OUT OF GAS: REMEMBERING CHRYSLER
Exiting The Fast Lane: The Chrysler bankruptcy makes us long for a time gone by. Take one last trip with us down memory lane to remember a once-great brand.
Posted: May 16, 2009
The last several years have been unkind to the smallest of the Detroit Three, Chrysler LLC (Auburn Hills, MI). First it was sold to private equity firm Cerberus Capital Management LP (New York, NY). Then the economy collapsed . . . and with it the automotive sector. Now, after receiving billions in tax-payer bailout cash and struggling to prove it could survive on its own, the little automaker that could has been forced to file for Chapter 11 bankruptcy.
THE BUSINESS AT HAND
While it is really no surprise at this point that Chrysler was forced into bankruptcy, it is sad to see such a storied company suffer this fate. Facing almost nonexistent sales, billions in outstanding debt and a murky future, bankruptcy was the correct path to take. Now the automaker has closed all of its facilities for a period of at least 60 days as it begins bankruptcy proceedings.
In order to survive this bankruptcy, Chrysler will be forced to close some of its assembly plants and reduce its overall work force by a significant number as it organizes itself into a streamlined, profitable enterprise. The company must also make some tough decisions about what exactly it will continue to sell. Chrysler still produces 30 models of vehicles, a number that will most assuredly be cut in at least half. (Editor?s Note: For deeper insights and solutions into this branding problem, reference ?The Demise of Detriot?s Big Three: What Will We Learn?? by David R. Dixon and Gary Conner in the February 2009 issue of Fabricating & Metalworking.)
Some of these cuts will take the form of a discontinuation of specific models. However, according to research by Industrial Info Resources (Sugar Land, TX), sources within the sector indicate that General Motors Corporation (Detroit, MI) has been in discussions with Chrysler about obtaining the smaller automaker's most successful brands: the Jeep line of vehicles and the Town & Country minivan. While these negotiations have not gotten past the talking stage, it does not really make much sense for GM ? which is potentially facing bankruptcy itself if it cannot restructure by a June 1 deadline ? to take on the burden of these additional models and brands when it already makes too many models that don't sell.
TOUGH TIMES AHEAD
The real question now is whether Chrysler can actually survive bankruptcy. Hard decisions must be made. The downstream effects of its plant closures will force many tier suppliers who provide parts to Chrysler to close their facilities in the coming months. The ripple effect of this bankruptcy won?t be felt fully until sometime next year. As this goes to press, Chrysler has announced the closing of 800 dealerships across the land.
Bankruptcy court Judge Arthur Gonzalez recently heard the first motions in the Chrysler bankruptcy. The hope is that the automaker can work its way through the bankruptcy process within 60 days. The agreement that is under consideration would see Cerberus give up its 80 percent stake in Chrysler and have current CEO Robert Nardelli step down. The United Auto Workers (UAW; Detroit, MI) union will end up with a 55 percent stake in the company, while the U.S. government will own 8 percent and the Canadian and Ontario governments will each own 2 percent.
Fiat SpA (Italy), which has been in negotiations with Chrysler for months on an alliance agreement, will initially receive a 20 percent stake in the new Chrysler and will allow the reborn automaker to produce Fiat's line of smaller, more fuel-efficient vehicles in the U.S. Fiat's stake in Chrysler could increase to 35 percent if certain benchmarks are met. An additional 16 percent stake is available to the European automaker by 2016 if Chrysler's loans from the U.S. government are fully repaid.
The real question at this point is whether Chrysler can actually survive bankruptcy. Hard decisions must be made in the coming days and the downstream effects of the coming closures will take even longer to pan out. Many tier suppliers who provide parts to Chrysler will be forced to close facilities in the coming months. The ripple effect of this bankruptcy will not fully be felt until sometime next year.
Hopefully Chrysler can make the tough decisions and do what needs to be done to cut back on unnecessary models, significantly reduce the number of dealerships and cut the payroll enough to make itself a viable, if smaller, automaker once again. If Chrysler can complete this process with the right mindset, the time is ripe for the automaker to emerge even better than it was before. Like the phoenix, Chrysler can once again be a major player in the automotive sector, but there will be some painful times during the rebirth process.
