DETROIT/WASHINGTON, (Reuters) – Chrysler LLC filed for bankruptcy yesterday and announced an industry-changing deal with Fiat, after being pummeled by sliding auto sales and unable to reach agreement on restructuring its debt.
Despite weeks of intense negotiations, Chrysler failed to gain full support from its lenders to avoid the first-ever bankruptcy filing by a major U.S. automaker.
The move was hailed by President Barack Obama as a critical step in saving 30,000 jobs at Chrysler, majority-owned by Cerberus Capital Group, and hundreds of thousands more jobs at affiliated suppliers and dealers.
At the same time, Chrysler entered an expected alliance with Fiat SpA, in which the Italian carmaker was given an initial stake of 20 percent.
The deal will allow Fiat to own up to 35 percent as it makes investments in U.S. operations and small-car technology for Chrysler. Over time, Fiat could eventually own 51 percent after Chrysler has repaid its loans to the U.S. Treasury.
Chrysler has struggled in recent years to compete, hurt by its near total reliance on the U.S. market, poor quality and a truck and SUV-dominated vehicle line-up with the lowest combined fuel economy of any major automaker.
