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Court Approves Sale of Chrysler LLC Operations to New Company Formed with Fiat

Auburn Hills, Mich. , Jun 1, 2009 -

Chrysler LLC today announced that the U.S. Bankruptcy Court, Southern District of New York, has approved its request to sell substantially all of its operations to Chrysler Group LLC, the new company formed in alliance with Fiat SpA.

“With this approval, the new Chrysler Group is created and can prepare to launch as a vibrant new company formed with Fiat,” said Robert L. Nardelli, Chairman and Chief Executive Officer of Chrysler LLC. “Through the hard work and foresight of many Chrysler stakeholders, Chrysler Group will soon begin operations with significant strategic advantages, such as a wage and benefit structure for active and retired employees that is competitive with those of transplant manufacturers; a reduction of debt and interest expense; the disposition of idle assets; a rationalized and more efficient dealer network; and sound agreements with our suppliers. While this has been an extremely difficult chapter in Chrysler’s history for all involved, the new Company and its customers, employees and suppliers can now begin on a fresh page.”

The alliance with Fiat provides Chrysler Group with access to exciting products that complement the Company’s current portfolio, technology cooperation and stronger global distribution. Work with Fiat is already well underway to develop the next generation of environmentally friendly, fuel-efficient high-quality vehicles.

These and other important steps taken over the past month will position Chrysler Group to provide customers and dealers with the high quality vehicles and service they expect, and enable the new company to become a strong competitor. Many of Chrysler’s stakeholders have worked expeditiously together to launch Chrysler Group, which will move quickly to realize the benefits of the alliance.

“We are very grateful to loyal Chrysler customers who have supported us throughout this process and assure them Chrysler Group is well prepared to produce and support quality vehicles under the Jeep®, Dodge and Chrysler brands as well as parts under the Mopar® brand,” continued Mr. Nardelli. “We also recognize the sacrifices, unstinting loyalty and enduring belief in Chrysler of many stakeholders, including Cerberus and Daimler, the UAW and CAW leadership, employees, dealers and suppliers who made critical contributions to the viability of Chrysler Group, Chrysler Financial and their efforts with GMAC to provide financing, and the energy and commitment of the U.S. Treasury, the President’s Auto Task Force, Members of Congress and representatives at the state and community level and Canadian Federal and Ontario Provincial governments in helping to move Chrysler Group forward. Without the extraordinary efforts of all these constituents, the alliance and the creation of a new Chrysler would not have been possible.”

Chrysler’s Mexican, Canadian and other international operations will also be acquired by Chrysler Group.

As the Company announced previously on April 30, Mr. Nardelli, who had been leading Chrysler since August 2007, will resign from Chrysler LLC on completion of the transaction. He will return to Cerberus Capital Management LP as an advisor.
 

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New Company will be vibrant

Nardelli: new company will be vibrant, competitive

Posted Monday, Jun 1, 2009, 8:30 am in Employee News

Last modified on Monday, Jun 1, 2009, 9:07 am.

Dear Employees,

I am very pleased to report that the U.S. Bankruptcy Court has approved the sale of substantially all of Chrysler LLC’s assets to the new company formed in alliance with Fiat, named Chrysler Group LLC.

The new company will be a vibrant and competitive auto company. It will begin operations with significant strategic advantages, including a wage and benefit structure for active and retired employees that is competitive

with those of transplant manufacturers; reduced debt and interest expenses; high-performing assets; a more efficient dealer network poised for profitability and sound agreements with our suppliers.

Chrysler can look forward to quickly developing a strong and synergistic partnership with Fiat, whose product portfolio, technology and global distribution network will complement Chrysler’s own strengths. Work with

Fiat is underway to develop the next generation of environmentally friendly, fuel-efficient, high-quality vehicles.

This has been an extremely challenging chapter in the company’s history for all involved, requiring hard choices and painful sacrifices by all stakeholders. Now Chrysler has a tremendous opportunity to start anew and

build something special in a global alliance with Fiat.

Thanks again to all of you who’ve worked so hard to bring us to this important point in Chrysler’s long history and put the new company on the road to a brighter future.

Bob
 

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Judge's Order

Chrysler's transformation from bankruptcy to a new company owned by Fiat, U.S. and Canadian taxpayers and UAW retirees, whose health care benefits could shrink in coming years, has been approved by U.S. Bankruptcy Judge Arthur Gonzalez.
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A $2-billion cash payment to about 45 banks and investments funds who will forgive $6.9 billion in loans, and at least $8.9 billion in aid to Chrysler has come from U.S. taxpayers. At least $4 billion of that money will not be repaid.

"The economic reality is that no one was willing to lend other than these governmental entities," Gonzalez wrote in his opinion. "In the current economic climate, the only alternative would be an immediate liquidation, which the evidence has shown would not bring a higher return to creditors."