This isn?t the first time Chrysler has endured pain since being founded by Walter P. Chrysler on June 6, 1925, when the Maxwell Motor Company (est. 1904) was re-organized into the Chrysler Corporation. The company?s legendary history has been filled with good times and bad.
GOING BACK: THE BUSINESS IN THE BEGINNING
Walter Chrysler originally arrived at the ailing Maxwell-Chalmers company in the early 1920s, having been hired to take over and overhaul the company's troubled operations after doing a similar rescue job at the Willys car company. In late 1923, production of the Chalmers automobile was ended.
In January 1924, Walter Chrysler launched his well-received namesake 6-cylinder automobile, designed to provide customers with an advanced, well-engineered car, but at a more affordable price than they might expect. Elements of this car are traceable back to a prototype that had been under development at Willys during the time Walter Chrysler was there.
The original 1924 Chrysler included a carburetor air filter, high compression engine, full pressure lubrication and an oil filter at a time when most autos came without these features. Among the innovations in its early years would be the first practical mass-produced four-wheel hydraulic brakes (a system nearly completely engineered by Chrysler, with patents assigned to Lockheed) and rubber engine mounts to reduce vibration.
Chrysler also developed a road wheel with a ridged rim designed to keep a deflated tire from flying off the wheel. This safety wheel was eventually adopted worldwide by the auto industry. Following the introduction of the Chrysler, the Maxwell was dropped after its 1925 model year run. The truth, however, is that the new line of lower-priced 4-cylinder Chryslers introduced for the 1926 model year were basically re-engineered and rebranded Maxwells.
During this period of the early 1920s, Walter Chrysler assumed the presidency of Maxwell and the company ultimately incorporated under the Chrysler name. The advanced engineering and testing that went into Chrysler Corporation cars helped to push the company to the second-place position in U.S. sales by 1936, a position it would last hold in 1949.
TAKEN FOR GRANTED
Chrysler introduced the first practical mass-produced four-wheel hydraulic brakes, rubber engine mounts to reduce vibration, a road wheel with a ridged rim designed to keep a deflated tire from flying off the wheel, capacity regulators, sealed radial compressors, the self-contained air conditioning system, a superior high-speed radial compressor, the industry's first wind tunnel, unibody construction and, of course, the minivan.
In 1928, Chrysler Corporation began dividing their vehicle offerings by price class and function. The Plymouth brand was introduced at the low-priced end of the market, created essentially by once again reworking and rebadging Chrysler's 4-cylinder model. At the same time, the DeSoto marque was introduced in the medium-price field.
Shortly thereafter, Chrysler bought the Dodge Brothers automobile and truck company and launched the Fargo range of trucks. By the late 1930s, the DeSoto and Dodge divisions would trade places in the corporate hierarchy. This proliferation of marques under Chrysler?s umbrella might have been inspired by a similar successful strategy employed by General Motors. Beginning in 1955, Imperial ? formerly the top model of the Chrysler family ? became a marque of its own. In 1960, the Valiant was introduced likewise as a distinct marque. In the U.S. market, Valiant was made a model in the Plymouth line and the DeSoto was discontinued for 1961.
With those exceptions per applicable year and market, Chrysler's range from lowest to highest price from the 1940s through the 1970s was Valiant, Plymouth, Dodge, DeSoto, Chrysler, and Imperial. After acquiring AMC in 1987, Chrysler fulfilled one of AMC's conditions of sale by creating the Eagle brand in 1988 to be sold at existing AMC-Jeep dealers. The Eagle lasted a decade and was discontinued in 1998, while Plymouth was ended three years later. By 2001, the automaker had three prominent marques worldwide: Dodge, Jeep, and Chrysler.
