Fiat buys Chrysler; Italian automaker says it has closed deal for the U.S. automaker's 'good' assets

Fiat buys Chrysler; Italian automaker says it has closed deal for the U.S. automaker's 'good' assets
Italy's Fiat is the new owner of the bulk of Chrysler's assets, closing a deal that saves the troubled U.S. automaker from liquidation & places a new company in the hands of Fiat's CEO. The deal clears the way for a new, leaner Chrysler Group 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 that it would soon reopen Chrysler factories that were idled in the bankruptcy process, costing the automaker $100M 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," it said. The Italian automaker won't put any money into the deal but will give Chrysler billions worth of small car and engine tech. "We intend to build on Chrysler's culture of innovation & Fiat's complementary technology and expertise to expand Chrysler's product portfolio both in North America & overseas," said Marchionne. The sale to Fiat SpA marks a victory for the Obama administration, which shepherded Chrysler into Chapter 11 protection on April 30 with the hope it would emerge in a matter of months with a new partner. A senior administration official said last week Marchionne will make management changes in short order. Chrysler CEO Bob Nardelli is stepping down while Vice Chair 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 IN pension and construction funds. The IN funds, which hold less than 1% of Chrysler's $6.9B in secured debt, claimed the sale unfairly favors Chrysler's unsecured stakeholders like the union ahead of secured debtholders like themselves. Supreme Court Justice Ginsburg decided Monday to delay the sale while studying the appeals. But on Tues., it 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 25% of its dealer base. Many of the dealers closed their doors for good Tuesday, though some will continue to sell used cars or other brands. Chrysler maintained the closures are a necessary part of its plan to cut costs. Jim Press, Chrysler's vice chairman & president, told a Senate committee the poor performance of many of the dealers slated to lose franchises costs the company $1.5B in lost sales each year, along with $150M in advertising and marketing costs and $33M in administrative costs. The dealers had argued they cover their own costs and little would be gained by terminating their franchises. Chrysler attorneys said the automaker would extend until Monday its program to help the affected dealers send any unsold vehicles to stores that will remain open. Chrysler's swift passage through about 5 weeks of bankruptcy proceedings was helped by the involvement of the Obama administration's auto task force, that provided billions in financing and helped negotiate a deal with its stakeholders. Under the deal brokered in the days leading up to Chrysler's Chapter 11 filing, Fiat will receive up to a 35% stake in the automaker in exchange for sharing the tech Chrysler needs to create smaller, more fuel-efficient vehicles. The UAW unionl gets a 55% stake to be used to fund its retiree health care obligations, while the U.S. & CN governments will receive a combined 10% stake. Fiat will get 20%, with possibility up to 35%. Meanwhile, its secured debtholders will get $2B in cash, or 29