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.
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, areas in which Chrysler was weak.
“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 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.
The 56-year-old Marchionne, who won acclaim for his turnaround of Fiat, brings a different style to Chrysler. The year after taking over Fiat in 2004, Marchionne led the company to post its first net profit in five years. He also streamlined its management, burnished the brand with the award-winning update of the Fiat 500 and entered a series of strategic alliances to share costs and enter new markets.
In his first move at the new Chrysler, Marchionne made significant management changes Wednesday, including the appointment of Jim Press as deputy CEO and adviser to help with the management transition.