In the 1930s, the company created a formal vehicle parts division under the MoPar brand (a portmanteau of Motor Parts), with the result that "Mopar" remains a colloquial term for vehicles produced by Chrysler Corporation. The MoPar (later Mopar) brand was not used in Canada (where parts were sold under the Chryco and AutoPar brands) until the Mopar brand was phased into the Canadian market beginning in the late 1970s. Many Chrysler Corporation vehicle parts also bore variants of the DPCD monogram, for Dodge-Plymouth-Chrysler-DeSoto, well after the 1961 end of DeSoto production.
Chrysler's Airtemp marque for stationary and mobile air conditioning, refrigeration, and climate control was launched in the 1930s, with the first installation being the Chrysler Building in New York City. The Airtemp Corporation would not be incorporated until 1934, when it used a former Maxwell factory.
Airtemp invented capacity regulators, sealed radial compressors, and the self-contained air conditioning system, along with a superior high-speed radial compressor. By 1941 it had over 500 dealers selling its air conditioning and heating systems. The company supplied medical refrigeration units in World War II and dominated the industry during the 1940s, but slowly fell behind. By the 1970s, Airtemp was losing money and was sold to Fedders in 1976.
A VALIANT EFFORT
The 1960 Valiant was the first production automobile with an alternator rather than a direct current electrical generator as standard equipment. All other Chrysler vehicles followed in 1961.
In 1934, Chrysler introduced the Airflow models that featured an advanced streamlined body ? among the first to be designed using aerodynamic principles. Chrysler created the industry's first wind tunnel to develop them. Buyers rejected Airflow styling while the more conventionally-designed Dodge and Plymouth cars pulled the firm through the Depression years. In fact, Plymouth was one of only a few marques that actually increased sales during the cash-strapped thirties.
The unsuccessful Airflow had a chilling effect on Chrysler styling and marketing, which remained determinedly conservative through the 1940s and into the 1950s, the single exception being the installation of hidden headlights on the very brief production run of 1942 DeSotos. Engineering advances continued and, in 1951, the firm introduced the first of a long and famous series of Hemi V8s. In 1955, things brightened with the introduction of Virgil Exner's successful Forward Look designs.
Torsion-Aire suspension was introduced with the inauguration of the second-generation Forward Look cars for 1957. This was not air suspension, but an indirect-acting, torsion-spring front suspension system that drastically reduced unsprung weight and shifted the car's center of gravity downward and rearward for a smoother ride and significantly improved handling. A rush to produce the 1957 models led to quality control problems, including poor body fit and finish, that resulted in significant and early rusting. This, coupled with a national recession, found the company again in recovery mode.
In the 1980s, Chrysler formed a subsidiary business called Acustar to sell parts to other automakers, as well as supplying parts for Chrysler-built vehicles, similar to General Motors' creation of Delphi Corporation and Ford's later creation of Visteon.
THE 1960s
Starting in the 1960 model year, Chrysler built all their passenger cars with Unibody (unit-body or monocoque) construction except for the Imperials, which retained body-on-frame construction until 1967. Chrysler thus became the only one of the Big Three American automakers to offer unibody construction on the vast majority of their product lines.
This construction technique, now the worldwide standard, offers advantages in vehicle rigidity, handling, and crash safety while reducing squeak and rattle development as the vehicle ages. Chrysler's new compact line, the Valiant, opened strong and continued to gain market share for over a decade. Valiant was introduced as a marque of its own, but the line was placed under the Plymouth marque for U.S. market sales in 1961.
The 1960 Valiant was the first production automobile with an alternator (generating alternating current, paired with diodes for rectification back to direct current) rather than a direct current electrical generator as standard equipment. It proved to be such an improvement that it was used in all Chrysler products in 1961.
PONY UP
The Plymouth Barracuda was actually the first pony car, released almost two weeks before the Ford Mustang. The huge glass rear window and sloping roof were polarizing styling features, and it was outsold 10-to-1 by the Mustang between April 1964 and August 1965.
