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Chrysler Bankruptcy Ends; Supreme Court Clears Sale to Fiat

Posted: Jun 10, 2009 10:59 a.m.

The New York Times reports, "With the touch of pen to paper and a simple wire transfer, Chrysler completed its deal with Fiat on Wednesday morning, largely ending its quick trip through bankruptcy.  The last obstacle to an exit -- a temporary stay imposed by the Supreme Court -- was lifted late Tuesday, after the nine justices declined to hear a challenge of the deal by three Indiana state funds and several consumer groups."

The Wall Street Journal explains, "The Supreme Court, in a brief order, said that the funds had not ‘carried the burden' of proving that their grievances merited the court's attention."

According to Bloomberg, "The new company, Chrysler Group LLC, will be owned 20 percent by Turin, Italy-based Fiat, 9.85 percent by the U.S., 2.46 percent by Canada and 67.69 percent by a United Auto Workers union retiree health care trust fund. The U.S. and Canadian governments financed the sale with $2 billion." 

CBS News adds, "Chrysler cleared another obstacle Tuesday when a bankruptcy judge approved a plan to terminate 789 dealer franchises."

Sergio Marchionne, CEO of Fiat, takes over as chief executive of the combined company.  Marchionne told CNN, ""This is a very significant day ... for the global automotive industry as a whole. From the very beginning, we have been adamant that this alliance must be a constructive and important step towards solving the problems impacting our industry."

Fiat assumes control of most of Chrysler's assets, but not many of its debts, as a result of the deal.  Bloomberg explains, "The assets left behind will be sold off under court supervision with the proceeds to be distributed to creditors with claims against Chrysler LLC."

 The New York Times explains, "Wednesday's sale will create a new carmaker freed from old Chrysler's crushing labor costs and debt levels. It will have gained in Fiat, which will run the company, a partner skilled in making and selling small, fuel-efficient cars around the world."

All of Chrysler's U.S. manufacturing operations have been shut down throughout the bankruptcy process, and it remains unclear which vehicles will resume production, or when.  Chrysler is expected to begin importing some Fiat models for sale in the U.S. in as little as 18 months, and may trim its SUV-heavy lineup.

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