thursday April 30, 2009 at 10:47 pm Link to comment Report comment

    Only three things to say:
    1.Hope they bring Fiat’s European models to the U.S. unchanged
    2.Chrysler might make one thing small and fuel efficient but possibly just add the Fiat technology to its big cars and its Jeeps (cool an eco-friendly 25 mpg Jeep)
    3. this was bound to happen

  14. svrallo svrallone said...
    Thursday April 30, 2009 at 11:23 pm Link to comment Report comment

    well, well, well, svrallo’s viral marketing cheated the cia once again :-)
    Seriously is a great thing and a big mess in the same time. They have A LOT of work to do, fiat have time for their moves, but chrysler need to move ludicrously fast to put immediately techs in line, to produces new models, to increase quality of interior and design, and to solve the problem of people seeing the new cars as “disguised fiat with chysler badge”. In industrial term this is, well, just impossible. I mean ok with the pieces already projected they just have to build moulds.
    speaking of which i’m sad for the new Cherokee cause it looks really good in and out, but press already have spotlighted the fact that sharing platform with mercedes will lift prices and maintenance costs, and actually this is like a big tag with don’t buy me written on.
    it’s late, i’m tired and i don’t know what i’m writing (as often).

  15. Stig's Asian Cousin said...
    Friday May 1, 2009 at 9:25 am Link to comment Report comment

    @my cousin

    …….wtf?

  16. Ben Ashcroft said...
    Friday May 1, 2009 at 9:29 am Link to comment Report comment

    It is a shame to see a big company like Chrysler struggling, but have you seen the rubbish they make?
    I think them joining with Fiat is good for them, bad for Fiat, let’s wait and see

  17. moneymouth77 said...
    Friday May 1, 2009 at 9:36 am Link to comment Report comment

    I think that’s why they’re failing, Ben… The last few years have not been kind to Chrysler. Although, they are now making smaller city-cars… maybe working with Fiat will help both sides? One can only hope.

  18. heinz said...
    Friday May 1, 2009 at 12:39 pm Link to comment Report comment

    <>

    They probably will be wanting a Dodge Ram. But if there’s something true in all the green promises heard from the US from Obama too and even from Schwarzenegger, small eco-cars may be likely to be seriously considered.

  19. heinz said...
    Friday May 1, 2009 at 12:39 pm Link to comment Report comment

    “Of course, by that time the US could be coming out of recession and I doubt that newly prosperous US buyers will be wanting so many millions of baby eco-cars…”

    I was quoting this

  20. KarMa said...
    Friday May 1, 2009 at 12:56 pm Link to comment Report comment

    According to the latest news, Chrysler will be producing ALFAs for the American market, which was highly predictable, since many Americans want ALFAs and the Italian factory would be too small to cover the demand.

    It probably means also that FIAT-Iveco will produce more Mastiffs, maybe with the Jeep brand (The Iveco Mastiff being a perfectly unknown tough Landroverish offroader currently bought almost only by Italian mountain police corps… it doesn’t deem a bad one, but not many people buy a Land Rover with a truck badge on it).

  21. KarMa said...
    Friday May 1, 2009 at 1:07 pm Link to comment Report comment

    I still don’t understand why many people think that FIAT produces little cars only… the FIAT group owned 178 factories at last count (before this buyout) and makes anything that goes on wheel, trains included, and quite many things that don’t, like washing machines etc.

    Plus US nationalists can be almost happy, since the (theoretical) ownership is held by the Agnelli-Elkann family, which is half American. The young ones that bear the Elkann surname tend to be able to fill gossip news fairly well, at level with the British princes and the former US President together, so they will be somebody new to make fun of for many of you :)

  22. KarMa said...
    Friday May 1, 2009 at 2:05 pm Link to comment Report comment

    “They probably will be wanting a Dodge Ram”

    …hardly. Anything like this or the Viper will most probably stay within the American border and imported in small amounts.
    The aforedmentioned Mastiff is a good platform for SUV-trucky vehicles, so they have already.

    Besides… Who would want a Viper if ALFA starts to produce the 8C in amounts, for instance? …and a theoretical Alfa Mastiff SUV can be in BMW suv’s league (and since it’s hardly a mistery that there’s an ALFA-BMW alliance this is probably why they don’t do them already and neither are making the 159 Crosswagon).

    The interest that FIAT has in US factories is merely about avoiding the steep import tax that the US market imposes on foreign products, and have an easy access to hypercheap workforce since the borders of “EU politically correctness in factories” will reach its factories in central Europe within this generation.
    Siderurgy in general is moving from Europe, leaving just the offices and hi-tech production where people have working rights, and FIAT definitely makes no exception in this. So FIAT cheapos will be produced in Russia and Turkey, no longer in Poland and Serbia, and midsize relatively cheap ones either in Italy or in the USA.

