May 1, 2009
Public Relations Manager
Chrysler South Africa
Telephone: +2712 677 1854
Facsimile: +27 12 677 5779
Chrysler LLC and Fiat group announce global strategic alliance to form a vibrant new company
Zwartkop, Pretoria - Chrysler LLC, parent company of Chrysler South Africa (Pty) Ltd, 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 vibrant new company. It will allow Chrysler and Fiat to fully optimise 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.
Chrysler initiated discussions with Fiat more than a year ago to develop plans for a global product alliance. Over the past several months, these discussions have evolved and expanded. Chrysler and many of its stakeholders worked tirelessly to agree upon concessions that will result in a significantly lower cost base and enable fulfilment of a broader strategic alliance.
Despite substantial progress on many fronts, Chrysler was not able to obtain the necessary concessions from all of its lenders, which would have avoided the need for a bankruptcy proceeding. As a result, under the direction of the U.S. Treasury, Chrysler LLC and 24 of its wholly owned U.S. subsidiaries today filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for the Southern District of New York.
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.
During the restructuring process, the government will provide sufficient debtor-in-possession (DIP) financing to allow continuation of “business as usual.” The U.S. government has extended its backing of the warranty coverage to customers outside of the U.S., in addition to the previous commitments made to their domestic customers.
“These bankruptcy proceedings have no effect on Chrysler South Africa, or that of Chrysler’s International business operations. Chrysler South Africa and our dealers will continue to sell and service all vehicles, seamlessly honor warranty claims, and pay suppliers,” said Trent Barcroft, CEO, Managing Director, Chrysler South Africa.
“Chrysler South Africa is in a very strong financial position, recent sales have been delivering increased market share and our local dealer body continues to grow with significant investments by several retail partners,” continued Trent.
Upon completion of the transaction, the Voluntary Employee Beneficiary Association (VEBA) will own 55 % of the new company and the U.S. and Canadian governments will own proportionate shares of a 10 % stake. Fiat will initially hold a 20 % ownership stake in Chrysler. Fiat will have the right to increase its ownership stake an additional 15 % in three increments as it meets the following criteria: 5 % for bringing a fuel-efficient vehicle platform to Chrysler to be produced in the U.S.; 5 % for providing a fuel-efficient engine family to be produced in the U.S. for use in Chrysler vehicles; and 5 % for providing Chrysler access to its vast global distribution network to facilitate the export of Chrysler vehicles. Fiat cannot become a majority owner until after all U.S. government loans have been completely repaid.
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