• PDF: See the judge's order on Chrysler sale (47 pages)

http://www.freep.com/uploads/pdfs/2009/06/0601_chrysler.pdf

Balance of Article Link:Judge OKs Chrysler sale | Freep.com | Detroit Free Press
 

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Chrysler Getting $6.9 Billion

Chrysler Getting $6.9 Billion for New Company, Treasury Says

May 29 - The new Chrysler LLC that will emerge from bankruptcy will receive a $6.6 billion in exit financing, the U.S. Treasury said today in a statement today.

The new entity will also get almost $350 million under a loss-sharing deal with GMAC LLC that was previously announced, according to Treasury.

In the same document that listed transactions in the government’s Troubled Asset Relief Program, Treasury said General Motors Corp. got $360.6 million in additional aid to fund its warranty program. The assistance brings to $19.76 billion the total that Detroit-based GM has received so far.

President Barack Obama announced loan guarantees for Chrysler and GM warranties on March 30. It aims to reassure potential car buyers that the government would backstop claims if needed.

LINK:Chrysler Getting $6.9 Billion for New Company, Treasury Says - Bloomberg.com
 

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Judge Moves Appeal

June 2, 2009, 11:41 am
Judge Moves Appeal of Chrysler Sale to 2nd Circuit

A federal judge on Tuesday ordered an appeal of Chrysler’s sale to Fiat be heard by the Second Circuit Court of Appeals, a move lawyers for the American carmaker had sought in an effort to fast-track the deal.

Normally, appeals to bankruptcy court decisions are heard in federal district court, which sits directly above bankruptcy court in the judicial hierarchy. But cases may be moved directly to the appeals court if a judge finds the need to do so necessary.

Judge Arthur J. Gonzalez, who has overseen the Chapter 11 case, wrote in his order: “This case involves a matter of public importance, and an immediate appeal may materially advance the progress of this case.”

The appeal was filed by lawyers for a group of Indiana pension funds, who objected to the sale because they are seeking more compensation for the Chrysler secured debt that they hold.

The funds hold about $42.5 million of Chrysler’s $6.9 billion in first-lien debt, so called because it is first in line for repayment. But holders of about 92 percent of those loans agreed to a government plan whereby they will receive 29 cents on the dollar in cash for their claims.

The Indiana funds have questioned whether they would have earned more money in a liquidation of the company.

Late Sunday night, Judge Gonzalez approved Chrysler’s sale to Fiat, overruling the objections by the Indiana funds and others. On Monday night, he agreed to shorten a customary 10-day stay of the sale to four days, allowing Chrysler to complete the transaction by Friday at noon.

Should that happen, the Indiana funds would likely receive only damages if the appeals court rules in their favor, rather than an unwinding of the deal.

LINK:Judge Moves Appeal of Chrysler Sale to 2nd Circuit - DealBook Blog - NYTimes.com
 

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Judge Sides With Chrysler

June 2, 2009, 3:08 pm
Judge Sides With Chrysler on Liability Issue


In approving the sale of most of Chrysler’s assets to a new company run by Fiat over the weekend, Judge Arthur J. Gonzalez also granted the automaker’s request that the new company not be held liable for future product-liability problems involving current owners. That means people who own a Chrysler, Dodge or Jeep have lost their right to sue if they are injured by a safety defect.

In court filings, Fiat had argued it was unfair to burden it with financial obligations springing from the “old” Chrysler. And during the bankruptcy hearing, Robert L. Nardelli, Chrysler’s chief executive, testified that the idea of not allowing current owners to sue came up during the discussions between the Treasury and Fiat.

Consumer groups, including Public Citizen, the Center for Auto Safety and Consumers for Auto Reliability and Safety, have formally objected, arguing that Chrysler’s request would deprive consumers of their rights. But Judge Gonzalez dismissed those objections.

“Every single person who owns a Chrysler vehicle now has nobody standing behind them if this order is confirmed by the appellate court,” said Scott P. Nealey, a San Francisco lawyer who worked with the consumer groups to oppose that provision.

Mr. Nealey said the groups planned to appeal.

As noted in my previous blog posts several law professors have questioned whether a bankruptcy judge can take away an owner’s future legal rights without due process.

Another concern of consumer groups was the people who already have been injured in accidents and have filed suits against Chrysler, asserting a vehicle had a safety defect. The groups said even if those people win in court they will have virtually no chance of getting money from the automaker. They asked the judge to intervene, but he did not.

Mr. Nardelli said in court that after Chrysler’s debts are settled there will be very little money, if any, available to those litigants.

LINK:Judge Sides With Chrysler on Liability Issue - Wheels Blog - NYTimes.com
 
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