Fiat closes deal to take bulk of Chrysler’s assets

DETROIT— Italy’s Fiat is the new owner of the bulk 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 chief executive. The deal clears the way for a new, leaner Chrysler Group LLC to emerge from bankruptcy protection minus billions in debt, 789 underperforming dealerships and burdensome labor costs that nearly sank the storied automaker. Fiat CEO Sergio Marchionne immediately was named CEO of the new company, which said in a statement that it would soon reopen Chrysler factories that were idled during the bankruptcy process, costing the automaker $100 million per day. The new company will focus on smaller vehicles. “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,” the new company said in a statement. The Italian automaker won’t put any money into the deal but will give Chrysler billions worth of small car and engine technology. “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 in a statement. The sale to Fiat SpA marks a victory for the Obama administration, which shepherded Chrysler into bankruptcy protection on April 30 with the hope that the company would emerge in a matter of months with a new partner. Marchionne immediately made management changes, including the appointment of Vice Chairman and President Jim Press as deputy CEO and adviser to help with the management transition. Press, formerly Toyota Motor Corp.’s top U.S. executive, joined Chrysler shortly after it was taken over in 2007 by private equity firm Cerberus Capital Management LP. In a statement, Marchionne said the organization will be designed to give leaders broad control and increase the speed of decision making. Chrysler CEO Bob Nardelli bid employees farewell in an e-mail obtained by The Associated Press, while Vice Chairman Tom LaSorda already has retired. On Tuesday, Chrysler won its battle to erase its secured debt after the Supreme Court declined to rule on objections to the sale to Fiat from a trio of Indiana pension and construction funds. The Indiana funds, which hold less than 1 percent of Chrysler’s $6.9 billion in secured debt, claimed the sale unfairly favors Chrysler’s unsecured stakeholders, such as the union, ahead of secured debtholders like themselves. Supreme Court Justice Ruth Bader Ginsburg decided Monday to delay the sale while studying the appeals. But on Tuesday, the court turned down the opponents’ last-ditch bid by declining a hearing on the appeals. Also on Tuesday, Judge Arthur Gonzales approved Chrysler’s motion to terminate 789 of its dealer franchises, or about 25 percent of its dealer base. Many of those dealers closed their doors for good on Tuesday, though some will continue to sell used cars or other brands. Chrysler has maintained that the closures are a necessary part of its plan to cut costs. Press, the vice chairman and president, told a Senate committee that the poor performance of many of the dealers slated to lose franchises costs the company $1.5 billion in lost sales each year, along with $150 million in advertising and marketing costs and $33 million in administrative costs. Under the agreement brokered in the days leading up to Chrysler’s bankruptcy filing, Fiat will receive up to a 35 percent stake in the automaker in exchange for sharing the technology Chrysler needs to create smaller, more fuel-efficient vehicles. The United Auto Workers union will get a 55 percent stake that will be used to fund its retiree health care obligations, while the U.S. and Canadian governments will receive a combined 10 percent stake. Meanwhile, the automaker’s secured debtholders would get $2 billion in cash, or about 29 cents on the dollar, for their combined $6.9 billion in debt.