The DeSoto marque was withdrawn from the market after introducing the 1961 models, partially due to the broad array of the Dodge lines and the general neglect of the division. The same affliction plagued Plymouth, which suffered when Dodge crept into its price range. This would eventually lead to the demise of Plymouth several decades later. An ill-advised downsizing of the full-size Dodge and Plymouth lines in 1962 hurt sales and profitability for several years.
In April 1964, the Plymouth Barracuda (a Valiant sub-model) was introduced. The huge glass rear window and sloping roof were polarizing styling features. Barracuda was released almost two weeks before Ford's Mustang, so it was chronologically the first pony car. But the Barracuda didn't do as well in sales as the Mustang, being outsold by 10-to-1 between April 1964 and August 1965.
During the 1960s, Chrysler expanded into Europe and attained a majority interest in the British Rootes Group in 1964, Simca of France and Barreiros of Spain, to form Chrysler Europe. For the Rootes Group, one outcome of this takeover was the launch of the Hillman Avenger in 1970 (briefly sold in the U.S. as the Plymouth Cricket), which sold in Britain alongside the rear-engined Imp and the Hunter.
THE 1970s
During the 1970s, the former Rootes Group fell into severe financial difficulties. The Simca and Barreiros divisions were more successful, but in the end the various problems were overwhelming and the firm gained little from these ventures. Chrysler sold these assets to PSA Peugeot Citroën in 1978, which in turn sold the British and Spanish truck production lines to Renault of France.
More successfully, during this same time the company helped create the muscle car market in the U.S., first by producing a street version of its Hemi racing engine and then by introducing a legendary string of affordable but high-performance vehicles, including the Plymouth GTX, Plymouth Road Runner and Dodge Charger. The racing success of several of these models on the NASCAR circuit burnished the company's engineering reputation.
The 1970s were tumultuous for Chrysler. American cars had previously been developed without much emphasis on fuel economy, safety or emissions, but now all automobile manufacturers had to develop smaller, lighter engines that ran much cleaner and still produced enough power to move large automobiles.
U.S. anti-trust laws were interpreted as prohibiting the formation of a Japanese- or European-style industry consortium for rapid and cost-effective development of solutions to the new car safety and antipollution regulations. No cost-sharing was possible. Each company had to solve each problem on its own. Chrysler's lower sales volumes meant these new development and implementation costs made up a larger proportion of a vehicle's cost, as compared to Ford and General Motors.
ROAD RUNNERS
Chrysler helped create the U.S. muscle car market with a street version of its Hemi racing engine and affordable but high-performance vehicles: the Plymouth GTX, Plymouth Road Runner and Dodge Charger.
To avoid pricing themselves out of the market, the automaker had to retrofit and detune their existing engines to meet emission requirements. This resulted in poor fuel economy just when fuel prices were rising. There was a rush of sales for the compact Dodge Dart and Plymouth Valiant, but the 1973 oil crisis sharply reduced demand for the large, fuel-thirsty vehicles Americans previously bought in large number ? many of which made up the bulk of Chrysler's product line.
The Japanese automakers' American market share sharply increased because their smaller cars were generally much more fuel-efficient. Chrysler bought a 15 percent stake of Japan's Mitsubishi Motors in 1971 and began selling rebadged Mitsubishi models in the U.S.
At mid-decade, the company scored a conspicuous success with its first entry into the personal luxury car market, the Chrysler Cordoba. The hurried introductions of the Dodge Aspen and Plymouth Volaré in 1976 brought enormous warranty costs to repair faulty design and shoddy construction and destroyed the longstanding loyalty built up by the Dart and Valiant predecessors.
Chrysler Europe essentially collapsed in 1977 and was offloaded to Peugeot the following year, soon after helping design the new Plymouth Horizon and Dodge Omni. Shortly thereafter, Chrysler Australia, which was producing a local Valiant and selling rebadged Japanese Mitsubishi Galants, was sold to Mitsubishi Motors. The subcompact Horizon began reaching the U.S. market as the second gas crisis struck and devastated sales of Chrysler's larger cars and trucks ? and the company had no strong compact line to fall back on.
