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Message from Bob Nardelli

Posted Thursday, Jun 4, 2009,
Last modified on Thursday, Jun 4, 2009, 8:56 pm.

Dear Employees,

This week, we have cleared some additional hurdles on our way to finalizing a definitive alliance agreement between Chrysler and Fiat S.p.A.

As you know, last Sunday night, Judge Gonzalez approved the sale of substantially all of the assets of Chrysler to the new company formed in alliance with Fiat. This was very gratifying news as it sets the stage for the creation of a vibrant new company. We were pleased, too, that following this decision, the Judge ruled that any appeal of his order should be made directly to the Second Circuit Court of Appeals, eliminating the need to first file an appeal with the district court. He further set a deadline of Friday June 5 for the filing of any appeal. In reaching these decisions, the Judge recognized the importance of a quick resolution of the matter in order to preserve Chrysler’s value, and said that an immediate appeal would materially advance the progress of the case.

After the Indiana pension funds that are objecting to the sale filed an appeal, the appellate court, consistent with Judge Gonzalez’s recognition of the importance of the matter, scheduled a hearing on the case for Friday at 2:00 p.m. This is the last important matter to be resolved before the Chrysler-Fiat alliance can be finalized, and we are encouraged that the process continues to move along quickly. We look forward to a decision that will enable us to close the transaction very shortly.

On Wednesday, the U.S. Bankruptcy Court also approved a settlement with Cerberus and Daimler AG under which they will forgive all loans to Chrysler LLC in return for our dropping all claims against them. As with all our stakeholders, Cerberus and Daimler AG have made major concessions during this process in order to meet the requirements of the viability plan determined by the U.S. Treasury. Cerberus is giving up its equity stake to allow assignment of ownership to other stakeholders, has forgiven a $500 million loan to our company, will provide the Auburn Hills campus to the new company as part of the sale and is giving up its claims against Daimler. Daimler has agreed to walk away from a $1.5 billion loan to the company, will contribute $600 million to the Chrysler LLC pension fund and will provide an additional $200 million guarantee to the pension fund after the sale of the company is complete.

Today, hearings continued related to the discontinuation of contracts with 789 dealers who will not be part of the new company that we are forming with Fiat. The decision about which of the company’s dealers would be brought forward to the new company was gut wrenching, but absolutely necessary for our survival. The 2,392 dealers who will go forward with us will be much stronger – and therefore will make the new Chrysler Group stronger and more competitive for the long term. The fact is, Today’s automotive industry simply cannot support the number of dealers currently in the marketplace. From 1990 through 2007, the industry averaged 16 million new vehicles sold each year. As a result of the industry depression, U.S. light vehicle sales fell to 13.2 million vehicles in 2008, and are projected to be only 10 million to 10.5 million vehicles in 2009.

Our dealership realignment plan (as well as that of GM) was the subject of a hearing Wednesday before the U.S. Senate Committee on Commerce. Jim Press, representing Chrysler, made the point that we are working hard to assure as soft a landing as possible for discontinued dealers. Every dealer was offered help in the disposition of their vehicles, parts inventory, special tools and signage. On May 14, there were 42,000 vehicles in stock at discontinued dealers. To date, 97 percent of them have already been sold or have commitments in place to be redistributed.
 
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