We've been following the "carpocalyse" for months now, watching to see what would happen with automotive giants General Motors and Chrysler. Today's big news came with twice the jaw-dropping effect, as Chrysler announced that it will merge with Italian automaker Fiat, whie also declaring Chapter 11 bankruptcy.
Every automotive website we follow is talking about it, each with their own spin on the circumstances surrounding this monumental arrangement, which according to President Barack Obama "will provide a new lease on life for Chrysler." Here are short summaries of the most important points, from each of the blogs we follow on this subject.
Our colleague Rich Truesdell, over at AutomotiveTraveler.com has posted a blog supplying many of the details on this transition, explaining that Chrysler, Fiat, and the US Treasury will appoint a new board of directors (with six members to be named by the US Government and three by Fiat), which will then appoint a new CEO to replace current CEO Bob Nardelli after he steps down. According to Truesdell, the US Treasury will provide $3.5 billion in debtor-in-possession financing as well as an additional $4.7 billion upon the company's emergence from Chapter 11. The Fiat-Chrysler partnership is official; Fiat has already agreed to transfer technology and has also agreed to build engines and cars here in North America. Finally, American taxpayers will be repaid before Fiat can increase its initial ownership stake, Daimler will give up its stake and contribute to pension plan obligations.
Eric Evarts at Consumer Reports does an excellent job of describing the new arrangements with Fiat, explaining how "a new company will emerge phoenix-like from the Chrysler Corp. ashes, with its autoworkers' Voluntary Employee Beneficiary Association (VEBA) owning 55 percent... Fiat will initially hold a 20 percent ownership stake in Chrysler (without shelling out one single Euro), which may be expanded as government loans are repaid. In the meantime, the U.S. and Canadian governments combined will have a 10 percent stake."
Evarts tell us that most manufacturing operations will be temporarily idled beginning May 4th, though they are expected to resume in 30 to 60 days once the dust has settled and a new company emerges. Apparently, according to Evarts, the combined merger and bankruptcy comes just a few months shy of 30 years after Lee Iacocca saved Chrysler by winning government loan guarantees, on September 7, 1980.