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Fiat Sets Chrysler Back on Track; GM Strives to Go Green

11 June 2009 - News - Editor

The U.S. auto industry has been under the spotlight for some months now, with bailouts, bankruptcy filings and major restructuring all receiving attention. Stock market investors have watched these developments with keen interest trying to gauge what effect government intervention will have on the industry, as well as all the related service and product suppliers that rely to a large extent on automakers for their continued existence.

Despite an appeal to the US Supreme Court by creditors who are opposed to the deal, Fiat was given the go ahead to step in and purchase Chrysler’s strongest assets, effectively saving the 84-year old automaker from liquidation. Fiat will take a 20 percent stake in Chrysler, which has been operating under Chapter 11 bankruptcy since 30 April, with a view to increasing this to 35 percent if predetermined fuel-efficiency goals are met. Stating that the alliance between the two companies must be a “constructive and important step towards solving the problems impacting the industry”, Fiat’s Chief Executive and now CEO of Chrysler, Sergio Marchionne, noted that the move was significant for the global automotive industry. The company’s restructuring will take place under the watchful eye of Chrysler’s former Vice Chairman, Jim Press, who will be filling the role of deputy CEO and special advisor in the new company - Chrysler Group LLC. The United Auto Workers union owns 55 percent of Chrysler Group LLC, with the U.S. government and Canada owning 8 percent and 2 percent respectively. Fiat will only be permitted to take a majority stake in the restructured company once it has repaid the $22.1 billion Treasury Department loan. This amount includes the “exit financing” amount of $6.6 extended to Chrysler. A Treasury official has been quoted as saying that “the Chrysler-Fiat alliance has now exited the bankruptcy process and is poised to emerge as a competitive, viable automaker.” There are no doubt many stakeholders hoping this proves to be true.

Meanwhile General Motors, which filed for Chapter 11 bankruptcy protection last week, is moving ahead with its state-of-the-art $25 million automotive battery laboratory based outside Detroit, Michigan, which was started in late 2007. This move is in line with the embattled automaker’s resolve to shake its gas-guzzling image and emerge as a “leaner, greener” company. The more than 1,000 engineers employed at the Global Battery Systems Lab will be dedicated to making this lofty goal a reality by accelerating the development of electric-powered vehicles for everyday use.

 



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