Chrysler CEO Bob Nardelli now has just 30 days to forge an alliance with Fiat.
The Obama White House appears to have cleared away some of the barriers to a deal between Chrysler and the Italian carmaker. A green light for the Fiat deal was near the top Chrysler’s wish list when it submitted its viability plan to the White House back in February. Washington hands said the Fiat deal might not pass muster in the nation’s capitol. However, Obama’s Auto Task Force has now approved the concept of Chrysler-Fiat, pending resolution of the final details. The Obama’s administration said that the company has another 30 days to finish restructuring its operations and debt, and complete negotiation with Fiat. The deal with Fiat could be instrumental in reviving Chrysler, Obama said.
Chrysler Chairman Robert Nardelli said he was encouraged by the administration’s commitments to both the American automobile industry and “Chrysler’s viability through an alliance with Fiat.”
“I want to personally assure all of our customers, dealers, suppliers and employees that Chrysler will operate ‘business as usual’ over the next 30 days,” Nardelli said. “While we recognize that we still have substantial hurdles to resolve, Chrysler is committed to working closely with Fiat, the Administration, U.S. Treasury and the Task Force to secure the support of necessary stakeholders. If successful, the government will consider investing up to the additional $6 billion requested by Chrysler to help this partnership succeed.
Nardelli ignored comments from the White House and the Automotive Task Force, suggesting the company was no longer “viable as a stand alone company.”
Chrysler has struggled as an independent company ever since it was auctioned off by Daimler in the summer of 2007.
Cerberus, which purchased Chrysler from Daimler, has struggled to restructure and manage the automaker even before the recession and credit crisis. At the same time, Cerberus has ordered deep cuts in Chrysler’s product and technology portfolios.
Chrysler eliminated more than 5,000 salaried jobs on the day before Thanksgiving. The cuts have reduced the size and scope of the company’s engineering and technical staff, leaving it more dependent then ever on outside suppliers for new technology, Chrysler insiders have admitted. Fiat, however, is offering $8-10 billion in new technology in return for a 35% stake in Chrysler. Fiat has an option to increase this to 55%. Fiat also could demand a larger stake “because it has all the leverage,” according to one observer.
So far neither Chrysler nor GM has been able to complete a satisfactory agreement with the bond holders. The creditors have complained pensioners at GM and Chrysler have been given preferential treatment by Obama’s Auto Task Force.
Meanwhile, Representative Sander Levin (D-Mi.) also said creditors can either accept the deal offered by the administration or both GM and Chrysler could be forced into bankruptcy. “It means that creditors must get to table and take their losses in a new framework for a viable auto industry; if not this result will occur through a bankruptcy proceeding that could also have unforeseen consequences for all involved,” said Levin.