Chrysler will join with Italian Fiat.

President Obama confirmed on Thursday, that Chrysler, the third largest car company, would file for bankruptcy and join with Italian automaker Fiat (read more).

Obama underscored that, "This is not the sign of the weakness". Thanks to contracts with government, with creditors and trades-unions, all resulting in the decision to file for bankruptcy, the car company syndicate will survive and, "will be stronger and more competitive than ever before.”

Chrysler-Fiat Deal Still Possible?


Filing for bankruptcy (Chapter 11) will also give Chrysler a chance to reduce some of its debt. How much debt Chrysler will repay will be decided in court. Legal procedures should take about two months.

Chrysler’s tie-up with Fiat will assure the American car company of access to new fuel-efficient technology. In exchange, Fiat receives 20 percent of Chrysler’s equity and rights to earn 15 percent more. Chrysler will produce Fiat cars and their engines in their own factories and sell then under their own brand.
The present governor of Chrysler, Robert Nardelli, will by replaced by the chief of the Italian syndicate, Sergio Marchionne.

The restructuring plan was finalized on Thursday. The previous plan, which was rejected, permitted thirty days to present another one. The new plans calls for another 8 billion in taxpayer money after having already an earlier 4 billion in tax dollars.

Obama underlined that his administration is very interested in Chrysler’s survival, and praised the company as a symbol of American enterprise and innovation.

Pundits are quick to point out that Democratic administration supports car companies because their financial demise will only worsen our current economic crisis.

Obama is also politically indebted to the trades-unions of the Detroit car companies that strongly sponsored his presidential campaign.

President Obama speaks on Chrysler Bankruptcy, G-Power BM...