Chrysler announced the sale of its "good" assets to New Chrysler, an entity to be led by Italian auto maker Fiat SpA.
In a simple announcement Wednesday morning, Fiat closed its purchase and alliance with Chrysler after the U.S. Supreme Court denied an emergency appeal from some of Chrysler's creditors Tuesday evening.
Robert Kidder was appointed to serve as chairman of the New Chrysler and Sergio Marchionne as CEO.Jim Press, who joined Chrysler after being with Toyota, will become deputy CEO and advisor to Marchionne.
The new company now exits Chapter 11 bankruptcy after only 40 days in bankruptcy with $6 billion in exit financing. In a statement, the "new" Chrysler said it plans to begin operations immediately.
"This is a very significant day, not only for Chrysler and its dedicated employees, but for the global automotive industry as a whole," Marchionne said in a statement.
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Under the terms of the agreement with the U.S. Bankruptcy Court of the Southern District of New York, Fiat will now own a 20% equity stake in the new company, which will grow to a 35% stake if certain milestones are achieved. Fiat cannot own a majority stake until all taxpayer funds are returned.
The United Auto Workers union, through its VEBA health care trust, owns a 55% stake in the company, while the U.S. taxpayer owns a 8% stake in Chrysler.
In a memo to Chrysler employees, Marchionne said, "Chrysler is now a more focused and nimble company that will benefit greatly from its new global strategic alliance with Fiat."
For consumers, little has officially changed other than the parent company of the Detroit auto maker. Chrysler will, for the time being, continue to manufacture its Dodge, Jeep and Chrysler brands. As the engineering operations between Fiat and Chrysler are integrated, consumers should begin seeing models like the Fiat 500 in showrooms.
Chrysler, which already was the smallest of Detroit's Big Three auto makers, now walks away even smaller. The 789 dealerships Chrysler designated to be closed have just a week to sell their remaining cars; their leftover inventories will be redistributed among the company's surviving members.
Any obstacles to the sale of Chrysler became void after Justice Ruth Bader Ginsburg's temporary stay was lifted on Tuesday by the High Court. Originally some of Chrysler's creditors, most notably representatives of some Indiana pension funds, had objected to the sale and asked for a stay in the sale, arguing that some bankruptcy law protections were voided in exchange for expediency.
In its statement, the Court noted that the denial wasn't based on the legal merits per se, but on such factors as whether a majority of the justices would see the lower-court decisions as erroneous.
The step enabled "the previously announced global strategic alliance, forming a vibrant new car company, to proceed," Chrysler announced in a statement Tuesday night.
READ the Supreme Court's Official OrderChrysler and Fiat had both said throughout the proceedings that their deal must be completed quickly.
Fiat’s CEO had said the company would never walk away from the Chrysler deal, but a court filing by the company noted that if the deal didn't get done soon, it would at the very least have to be re-worked.
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Fiat was the only prominent company to put an offer on the table to purchase Chrysler, and was the one designated by the White House as the best option for the bankrupt auto maker. The company has changed hands three different times in the past 10 years, starting with the 1998 deal between Chrysler and Germany's Daimler. Daimler then sold its stake in 2007 to private equity firm Cerberus Capital Management, who was unable to turn around the company in time.
"During my 38 years in business, I’ve never faced a tougher challenge," former Chrysler CEO Robert Nardelli said in an exit letter to employees. "Even with our early and aggressive restructuring efforts, we could not offset the negative impact of the financial crisis and the severe economic recession."
Correction: This article originally stated Jim Press was from Ford Motor Co. Press actually came from Toyota before coming to Chrysler in 2007.
