Tom LaSorda, Chrysler Vice Chairman and President, left, and Bob Nardelli, Chairman and CEO, will leave.
Chrysler LLC today announced that, as a result of the comprehensive restructuring plan agreed to by many of its stakeholders, it has reached an agreement in principle to establish a global strategic alliance with Fiat SpA to form a new company.
Unfortunately for workers, the company also filed for bankruptcy at a Federal court in New York City. During the bankruptcy proceedings, which are expected to last from 30 to 60 days, most of its manufacturing facilities will be closed. It is only when the New Chrysler emerges from bankruptcy that production will gradually resume. Workers will be eligible for supplemental unemployment benefits, worth about 80% of pay. Some additional plant closings are anticipated.
Chrysler already has a relatively low inventory as a result of previous cutbacks. The decision does not restrict Chrysler’s ability to reopen the plants if buyer demand warrants. Nonetheless, this is a severe blow to suppliers, who are also under pressure from GM’s announcement last week to take its plants down for 90 days.
“Even though total agreement was not possible, I am truly grateful for all that has been sacrificed, on the part of many of Chrysler’s stakeholders to reach an agreement in principle with Fiat,” said CEO and Chairman, Bob Nardelli. “My number one priority has been to preserve Chrysler and the thousands of people who depend on its success. While I am excited about the creation of the global alliance, I am personally disappointed that today Chrysler has filed for Chapter 11. This was not my first choice. ”
Things didn’t work out so well for Nardelli, as TheDetroitBureau.com previously predicted, and even though he was singled out for praise by the Administration today. “Chrysler’s management, and in particular, its CEO, Robert Nardelli, have played a positive and constructive role throughout this process,” President Obama said.
Nardelli, who has been leading Chrysler since August 2007, also announced to Chrysler LLC’s Board of Management and the U.S. Treasury his plan to leave the company following the emergence of the new company from Chapter 11 and the completion of the alliance with Fiat. He will return to Cerberus Capital Management LP as an advisor. Tom LaSorda, Chrysler president, also announced his plans to retire, likely before the bankruptcy is completed.
“Now is an appropriate time to let others take the lead in the transformation of Chrysler with Fiat,” said Nardelli. “I will work closely with all of our stakeholders to see that this new company swiftly emerges with a successful closing of the alliance.”
Chrysler also will file a motion under Section 363 of the Bankruptcy Code requesting the swift approval by the Court of the agreement with Fiat and the sale of Chrysler’s principal assets to the new company. “The benefit of this type of filing is speed. It should allow a leaner new company to emerge in a matter of 30 to 60 days, well positioned for long-term viability,” Chrysler said in a statement.
The alliance will allow Chrysler and Fiat to “fully optimize their respective manufacturing footprints” and the global supplier base, while providing each with access to additional markets. Fiat powertrains and components will also be produced at Chrysler manufacturing sites. Whether they will go into Canadian, Mexican or U.S. facilities, Chrysler refused to specify.