1 May 2009

Chrysler in bankruptcy deal

3:31 pm on 1 May 2009

United States car maker Chrysler is to enter a government-backed bankruptcy and a partnership with Italy's Fiat.

The ailing company will get a total of $US10.4 billion in funding from the US and Canada to support the move.

US President Barack Obama says the Fiat alliance and bankruptcy reorganisation "will save more than 30,000 jobs in Chrysler and tens of thousands of jobs to suppliers, dealers, and other businesses".

Senior US officials said the company, founded in 1919 by Walter Chrysler, was forced to file for protection under Chapter 11 of the bankruptcy code after creditors baulked at a deal to reduce $US6.9 billion in debt.

A senior official said the government would provide up to $US8 billion in bankruptcy financing and exit financing.

The US Treasury would hold 8% of the equity of the new Chrysler under the plan and have a right to select four independent directors, but "will not play a role in the governance or management of the company", a White House statement said.

Chrysler employed 54,000 people around the world at the end of 2008.

Chrysler-Fiat deal

The deal between Chrysler and Fiat deal creates the sixth-biggest vehicle maker in the world.

Fiat is to invest in technology to help Chrysler build more fuel-efficient cars in US factories.

It has right to choose three Chrysler directors and can earn up to 15% in additional equity for meeting targets such as producing a vehicle from a US factory that performs at 40 miles per gallon (5.88 litres per 100 kilometres).