CHICAGO, June 10 (Xinhua) -- Chrysler LLC, the third largest U.S. automaker that filed for bankruptcy protection at the end of April, has completed its sales of assets to a new group headed by Italian auto giant Fiat, allowing for the formation of a new automaker -- Chrysler Group LLC.
The new group will combine the good assets from the bankrupt Chrysler and technology from Fiat, the company announced on Wednesday.
The move came one day after the U.S. Supreme Court decided not to hear a court action from a group of pension funds in the U.S. state of Indiana, which had temporarily halted the merger on Monday.
The deal has come five days ahead of a deadline imposed by Fiat to complete the merger and is expected to open the door for more government loans to the struggling Chrysler.
The deal gives Fiat, which manufactures Fiat-, Alfa Romeo-, and Lancia-branded vehicles in Europe, 20 percent of the equity in Chrysler in exchange for sharing billions of dollars worth of technology and engineering assets with the U.S. automaker. The company has an option to buy up to 35 percent of Chrysler down the road if certain milestones mandated by the agreement are achieved.
The two sides signed off on a partnership this morning that creates a new automaker to be known as Chrysler Group LLC.
It begins operations immediately, under new chairman Robert Kidder and Chief Executive Officer Sergio Marchionne, who is also CEO of Fiat. Former Chrysler chairman and CEO Robert Nardelli returns to former employer Cerberus Capital Management LP.
"This is a very significant day, not only for Chrysler and its dedicated employees, who have persevered through a great deal of uncertainty during the past year, but for the global automotive industry as a whole," Marchionne said in a statement released on Wednesday morning.
"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. We now look forward to establishing a new paradigm for how automotive companies can operate profitably going forward," Marchionne added.
Chrysler and Fiat wasted no time consummating the deal to get the new company up and running. The new Chrysler combines the most valuable assets of the bankrupt U.S. automaker with small-car and engine technology from Fiat, which is not putting cash into the deal.
Fiat has an initial 20-percent stake in the company, which will grow to 35 percent on certain conditions and can increase to as much as 51 percent when all government loans are repaid. The U.S. Treasury and the governments of Canada as well as Canada's Ontario province are providing 6 billion dollars in loans to the new company, on top of more than 7 billion dollars that the old Chrysler had received.
The new CEO said the Chrysler plants, which have been idled since Chrysler filed for bankruptcy protection on April 30, "will soon be back up and running, and work is already under way on developing new environmentally friendly, fuel-efficient, high-quality vehicles that we intend to become Chrysler's hallmark going forward."
According to a Detroit News report, Marchionne will bring Fiat management style to Chrysler, and the Italian automaker also offers its international distribution network to sell Chrysler vehicles in Europe, Latin America and Russia.
The new company will be governed by a nine-member board including Marchionne and two more Fiat appointees. Four directors will be appointed by the U.S. government, one will come from the Canadian government and one from the United Auto Workers' retiree health trust fund.
Under the deal, Fiat's shareholding will expand to 35 percent if certain targets are met. The United Auto Workers union gets 55 percent of the new company, while the U.S. and Canadian governments will take 8-percent and 2-percent stake, respectively.
Despite a U.S. government bailout effort at the end of last year, Chrysler was forced into bankruptcy protection by depleted sales, huge debts and crippling labor, pension and healthcare costs.
The new Chrysler will still have its headquarters in the U.S. state of Michigan and will produce Chrysler, Jeep and Dodge branded vehicles and Mopar spare parts.