Chrysler in Trouble

Chrysler in Trouble
Case Code: BSTR338
Case Length: 21 Pages
Period: 2008-2009
Pub Date: 2009
Teaching Note: Not Available
Price: Rs.300
Organization: Chrysler Motors LLC.
Industry: Automobiles
Countries: US
Themes: Managing in Trouble Times, Slowdown in Global Automobile Industry, Bankruptcy
Chrysler in Trouble
Abstract Case Intro 1 Case Intro 2 Excerpts

"For too long, Chrysler moved too slowly to adapt to the future, designing and building cars that were less popular, less reliable and less fuel efficient than foreign competitors."

- Barack Hussain Obama, President of the United States, in April 2009.

"More than anything the consumers are very hesitant to do business with a manufacturer in bankruptcy."

- Peter Grady, Executive at Chrysler, in May 2009.

"This partnership (with Fiat SpA) transforms Chrysler into a vibrant new company with a wealth of strategic advantages. It enables us to better serve our customers and dealers with a broader and more competitive line-up of environmentally friendly, fuel-efficient high-quality vehicles."

- Bob Nardelli, Chairman and CEO of Chrysler LLC, in May 2009.

Chrysler Files for Bankruptcy

On April 30, 2009, Chrysler Motors LLC (Chrysler), the third largest automobile manufacturer in the US, filed for bankruptcy protection under Section 3634 of Chapter 115 of the US bankruptcy code in the Manhattan Bankruptcy Court along with its 24 wholly-owned US subsidiaries.

As part of its bankruptcy filing, Chrysler announced that it would establish a global strategic alliance with Fiat SpA (Fiat). It would create a new company in which Fiat would initially have a 20 percent stake, which would later be increased up to 35 percent.

The Voluntary Employees' Benefit Association (VEBA) would have a 55 percent stake in it and the US Treasury Department (US Treasury) an 8 percent stake. The Canadian and Ontario governments would have a combined 2 percent stake, with the Canadian government holding 1.33 percent and the Ontario government the remaining 0.67 percent stake.

Chrysler was struggling to stay afloat even after receiving financial aid in the form of a federal loan. The company had got a federal loan of US$ 4 billion in January 2009 out of the requested amount of US$ 7 billion...

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