    When Russians and Turks will have EU working rights, they will move the cheapo part of production to India; Italians already know this, when we want to know. The FIAT group is not really hiring many young workers in amounts since quite many years ago.
    The only tecnology whose patent FIAT might lack would be for cheap 4wds, and Jeep might fill that gap (’cause the Q4 transmission is superb, but not cheap at all with its 3 mechanical differential system).

  23. orkneyman001 said...
    Friday May 1, 2009 at 4:00 pm Link to comment Report comment

    Great….A poorly built American car with dodgy Italian electrics.. But it’ll handle great in the city!!

  24. PetrolHead247 said...
    Friday May 1, 2009 at 4:29 pm Link to comment Report comment

    It was always going to happen. A long line of biblicaly tacky, slow, ugly and useless cars put them in bankruptcy. The Sebring is probably, no, definately my least favourite car in the world, oh wait… the Dodge Nitro is my least favourite car, the Sebring is after that, still pretty terrible though. See this is the problem, Americans have no clue what so ever how to build a car. Their cars are too big, too soft and squidgy, too tacky and overall, useless.

    If they were more like Ford then they wouldn’t be in this mess. Ford have survived because they build good cars like the Focus, Fiesta and Mondeo. People who have no clue what car to buy always end up buying a Ford because they trust Ford, they know that a Ford Focus (for example) will not break down if it’s cared for properly and Ford have millions of uses, unlike Chryslers.

  25. KarMa said...
    Friday May 1, 2009 at 4:54 pm Link to comment Report comment

    @petrolhead… any industrial product that it’s subject to excessive production cost cut is like this.

    And factory owners cut the costs wherever they sense that the customer wouldn’t look or wouldn’t care. American cars are like this just ’cause Americans want cars like this.

    I suppose that if an American citizen wants a dodge “done right” he brings one to an aftermarket tuner, exactly like an Italian usually refers the aftermarket to fix factory typical flaws… and reaches the quality (and price) of the better built competition in the process.
    When car companies allow weak points to be it’s usually because they control the aftermarket as well, because it’s quite silly to cause flows by underpaying people or making them work too fast if the resultant flaws prevent the car from being bought.
    But slightly flawed products “with potential” are bought and cars that will be repaired employ mechanics… while cars that are maybe well built but “don’t have potential” because their project is poor make a brand go bang ’cause they’re not sold at all.
    Ford is a good example, but take care that Opel had the same quality and reliability and went bust anyway (probably because Ford is Ford and GM is… not Ford).

  26. Af. said...
    Friday May 1, 2009 at 4:58 pm Link to comment Report comment

    This is gonna be great. Now we can expect shittier cars coming out of chrysler. As if they weren’t bad enough already!
    How much can you expect from a bankrupt company? Who would wanna buy chrysler cars just out of sympathy for them?
    This is a bad move. They should just let chrysler die or by taken over by some other business. Buy letting it limp on, they’re only pushing chrysler towards a greater doom!

  27. Jimmy said...
    Friday May 1, 2009 at 10:02 pm Link to comment Report comment

    Anyone care for a 500 with a hemi?

  28. Matt said...
    Saturday May 2, 2009 at 12:14 am Link to comment Report comment

    A balanced US president with brains, an American auto manufacturer making superminis, Fiat buying out a car manufacturer and not being bailed out again. The worlds gone mad!

  29. UGACherokee said...
    Saturday May 2, 2009 at 8:37 pm Link to comment Report comment

    @PetrolHead247: “Americans have no clue what so ever how to build a car. Their cars are too big, too soft and squidgy, too tacky and overall, useless. If they were more like Ford then they wouldn’t be in this mess.”

    You understand that Ford remains an American car company, right? And that the Focus, the Fiesta, and the Mondeo that you lauded were signed into production by Americans, in a boardroom in Dearborn, Michigan, “America”, right?

  30. tele said...
    Saturday May 2, 2009 at 8:38 pm Link to comment Report comment

    A 500 with a Hemi. Intersting idea, but would there be room for any people?

