Fiat Buys Chrysler

June 1, 2009
Fiat will own 20% of the equity of New Chrysler, with the right to acquire up to an additional 31%

A U.S. bankruptcy judge approved the sale of Chrysler to Fiat, saying this was the only was to save the business in a ruling made available early on June 1. "The sale motion is granted in its entirety and entry into and performance under and in respect of the purchase agreement and the sale transaction is approved," judge Arthur Gonzalez wrote in his ruling.

He further added despite extensive efforts over the last two years "to seek various alliances for Chrysler, the Fiat transaction is the only option that is currently viable." The third-biggest U.S. automaker has declared bankruptcy and is seeking a tie-up with Fiat in a plan presented as the only way to save the company from liquidation.

Creditors, parts suppliers, dealership owners and others losing money in the bankruptcy argue that their rights have been trampled in the effort to force through the deal.

The government says a new Chrysler company could be born within days of approval for the bankruptcy.

But legal appeals were expected if Gonzalez ruled in favor, meaning possible new delays. Fiat has said it might back out if the transaction is not completed by June 15.

Thomas Lauria, an attorney for pension funds attempting to stop the bankruptcy, said the plan was "illegal" and stripped his clients of their protections as provided under bankruptcy law.

A lawyer representing some of the 789 dealers who face being shut down accused Chrysler choosing the victims in an unbusiness-like way that equated to "throwing darts at a board."

Chrysler was forced to file for bankruptcy protection on April 30, then agreed to an alliance with Fiat that will initially give the Italian company a 20% stake. In return, Fiat will allow access to its technology to enable the US carmaker to make the smaller, greener cars that are increasingly in demand.

The U.S. Treasury has provided Chrysler with $9 billion in emergency aid. Fiat must repay this money if it wants to take a majority stake in the Detroit firm.

Judge Gozalez wrote that "Fiat will contribute to New Chrysler access to competitive fuel-efficient vehicle platforms, certain technology, distribution capabilities in key growth markets and substantial cost saving opportunities."

After the conclusion of the Fiat transaction, Fiat will own 20% of the equity of New Chrysler, with the right to acquire up to an additional 31% of the company, according to the ruling.

Copyright Agence France-Presse, 2009

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