Chrysler Is Born

Adam Shapiro, Jeff Flock, Ken Sweet and Joanna Ossinger
FOXBusiness


Chrysler announced the sale of its "good" assets to New Chrysler, an entity to be led by Italian auto maker Fiat SpA.

Robert Kidder was appointed to serve as chairman of the New Chrysler and Sergio Marchionne as CEO.

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.

The new company now exits Chapter 11 bankruptcy with $6 billion in exit financing. In a statement, the "new" Chrysler said it plans to begin operations immediately.

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"This is a very significant day, not only for Chrysler and its dedicated employees, but for the global automotive industry as a whole," said Sergio Marchionne, the newly-appointed Chief Executive Officer of the newly created Chrysler.

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 in the company until all taxpayer funds are returned.

The United Auto Workers, through their VEBA health care trust, owns a 55% stake in the company while the U.S. taxpayer owns a 8% stake in Chrysler.

Justice Ruth Bader Ginsburg had issued a temporary stay on Monday, but in its statement Tuesday 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.

Chrysler 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.

In a filing to the U.S. Supreme Court on Tuesday, Fiat said that “if the sale transaction approved by the bankruptcy court does not close by June 15th 2009, it will terminate under its express terms.”

Fiat put an offer on the table to purchase a newly formed version of iconic U.S. auto maker Chrysler, which is currently undergoing restructuring in bankruptcy. The proposal sailed through lower courts over the objections of some bondholders, a group led by an Indiana pension organization.

Chrysler said in its statement that "the new company will build upon Chrysler’s proud history of innovation and Fiat’s complementary technology and expertise to expand Chrysler’s product portfolio in the U.S., Canada and overseas. As the new company restarts operations in its facilities, it will continue work already under way on new environmentally friendly, fuel-efficient, high-quality vehicles that will become Chrysler's hallmark going forward."

Tom Lauria, an attorney for the Indiana pension funds challenging the deal, had used the reasoning in asking for Supreme Court consideration that “The executive branch of the government through this proposed transaction is trying to compel private investors who hold secured debt to subsidize the distribution of five billion dollars to the Administration’s preferred but junior class of creditors -- the labor claims.”