RESURRECTION AND REVIVAL
On September 7, 1979, Chrysler Corporation petitioned the U.S. government for $1.5 billion in loan guarantees to avoid bankruptcy. Former Ford executive Lee Iacocca was brought in as CEO at the same time. He proved to be a capable public spokesman, appearing in commercials that advised customers, ?If you find a better car, buy it.? Iacocca also provided a rallying point for Japan-bashing and instilling pride in American products. His book Talking Straight was a response to Akio Morita's Made in Japan.
The U.S. Congress reluctantly passed the "Chrysler Corporation Loan Guarantee Act of 1979" (Public Law 96-185) on December 20, 1979 (signed into law by President Jimmy Carter on January 7, 1980), prodded by Chrysler workers and dealers in every congressional district who feared the loss of their livelihoods. The military then bought thousands of Dodge pickup trucks that entered military service as the Commercial Utility Cargo Vehicle M-880 Series.
SELF-DESTRUCTIVE BEHAVIOR
Hurried introductions of the Dodge Aspen and Plymouth Volaré brought enormous warranty costs to repair faulty design and shoddy construction. This destroyed the longstanding loyalty held by former Dart and Valiant owners and stained the company?s brand.
With this help and a few innovations, such as the K-car platform and especially the invention of the minivan concept, Chrysler avoided bankruptcy and slowly recovered. In February 1982, Chrysler announced the sale of Chrysler Defense, its profitable defense subsidiary to General Dynamics, for $348.5 million. The sale was completed in March 1982 for the revised figure of $336.1 million.
By 1983, the loans were fully repaid, several years ahead of time, resulting in a profit of $350 million to the U.S. government. New models based on the K-car platform were selling well. A joint venture with Mitsubishi, called Diamond Star Motors, strengthened the company's hand in the small car market. Chrysler acquired American Motors Corporation (AMC) in 1987 primarily for its Jeep brand, although the failing Eagle Premier would be the basis for the Chrysler LH platform sedans. This bolstered the firm, although Chrysler remained the weakest of the Big Three.
In the early 1990s, Chrysler made its first steps back into Europe, setting up car production in Austria and beginning right-hand drive manufacture of certain Jeep models in a 1993 return to the UK market. The continuing popularity of Jeep, bold new models for the domestic market such as the Dodge Ram pickup, Dodge Viper (badged as "Chrysler Viper" in Europe) sports car and Plymouth Prowler hot rod, and the new "cab forward" front-wheel drive LH sedans put the company in a strong position as the decade waned.
BEGINNING OF THE END
In 1998, Daimler-Benz purchased Chrysler and formed DaimlerChrysler AG. Chrysler Corporation was legally renamed DaimlerChrysler Motors Company LLC while its total operations began doing business as Chrysler Group. Though initially declared to be a merger of equals, it quickly became evident that Daimler-Benz was the dominant partner.
Despite offering a range of attractive models, Chrysler fell into another financial tailspin soon after the merger. This greatly depressed the stock price of the merged firm and caused alarm at the headquarters in Germany, which sent Dieter Zetsche (who would later become CEO) to take charge. The Plymouth brand was phased out in 2001 and plans for cost cutting by sharing platforms and components began. The Mercedes-based Chrysler Crossfire was one of the first results of this program.
A return to rear-wheel drive was announced and, in 2004, a new line of full size cars appeared and was successful, spearheaded by the Chrysler 300 using some Mercedes-Benz technology and a new HEMI V8 engine. Financial performance began to improve, with Chrysler providing a significant share of DaimlerChrysler profits due to restructuring efforts at the Mercedes Car Group. The partnership with Mitsubishi was dissolved as DaimlerChrysler divested its stake in the firm due to Mitsubishi's demand for more control in the management.
In the April 2007 issue of Der Spiegel, CEO Dieter Zetsche expressed a desire to dismantle Chrysler and sell off the majority stake and at the same time keep Chrysler "dependent" upon Mercedes-Benz after the sale. On April 4 Zetsche announced the company was negotiating the sale of Chrysler, confirming weeks of rumors. One day later, investor Kirk Kerkorian placed a $4.5 billion bid for Chrysler. On April 12 Magna International of Canada announced a search for partners to place a bid for Chrysler. Magna's offer was outbid.
