Slimmed down Chrysler emerges

Slimmer, healthier Chrysler emerges
By Julie MacIntosh and Nicole Bullock in New York and Bernard Simon in Toronto
Copyright The Financial Times Limited 2009
Published: June 1 2009 19:10 | Last updated: June 2 2009 04:35
http://www.ft.com/cms/s/0/6807bf16-4ed2-11de-8c10-00144feabdc0.html


A slimmed down Chrysler is set to emerge from bankruptcy this week with Fiat’s chief Sergio Marchionne taking the helm in short order, said a person close to the matter.

Barack Obama, US president, praised the “quick, surgical” bankruptcy process of Chrysler. The automaker received court approval for the sale of most its operations roughly one month after it filed Chapter 11 and the night before General Motors’ petition on Monday.

A court order issued late Monday said the Chrysler sale can close on Friday.

Chrysler’s speedy trip through court is key for the US government to quell fears about the implications of a bankruptcy at its larger and more complex rival.

Chrysler’s board was expected to meet within a day or two of the closing of the transaction to appoint Mr Marchionne as chief executive. After Mr Marchionne’s appointment, Chrysler and Fiat will begin rolling out certain components of their integration plan, including alignments of the two companies’ manufacturing and engineering and an effort to export cars to Fiat dealers in Europe and Brazil.

“The period that GM is in bankruptcy is going to be another turbulent time with suppliers potentially struggling, so they need to be on the ball,” one person close to the matter said.

In the months leading up to Chrysler and GM’s filings, the companies’ executives worried that bankruptcy would drive customers away. But Chrysler insiders have been pleasantly surprised that sales of Chrysler cars have held up well, in relative terms, during the bankruptcy process.

Chrysler also enacted a heavier round of dealer closures than some insiders had expected.

“Chrysler is going to come out with not only a smaller dealer network but one that is much healthier,” because Chrysler has kept its manufacturing plants closed and has let its remaining dealers whittle down their inventories, said one person close to the matter. Mr Obama said on Monday that Chrysler sales were higher in May than April. However, the carmaker has offered unusually generous discounts and other incentives.

Furthermore, Chrysler has refused to buy back unsold cars and many of the 800 Chrysler, Dodge and Jeep dealers whose franchises will be revoked next week, have sought buyers for their inventory at bargain-basement prices.

On Sunday, Chrysler won court approval to sell most of its assets to a new Chrysler company that will be owned by the United Auto Workers union, Fiat and the governments of the US and Canada. Chrysler hopes to close the deal by Wednesday. A group of pension funds from Indiana, who own secured loans and oppose the transaction, plan to appeal. That could delay the timeline.