Topics: General Motors, Automotive industry, Bankruptcy Pages: 5 (1553 words) Published: May 9, 2013

On April 30, 2009, Chrysler Motors, the third largest automobile manufacturer in the United States, filed for bankruptcy protection under Section 363 of Chapter 11 of the U.S. bankruptcy code in the Manhattan Bankruptcy Court along with its 24 wholly-owned U.S. subsidiaries. Included in the bankruptcy filing for Chrysler, it announced that they had established a global strategic alliance with Fiat SpA. The plan for Chrysler was to provide the public with a new face to the company and Fiat would hold a 20 percent stake that would ultimately increase up to 35 percent. The Voluntary Employees Benefit Association (VEBA) would hold 55 percent stake, 8 percent would be held by the U.S. Treasury Department (US Treasury), the Canadian government would hold 1.33 percent and Ontario government would hold 0.67 percent.

Even after receiving financial aid in the form of a federal loan Chrysler was struggling to keep their head above water. In January 2009 the company had received a federal loan in the amount of 4 billion US dollars compared to the 7 billion US dollars loan that it had requested. Chryslers declining sales was struggling to continue its operations. In their Restructuring Plan for Long Term Viability the company had asked for additional 2 billion US dollars over the already 7 billion US dollars it had initially requested. The US government made a series of stipulations that Chrysler had to comply with to receive the additional federal loan. Chrysler was required to make an alliance with Fiat before April 30th, 2009 and the company was also required to restructure its debt and negotiate with United Auto Workers and Canadian Auto Workers to reduce costs.

Despite being able to come to an agreement with Fiat as well as agreements to reduce cost with UAW and CAW it had failed to come to an agreement with all of its creditors to agree to a debt restructuring. This all forced Chrysler to file for bankruptcy protection. Many of Chrysler’s leadership was proud of the sacrifices made by stakeholders to allow in the alliance with Fiat. Excited in the fact that they were creating a global alliance but ashamed of the fact they were filing Chapter 11.

Although there were a variety of individual analysts that believed in Chrysler’s viability it was possible that they could come out of Chapter 11 bankruptcy soon. Many thought this was just going to be a temporary thing among them was the former CEO Lee Iacocca. They had been there before and ultimately they were on the ropes would fight through it again. FINDINGS OF FACT

Mergers & Acquisitions:
Growing up I was always skeptical of mergers and acquiring other companies due to the layoffs many of them create. In the bigger scheme of things, mergers and acquisitions can help create jobs and when companies maybe in risk of things like Chapter 11 bankruptcy, it allows companies to stay afloat.

The Fiat alliance had allowed Chrysler to reap the benefits of Fiat’s entire product portfolio, power train technology, and worldwide distribution capabilities in the vehicles that Chryslers was already producing. It allowed for synergies in the form of purchasing, engineering, and distribution channels. Additional synergies and opportunities in logistics, funding for NSCs, sourcing through Fiat, and Alfa Romeo distributed in the North American Free Trade Agreement. The Fiat alliance had created an additional 5,000 manufacturing jobs, but left employees with severely altered benefit programs.

As the President had stated, Chrysler was known for moving too slowly in designing, building, and adapting their products to the current trends of fuel efficient vehicles. Chrysler was playing consistently from behind and didn’t have any cutting edge vehicles or vehicles that the public was talking about.

Had Chrysler moved ahead on its alliance it could have utilized the resources that Fiat could offer. It seems that Chrysler’s ego got in the way. I’m a die...
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