CAUGHT IN THE CROSSFIRE
The automaker fell into another financial tailspin soon after merging with Daimler-Benz. Plymouth was soon phased out and cost cutting began through sharing platforms and components, which resulted in the Mercedes-based Chrysler Crossfire.
On May 14, 2007, DaimlerChrysler announced the sale of 80.1 percent of Chrysler Group to American private equity firm Cerberus Capital Management, L.P. for $7.4 billion, although Daimler continued to hold a 19.9 percent stake. This deal was finalized on August 3, 2007. Chrysler Group (DaimlerChrysler Corporation) officially became Chrysler Holding LLC (changed to Chrysler LLC upon completion of the sale), with two subsidiaries: Chrysler Motors LLC (the new name of DaimlerChrysler Motors Company), which produces Chrysler/Dodge/Jeep vehicles, and Chrysler Financial Services LLC (the new name of DaimlerChrysler Financial Services Americas LLC), which took over the operations of Chrysler Financial. DaimlerChrysler AG changed its name to Daimler AG.
On August 6, 2007, after announcing the spin-off to Cerberus, Chrysler LLC, or "The New Chrysler", unveiled a new company logo and launched its new website with a variation of the previously used Pentastar logo. Robert Nardelli became Chairman and CEO of Chrysler under the ownership of Cerberus.
On October 10 of that year the new company experienced its first labor dispute. A strike deadline of 11:00 am was set by the UAW leadership pending successful negotiation of a new contract patterned after the pact with GM. As the talks progressed past the deadline, most Chrysler unionized workers walked off their jobs. With media speculation about the impact of a long strike, an impromptu announcement after 5:00 pm the same day indicated that a tentative agreement had been reached, thus ending the walkout after just over six hours.
Chrysler later collaborated with Tata Motors Limited of India: Tata's all-electric Ace mini truck was sold through Chrysler's Global Electric Motorcars division. In February 2008, the company announced it would reduce its product line from 30 models to 15 models. The automaker was first reported to be in talks with Fiat in August 2008.
THE MELTDOWN
In October 2008, Cerberus and General Motors discussed an exchange of GM's 49 percent stake in GMAC for Chrysler, potentially merging two of Detroit's "Big Three" automakers. These talks did not come to fruition and were discontinued the next month. On October 23, 2008, Daimler announced that its stake in Chrysler had a book value of zero dollars after write offs and charges. On October 24, 2008, Chrysler announced a 25 percent cut, or 5,000 jobs, in its salaried and contract workforce in November 2008.
Michigan governor Jennifer Granholm announced that she and five other governors sent a letter to U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke requesting emergency funding for the Detroit Three. That same day General Motors asked the Treasury Department for $10 billion to help restructure both their company and their possible future sibling, Chrysler, so they, in turn, could become one massive company.
By November 5 Chrysler sales in the U.S. market had fallen 34.9 percent in the past 12 months. A week later, CEO Robert Nardelli stated that the company could only remain viable by forming an alliance with another automaker, domestic or global, as well as receiving government assistance in the form of an equity stake. Several days later, Chrysler, Ford and GM all sought financial aid at a Congressional hearing in Washington D.C. in the face of worsening conditions caused by the automotive industry crisis. All three companies were unsuccessful and were invited to draft a new action plan for the sustainability of the industry.
On November 25 the Insurance Institute for Highway Safety released their Top Safety Pick awards for the year. 72 vehicles earned the Top Safety Pick award for 2009, more than double the number of 2008 recipients and over three times the number of 2007 winners. Chrysler LLC remains the only major automaker still lacking a single Top Safety Pick.
FALLING OFF THE CLIFF
Last November Chrysler sales in the U.S. market had fallen 35 percent in the past 12 months, with only 398,119 automobiles and 1,055,003 trucks sold during the year.
