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Chrysler, Fiat merge into world’s 6th auto giant

Chrysler, Fiat merge into world’s 6th auto giant
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First Published: Thu, Jun 11 2009. 09 17 AM IST
Updated: Thu, Jun 11 2009. 09 17 AM IST
Milan: Chrysler and Fiat sealed their deal to create a new global auto giant on Wednesday in a milestone for the world industry after the Italian champion stepped in to salvage the bankrupt US firm.
“This is a very significant day, not only for Chrysler... but for the global automotive industry as a whole,” Fiat boss Sergio Marchionne, who stepped to the helm of the new Chrysler after engineering the merger, said in a statement.
The two companies said in a separate communique that they had “finalised their previously announced global strategic alliance.... The new Chrysler will begin operations immediately.”
The announcement came after the US Supreme Court on Tuesday lifted the last legal obstacles to the deal despite opposition from disgruntled investors.
In a letter to Chrysler employees Marchionne said that the two companies combined ranked as the world’s sixth largest automaker.
“Chrysler will be back - strong and competitive and a rewarding place to work,” he wrote. It “is now a more focused and nimble company” with “a healthy balance sheet,” he added.
The move completes a quick restructuring of the number three US automaker in a plan orchestrated and backed financially by the US and Canadian governments after the world economic crisis sped up a decline in the US auto industry.
Rebecca Lindland, an analyst with IHS Global Insight, said it remained to be seen however whether the alliance would be a success.
“On paper it looks great, but when you put them in front of the consumer it’s going to be the real test,” she said. “We won’t know the success of this merger until we see the level of consumer acceptance.”
Canada’s Industry Minister Tony Clement said in a statement that Chrysler “can now focus on producing top quality vehicles that consumers want.”
Fiat will at first hold 20% of Chrysler Group, with its equity stake rising to 35% and eventually to a majority stake as long as targets mandated by the deal are achieved and taxpayer funds are repaid.
“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.
“Those Chrysler operations assumed by the new company that were idled during this process will soon be back up and running, and work is already underway on developing new environmentally friendly, fuel-efficient, high-quality vehicles.”
Fiat, which has not provided any cash for the alliance, will bring new technology to help Chrysler develop more fuel-efficient vehicles needed in the US and other markets, and will use Chrysler’s sales network in exchange.
Robert Kidder, a veteran of US industry, is expected to be named chairman of the new Chrysler.
In his letter to the employees, Marchionne said the firm would continue to produce its Chrysler, Jeep and Dodge brands as well as developing a new electric car project with Italian technology.
“This award-winning technology will... give the company a strategic advantage in many markets around the world,” he said.
The Supreme Court on Tuesday refused to extend a stay on the plan, imposed following complaints from Chrysler investors who argued they would be short-changed by the Fiat deal.
The case was watched closely as a possible precedent for bankruptcy proceedings against General Motors, which the US government has also bailed out and ushered toward bankruptcy to allow a quick restructuring.
The new Chrysler will initially be majority-owned by the United Auto Workers (UAW) union, with small stakes held by the US and Canadian governments, which would contribute some $10.5 billion to the venture.
Chrysler’s dealership network will be cut by a quarter to 2,400 under the plan approved Tuesday allowing for the immediate elimination of 789 dealers.
“The past few years have offered several painful lessons on what it will take to survive in the modern-day automotive industry,” said Marchionne, who was credited with rescuing Fiat from bankruptcy when he took over in 2004.
“The alliance is a bold first step to implement those lessons we’ve learned, but it is only a first step,” he wrote. “Now we must prove we can make it work.”
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First Published: Thu, Jun 11 2009. 09 17 AM IST
More Topics: Automaker | Merger | Chrysler | Fiat | US |