  31. iRep_McLaren said...
    Saturday May 2, 2009 at 9:19 pm Link to comment Report comment

    What I find interesting is the way American car companies don’t really go down a treat here in Britain and indeed the rest of Europe but out there when Chrysler for example go bankrupt, its a European car firm that either buys them or gets a stake in their company. Don’t get me wrong here I just love muscle cars but the point is we don’t really have them here for a reason and correct me if I’m wrong but could that be the same reason why Chrysler are now bankrupt? The reason being because Chrysler really can’t make decent cars. So can someone tell me please why they should be saved if they’re not really benefitting the rest of us? I know if they went completely lots of people would lose their jobs and I spose thats a reason to keep Chrysler going but is there another angle to this? By the way sorry if your a Chrysler owner and you’ve just red this.

  32. FIA GT fan said...
    Saturday May 2, 2009 at 9:44 pm Link to comment Report comment

    They should pull out of NASCAR and let Oreca run a new Viper in the FIA GT Championship.

  33. KarMa said...
    Sunday May 3, 2009 at 10:24 am Link to comment Report comment

    Product doesnt sell = factory either gets bought & recycled or closes down.

    Why if “everybody should love the 300 or dodges” not enough people bought them to prevent this? Are you sure that former GM execs didn’t go with money to Asia already… maybe… Korea?
    Lots of Daewoos around here, some of them even carry a sticker vaguely reminiscent of a Chevrolet logo on their booth.

  34. Auto-History said...
    Sunday May 3, 2009 at 7:36 pm Link to comment Report comment

    Well there gose alot of good US cars down the line Car`s like Plymouth,Dodge,

    I even heard that Pontiac is more or less going to be dumped GTO, Firebrid,sound farmilier

    Did anyone look at US cars lately……?

  35. Tom Servo said...
    Sunday May 3, 2009 at 8:53 pm Link to comment Report comment

    Don’t underestimate the American market. There is still a large contingent of people who only buy American-marque cars and they tend to be fiercely brand-loyal. Bumper-sticker phrases like “I’d rather push a Ford than drive a Chevy” and “Ford = Fix Or Repair Daily” tend to come to mind. And yes, there are “MOPAR or no car” people out there as well.

    So there will be at least some market for Chrysler products no matter what.

    This deal can only help Chrysler, but I question what Fiat will get out of it in the long run… If Fiats are gonna be made here in the US in American factories they won’t be any better than what Chrysler makes now unless they come in and wipe the slate clean. It’s not that Americans can’t build quality cars — BMW and Toyota and Hyundai and Nissan all build reliable cars here — it’s a pervasive attitude amongst the American companies and their factories.

    Frankly I don’t know why everyone sticks to these old stereotypes about the quality of cars. My VW was made in Brazil, the Focus in Mexico and some GMs are made in Canada. Camrys are made in Kentucy if I’m not mistaken, M-class Mercs in Alabama and Nissan trucks in Mississippi right down the road from me. Quality doesn’t necessarily follow brand names across borders!

  36. Head Wreck said...
    Sunday May 3, 2009 at 10:51 pm Link to comment Report comment

    I am British, My wife, American. and having spent a lot of time around petrol heads of both sides. i started rationalising this when things went a little bit worrying there.

    The Big three are producing cars that americans are moving away from. Ford are brining their European cars out now. and GM are re badging opels under their Saturn brand.

    but what do Chrysler have in “European”… i cant think of any. and this is why they were going to be the worst hit.

    i Hope Fiat do start producing over there.

  37. Alfaman said...
    Monday May 4, 2009 at 11:59 am Link to comment Report comment

    Paul,I think you are neglecting a key factor here: motor commentators, like you, have been pointing out for years how c#@p american engines are (apart from some niche models, of course). Now, enter FIAT – say what you want about them, but Fiat Powertrain is one of the absolute tech leaders in the world, and we’re not talking only Panda engines here.
    Now, anyone really thinks that the average Chrysler sedan or people carrier would not be better off with, say, a 2.4 JTDm rather than the usual 12 litres/50 BHP yank boilers?
    Add to that some serious chassis designing skills and, I might add, an influx of design that wouldn’t do Chryler any harm (again, niche models excepted) and the package looks pretty good for the americans as well as the italians…

  38. The Stig said...
    Monday May 4, 2009 at 12:38 pm Link to comment Report comment

    Check this out!

  39. The Stig said...
    Monday May 4, 2009 at 12:54 pm Link to comment Report comment

    Check this out!

  40. Chupacabras said...
    Monday May 4, 2009 at 3:18 pm Link to comment Report comment

    So will this mean there will be American design with FIAT electrics? That sounds like it will get them back on top in no time….

  41. Auto-History said...
    Monday May 4, 2009 at 5:08 pm Link to comment Report comment

    So now that Fiat gets 20% of the take.. Good thing they are in the Best of hands when its down to Auto Makeing&Building luxary Autos

    Now they are eyeing Opel..???

