In 41 days, Chrysler has gone from a company on the brink of extinction to one being run by Italian automaker Fiat. Chrysler emerged today from Chapter 11 bankruptcy, after the Supreme Court refused to hear arguments from three Indiana funds that sought to block the deal. Fiat Chief Executive Sergio Marchionne was named CEO of the new Chrysler.
As part of its bankruptcy exit, Chrysler received $6.6 billion of financing from the federal government, which, along with the Canadian government, owns a minority stake. The United Auto Workers union gets 55%, and Fiat owns a 20% share that could eventually grow to 35%.
As expected, the White House issued a statement saying that the Supreme Court’s decision will allow “Chrysler to re-emerge as a competitive and viable automaker.”
That remains to be seen. Of utmost concern is how quickly Chrysler will get back on its feet. How quickly will vehicle sales rebound? For Chrysler, sales are off 46% so far this year. How soon will it be able to produce smaller cars using Fiat’s technology — the ultimate purpose of the strategic alliance with the Italian automaker? How much backlash might there be from consumers upset by how the whole matter was handled?
While its factories were idled, Chrysler lost $100 million a day. At that rate, it would have only 66 days before it burns through the federal government’s capital infusion. Granted, the factories should be up and running soon, but much like with the bankruptcy filing, time is of the essence. I only hope Fiat can act quickly enough.