Beginning in December 2008, amid the automobile crisis, Chrysler announced they were dangerously low on cash and might not survive past 2009. After the defeat of the auto bailout in the Senate, the company stated they would most likely file for bankruptcy and shut down all operations permanently. On December 17 the automaker announced plans to halt production at all 30 of its manufacturing plants through January 19. It also charged fees on dealers holding inventories of new cars and trucks that were unsold after more than 360 days and required immediate payment of all remaining balances on inventories of used vehicles that remained unsold after six months.
Chrysler's 2008 performance was hit the hardest among the Big Three automakers, with only 398,119 automobiles and 1,055,003 trucks sold during the year. On December 19 President George W. Bush announced a $13.4 billion rescue loan for the American automakers, including Chrysler.
On January 20 Fiat SpA and Chrysler LLC announced a non-binding term sheet to form a global alliance. Under the terms of the potential agreement, Fiat could take a 35 percent stake in Chrysler and gain access to its North American dealer network in exchange for providing Chrysler with the platform to build smaller, more fuel-efficient vehicles in the U.S. and reciprocal access to Fiat's global distribution network.
On March 7 Chrysler Vice-Chairman Jim Press stated that current sales volume was sufficient to keep the company going, as sales should rise in the coming months. The Chrysler executive also noted that the automaker?s February retail sales were actually better than Ford?s, as Chrysler continued to curtail lower-margin fleet sales. He said the volumes being forecast for 2009 were within the estimates Chrysler envisioned in preparing its viability plan for the federal government.
On March 30 the White House announced it would provide an additional $6 billion in further support to Chrysler, contingent on the company finalizing an alliance with Fiat before the end of April. President Barack Obama issued a U.S. Government guarantee of Chrysler's warranty liabilities, publicly stating that the U.S. Government would back the warranties on Chrysler vehicles if the company were to go out of business.
By mid-April, as talks intensified between the two automakers to reach an agreement by a government-imposed deadline of April 30, Fiat's initial stake was reported to be 20 percent and include some influence on the structure of top management of the company. However, Fiat warned that the merger would not take place if Chrysler faild to reach an agreement with the UAW and the Canadian Auto Workers' Union.
On April 26 Chrysler appeared to reach a deal with the unions that would meet federal requirements, though details were not made available. The company said the union agreement ?provided the framework needed to ensure manufacturing competitiveness and helped to meet the guidelines set forth by the U.S. Treasury Department.?
On April 27 Daimler AG signed a binding agreement to give up its 19.9 percent remaining stake in Chrysler LLC to Cerberus Capital Management and pay as much as $600 million into the automaker's pension fund. On April 30 Chrysler filed for Chapter 11 bankruptcy protection at the Federal Bankruptcy Court of the Southern District of New York in Manhattan and announced a partnership with Fiat.
Chrysler announced on the day of the bankruptcy filing that during its restructuring it would cease most manufacturing operations on May 4 and resume production when the transaction is completed, which is anticipated within 30 to 60 days.
THANKS FOR THE MEMORIES
So our journey through the history of Chrysler ends with both the White House and Chrysler expressing hope for a "surgical" bankruptcy targeted to reduce the company's liabilities and post-bankruptcy emergence in stronger financial shape. Submitted court documents indicate there will be a reorganization plan presented to the court in 120 days, on August 28.
A new company, known as New CarCo Acquisition LLC, will be formed to acquire the assets of Chrysler. A White House official indicated the government will provide debtor-in-possession financing somewhere between $3 billion to $3.5 billion. Upon a completion of Chrysler bankruptcy restructuring and court proceedings, the company will be eligible to receive up to $4.5 billion in financing to resume operations, for total of $8 billion of government support.
The story is over for the Chrysler that once etched a unique mark in the American automotive landscape. But the fond memories it leaves behind with will stay with us forever. Here?s a toast to Hemis, muscle cars and a time gone by.
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?The Business at Hand? was sourced from Industrial Info Resources, Inc., Sugar Land, TX.
Information and photos for the remainder of our journey was sourced from research on Wikipedia.