Chrysler LLC and twenty-four of its affiliated subsidiaries filed a consolidated petition for bankruptcy on April 30, 2009, with the federal bankruptcy court in New York. The court filing occurred upon failure of the company to come to agreement with its creditors for an outside-of-bankruptcy restructuring plan, by the April 30 deadline mandated by the federal government.
On Sunday, May 31, 2009, bankruptcy judge Arthur J. Gonzalez approved a proposed government restructuring plan and sale of Chrysler's assets. The sale allows most of the assets of Chrysler to be purchased by a new entity in which Fiat would own 20%, and the autoworker's union retirement health care trust (voluntary benefit association "VEBA") 55%, with the U.S. and Canadian government as minority stakeholders. Secured bondholders would receive 29 cents on the dollar for their claims. The sale was appealed to the New York circuit court, which affirmed the sale on June 5, 2009. The dissident Indiana pension plan bondholders appealed again to the U.S. Supreme Court to block the sale. The U.S. 2nd circuit appeals court stayed its decision, pending a response from the Supreme Court, until 4 pm, June 8, 2009.
On June 8, 2009, Supreme Court Associate Justice Ruth Bader Ginsburg, who handles emergency motions arising from the United States Appeals Court for the Second Circuit, in a one-sentence order, temporarily stayed the orders of the bankruptcy judge allowing the sale, pending further order by Justice Ginsburg or the Supreme Court.
On June 9, 2009, the Supreme Court published its denial of the applications for a stay of the sale from the three Indiana funds, allowing the sale of assets to "New Chrysler" to proceed.
According to the two-page decision and order, the Indiana funds "have not carried the burden" of demonstrating that the Supreme Court needed to intervene. The U.S. Department of the Treasury issued a statement saying: "We are gratified that not a single court that reviewed this matter, including the U.S. Supreme, found any fault whatsoever with the handling of this matter by either Chrysler or the U.S. government." The proposed sale of assets is scheduled to close on June 10, 2009, when the money to finance the deal is wired by the government. Fiat will receive equity in the New Chrysler through its contribution of automobile platforms as a base for a new line of Chrysler cars.
On June 10, 2009, the sale of most of Chrysler assets to "New Chrysler", formally known as Chrysler Group LLC was completed. The federal government financed the deal with US$6.6 billion in financing, paid to the "Old Chrysler", formerly known as Chrysler LLC and currently named Old Carco LLC.
The transfer did not include eight manufacturing locations, nor many parcels of real estate, nor equipment leases. Contracts with 789 U.S. auto dealerships, that were being dropped, were not transferred.
By mid-April, as talks inte
By mid-April, as talks intensified between the two automakers to reach an agreement by a government-imposed deadline of April 30, Fiat's proposed initial stake was reported to be 20% with some influence on the structure of top management of the company.
However, Fiat had warned that there would be no agreement if Chrysler failed to reach an agreement with the UAW and the Canadian Auto Workers' Union. On April 26, 2009, it appeared as if Chrysler had reached a deal with the unions which would meet federal requirements, though details were not made available. Chrysler said the union agreement "provides the framework needed to e
However, Fiat had warned that there would be no agreement if Chrysler failed to reach an agreement with the UAW and the Canadian Auto Workers' Union. On April 26, 2009, it appeared as if Chrysler had reached a deal with the unions which would meet federal requirements, though details were not made available. Chrysler said the union agreement "provides the framework needed to ensure manufacturing competitiveness and helps to meet the guidelines set forth by the U.S. Treasury Department."
Chrysler filed for chapter 11 bankruptcy protection at the Federal Bankruptcy Court of the Southern District of New York, on April 30, 2009, and announced an alliance with Fiat.
Both the White House and Chrysler expressed hope for a "surgical" bankruptcy lasting 30 to 60 days, with the result of reducing the company's liabilities and post-bankruptcy emergence in stronger financial shape. The submitted court documents indicated that there would be a reorganization plan presented to the court in 120 days, on August 28, 2009
Both the White House and Chrysler expressed hope for a "surgical" bankruptcy lasting 30 to 60 days, with the result of reducing the company's liabilities and post-bankruptcy emergence in stronger financial shape. The submitted court documents indicated that there would be a reorganization plan presented to the court in 120 days, on August 28, 2009. A White House official indicated that the government would provide debtor-in-possession financing for between US$3 billion to US$3.5 billion, and upon a completion of Chrysler bankruptcy restructuring and court proceedings, the company would be eligible to receive up to US$4.5 billion in financing to resume operations, for total of US$8 billion of government support. Prior to the bankruptcy filing, Chrysler had received US$4.5 billion in financing from the U.S. government, under a George W. Bush administration plan, in December 2008, after Congress declined to approve legislation to provide federal loans. Between 2007 and 2012, Chrysler benefitted from $1.39 billion in local tax incentives.
A new company will be formed to acquire the assets of Chrysler, which will be known as New CarCo Acquisition LLC.
Chrysler announced on the day of the bankruptcy filing that during the restructuring it would cease most manufacturing operations on May 4, 2009, and resume production "when the transaction is completed, which is anticipated within 30 to 60 days."
On May 1, the two assembly plants in Canada, Brampton Assembly and Windsor Assembly, both located in Ontario, were shut down indefinitely. The shut downs affected about 2,700 and 4,400 employees respectivel
On May 1, the two assembly plants in Canada, Brampton Assembly and Windsor Assembly, both located in Ontario, were shut down indefinitely. The shut downs affected about 2,700 and 4,400 employees respectively. A Chrysler parts plant in Etobicoke, Toronto operated until May 10, 2009, when it was shut down, affecting 300 employees.
Chrysler attorneys said eight of the company's factories, including five with a total of 4800 employees closing in 2010, would not be part of the Fiat deal. The company also announced the retirement of president and vice chairman Tom LaSorda.
Documents showed that the Sterling Heights, Michigan plant, the Detroit Conner Avenue plant and the St. Louis North plant would close, along with the Twinsburg, Ohio parts-stamping plant and the Kenosha, Wisconsin engine plant.
The St. Louis South plant and a Newark, Delaware plant were already closed and should not be sold to Fiat. Work from the Detroit axle plant, also not part of the Fiat deal, was moving to Port Huron, Michigan. The eight plants would be leased by "new Chrysler" and then closed in 2010. As many employees as possible would be offered jobs at other Chrysler plants.
Federal bankruptcy judge Arthur J. Gonzalez approved six motions at a May 1 hearing. At the next hearing on May 4, attorneys were expected to ask Gonzalez for permission to use the $4.5 billion the company had already received from the U.S. and Canadian governments to let the company continue operations. Also expected at the same hearing was a request for a date to sell assets to "new Chrysler." No other bids were expected, but documents showed attempts at deals with dozens of companies, including Renault–Nissan, Toyota, Honda, Volkswagen and General Motors. Banks possessing 70 percent of Chrysler debt agreed to be paid 29 cents on the dollar. But some hedge funds and other creditors that failed to agree with proposed pre-bankruptcy restructuring of debt have yet to approve of the debt restructuring proposed in initial court bankruptcy motions. A health care trust fund owned by the United Auto Workers is proposed to own a 55% stake in the new Chrysler.
On May 14, 2009 Chrysler filed with the
On May 14, 2009 Chrysler filed with the bankruptcy court to terminate the dealership agreements of 789, or about 25% of its dealerships.