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Italy's Fiat is the new owner of the bulk of
Chrysler's assets, closing a deal Wednesday that saves the troubled
U.S. automaker from liquidation and places a new company in the
hands of Fiat's CEO.


      The deal clears the way for a new, leaner Chrysler Group LLC to
emerge from bankruptcy protection minus billions in debt, 789
underperforming dealerships and burdensome labor costs that nearly
sank the storied automaker.


      Fiat CEO Sergio Marchionne immediately was named CEO of the new
company, which said in a statement that it would soon reopen
Chrysler factories that were idled during the bankruptcy process,
costing the automaker $100 million per day.


      The new company will focus on smaller vehicles, areas in which
Chrysler was weak.


      "Work is already under way on developing new environmentally
friendly, fuel-efficient, high-quality vehicles that we intend to
become Chrysler's hallmark going forward," the new company said in
a statement.


      The Italian automaker won't put any money into the deal but will
give Chrysler billions worth of small car and engine technology.


      "We intend to build on Chrysler's culture of innovation and
Fiat's complementary technology and expertise to expand Chrysler's
product portfolio both in North America and overseas," Marchionne
said in a statement.


      The sale to Fiat SpA marks a victory for the Obama
administration, which shepherded Chrysler into Chapter 11
protection on April 30 with the hope that the company would emerge
in a matter of months with a new partner.


      A senior administration official said last week that Marchionne
will make management changes in short order. Chrysler CEO Bob
Nardelli is stepping down while Vice Chairman Tom LaSorda already
has retired.


      The official did not want to be identified because the changes
have not been made public.


      On Tuesday, Chrysler won its battle to erase its secured debt
after the Supreme Court declined to rule on objections to the sale
to Fiat from a trio of Indiana pension and construction funds. The
Indiana funds, which hold less than 1 percent of Chrysler's $6.9
billion in secured debt, claimed the sale unfairly favors
Chrysler's unsecured stakeholders such as the union ahead of
secured debtholders like themselves.


      Supreme Court Justice Ruth Bader Ginsburg decided Monday to
delay the sale while studying the appeals. But on Tuesday, the
court turned down the opponents' last-ditch bid by declining a
hearing on the appeals.


      Also on Tuesday, Judge Arthur Gonzales approved Chrysler's
motion to terminate 789 of its dealer franchises, or about 25
percent of its dealer base.


      Many of those dealers closed their doors for good on Tuesday,
though some will continue to sell used cars or other brands.
Chrysler has maintained that the closures are a necessary part of
its plan to cut costs. Jim Press, Chrysler's vice chairman and
president, told a Senate committee that the poor performance of
many of the dealers slated to lose franchises costs the company
$1.5 billion in lost sales each year, along with $150 million in
advertising and marketing costs and $33 million in administrative
costs.

      The dealers had argued that they cover their own costs and
little would be gained by terminating their franchises. Chrysler
attorneys said the automaker would extend until Monday its program
to help the affected dealers send any unsold vehicles to stores
that will remain open.


      Chrysler's swift passage through about five weeks of bankruptcy
proceedings was helped by the involvement of the Obama
administration's auto task force, which provided billions in
financing and helped negotiate a deal with the company's
stakeholders.


      Under the agreement brokered in the days leading up to
Chrysler's Chapter 11 filing, Fiat will receive up to a 35 percent
stake in the automaker in exchange for sharing the technology
Chrysler needs to create smaller, more fuel-efficient vehicles.


      The United Auto Workers union will get a 55 percent stake that
will be used to fund its retiree health care obligations, while the
U.S. and Canadian governments will receive a combined 10 percent
stake. Fiat would get 20 percent, with the possibility of up to 35
percent.


      Meanwhile, the automaker's secured debtholders would get $2
billion in cash, or about 29 cents on the dollar, for their
combined $6.9 billion in debt. Some debtholders, including the
Indiana funds, balked at the deal, saying as secured lenders they
deserved more. The funds also challenged the constitutionality of
the Treasury Department's use of money from the Troubled Asset
Relief Program, or TARP, to supply Chrysler's bankruptcy protection
financing. They say TARP was earmarked for the financial industry
and diverted to the auto industry without Congressional authority.

      Consumer groups and individuals with product-related lawsuits
also contested a condition of the Chrysler sale that would release
the company from product liability claims related to vehicles it
sold before the asset sale to Fiat. Compensation for such claims
would have to come from the parts of the company not being sold to
Fiat. But those assets have limited value and it's unlikely there
will be anything to pay out.

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Business and Economic News

Italy's Fiat is the new owner of the bulk of
Chrysler's assets, closing a deal Wednesday that saves the troubled
U.S. automaker from liquidation and places a new company in the
hands of Fiat's CEO.


Fiat acquisition of Chrysler complete

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