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Fiat and Chrysler finalise global alliance

Fiat has finalised its global strategic alliance with Chrysler which will see the Italian carmaker’s chief executive Sergio Marchionne become CEO of Chrysler too.

Robert Kidder has been named to become chairman of the “New Chrysler” which is now out of Chapter 11 bankruptcy protection and begins operations immediately.

As part of the alliance, Fiat will contribute to technology, platforms and powertrains for small- and medium-sized cars to Chrysler.

Marchionne said: “This is a very significant day, not only for Chrysler and its dedicated employees, who have persevered through a great deal of uncertainty during the past year, but for the global automotive industry as a whole.

“From the very beginning, we have been adamant that this alliance must be a constructive and an important step towards solving the problems impacting our industry. We now look forward to establishing a new paradigm for how automotive companies can operate profitably going forward.”

The deal

Under the terms approved by the US bankruptcy court in New York and various regulatory and antitrust regulators, the company formerly known as Chrysler LLC yesterday formally sold substantially all of its assets, without certain debts and liabilities, to a new company that will operate as Chrysler Group LLC.

Chrysler Group in turn issued to a subsidiary of Fiat a 20% equity interest on a fully diluted basis in the new company.

Fiat has also entered into a series of agreements necessary to transfer certain technology, platforms and powertrains to the new Chrysler. Fiat’s equity interest will increase in increments by up to a total of 35% in the event that certain milestones mandated by the agreement are achieved, but Fiat cannot obtain a majority stake in Chrysler until all taxpayer funds are repaid.

Similarly, the United Auto Workers’ Retiree Medical Benefits Trust, a voluntary employees’ beneficiary association trust (VEBA) has been issued an equity interest in
Chrysler Group equal to 55%. The US Treasury and the Canadian government have been issued an equity interest equal to 8% and 2% respectively.

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