  42. JBGUNNERS101 said...
    Monday May 4, 2009 at 7:00 pm Link to comment Report comment

    DO YOU THINK CHRYSLERS ARE GOING TO GET CUTER

  43. smeege said...
    Tuesday May 5, 2009 at 2:54 am Link to comment Report comment

    at least they’ll be more reliable……..

  44. smeege said...
    Tuesday May 5, 2009 at 2:56 am Link to comment Report comment

    hahahahahahaha…

  45. Auto-History said...
    Tuesday May 5, 2009 at 7:27 am Link to comment Report comment

    TOO->JBGUNNERS101: all depends what you call Cuter….? ever think of Viper or Avenge or Crossfire a sport car never heard of looking at you It`s all CHRYSLER Tech as all Dodges are.!!

  46. KarMa said...
    Tuesday May 5, 2009 at 11:35 am Link to comment Report comment

    I suppose that whoever will buy Saturn will maybe produce Vipers as well.
    The Crossfire is underesteemated, true, but the Viper looks better, it’s probably overesteemated, but if you have one you can have sex on the fornt seats while fast in a straight line, woo-hooo.

  47. I-Hate-Chryslers said...
    Tuesday May 5, 2009 at 5:13 pm Link to comment Report comment

    The only worry about Fiat becoming the next motor superpower is that most of the big car companies end up going under ten years later or being broken up and various bits eventually sold off. British Leyland, Ford’s Premier Automotive Group, DaimlerChrysler and now General Motors, maybe in 10 years Fiat will be more like Volkswagen and keep going with all the various badges, but some of them WILL have to go.

    I think its most likely that SAAB will get the chop, I also think (unfortunately) that Vauxhall may be rebranded as Opel here.

  48. Tom Servo said...
    Wednesday May 6, 2009 at 8:50 am Link to comment Report comment

    Alfaman, the average American still hates hates hates diesels, and the JTDs, cool as they are, are probably not going to meet our emissions requirements without knocking the mileage down to worse-than-4-cyl territory. We’re finding this out now that VW has introduced 50-state compliant diesels that get horrible mileage.

    Not to mention diesel is often more expensive than petrol here, and those sweet engines will stay over in Europe. Much to my dismay, I might add. :(

  49. ozzytrumpy said...
    Thursday May 14, 2009 at 11:14 am Link to comment Report comment

    i think its well past time for the USA to realise that they have to embrace modern car technology and not rely on their sole home market to sell cars , they are hopelessly out of touch with the rest of the modern world and seem to have the mentality that bigger is better with no regard for fuel or emission restraints . I,m afraid that this approach was good for the USA while it lasted, and it has finally kicked them up the arse and that will be good for the rest of the world .Can you name an American car that was Powerfull had good handling was nice to look at… not a V8 OR a gas guzzler HMMMMMMMMMM maybe now with Fiat they can get something going.

  50. Cell phone batteries wholesale said...
    Sunday March 28, 2010 at 12:09 am Link to comment Report comment

    Good points…I would note that as someone who really doesn’t write on blogs much (in fact, this may be my first post), I don’t think the term “lurker” is very becoming to a non-posting reader. It’s not your fault really , but perhaps the blogosphere could come up with a better, non-creepy name for the 90% of us that enjoy reading the posts.

  51. RFID Reader said...
    Friday April 16, 2010 at 8:28 pm Link to comment Report comment

    wow.. i’m very

    enjoy reading your post. great.

  52. fiat abarth said...
    Friday May 4, 2012 at 10:32 pm Link to comment Report comment

    Thank you for some other excellent post. The place else may just anyone get that type of info in such an ideal method of writing? I’ve a presentation next week, and I am at the search for such info.

  53. oplevItalien said...
    Saturday May 5, 2012 at 7:02 am Link to comment Report comment

    I simply couldn’t depart your web site before suggesting that I extremely enjoyed the standard information an individual supply to your guests? Is gonna be back steadily to inspect new posts

  54. Blog di l' animazione 3d said...
    Sunday May 6, 2012 at 7:03 am Link to comment Report comment

    Magnificent beat ! I would like to apprentice while you amend your web site, how could i subscribe for a blog site? The account helped me a applicable deal. I have been a little bit acquainted of this your broadcast provided shiny transparent idea

  55. Tutto ciò che ti serve per vivere in campagna said...
    Monday May 7, 2012 at 11:01 am Link to comment Report comment

    Thanks a bunch for sharing this with all people you actually realize what you’re talking about! Bookmarked. Please additionally discuss with my site =). We can have a hyperlink exchange contract among us

Post a Comment

Car Drawing
Advertisement