Italy's Fiat and Detroit No.3 Chrysler have made their partnership official and created the foundation for what the Italian automaker hopes will become a global player.
"This is an important day not only for Chrysler and its staff, who have gone through a long period of uncertainty, but also for the entire automobile industry" said Fiat CEO Sergio Marchionne, who will now take over the same job at Chrysler. The two automakers were able to finalise their alliance after the United States Supreme Court on Tuesday, in a unanimous decision, rejected a challenge to Fiat's takeover of the American automaker.
The challenge had been lodged by a group of pension funds in the state of Indiana, which hold $42 million of bankrupt Chrysler`s $6.9 billion debt, or less than 1%. The alliance with Fiat will allow Chrysler to pull out of bankruptcy protection and qualify for federal bail-out funds. The American automaker's key assets will be placed in a new company, Chrysler Group, which will be owned by Fiat, an auto workers union trust fund and the American and Canadian governments.
"Chrysler's activities which will be part of the new company and are or will soon be operative and work is already underway to develop high-quality, fuel- efficient green vehicles" Marchionne said. "Based on Chrysler's innovative mentality and Fiat's technology and know-how, we intend to expand the portfolio of Chrysler's products in North America and elsewhere," he added.
Fiat, through its auto division, will initially have a 20% stake and management control of the American automaker in exchange for its cutting-edge green and small car technology, as well as access to Fiat's sales and service networks in Europe and Latin America. The stake will rise to 35% once benchmarks are met in the US, including producing Fiat and Alfa Romeo models in Chrysler plants.
It can increase its stake to over 50% once federal loans have been repaid. Aside from Marchionne, Fiat will have two other members on the new board, four will be nominated by the US Treasury, one by the Canadian government and one by the unions. Former Borden Chemical and Duracell chairman C. Robert Kidder is expected to be appointed chairman. In his role as Chrysler CEO, Marchionne is expected to overhaul the company's management and operating structure in much the same way as he successfully did after he joined a near-bankrupt Fiat in 2004.
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