Wednesday, May 6, 2009

THE FALL OF CHRYSLER,an icon of US Automobile Industry.

The word Chrysler once regarded as a symbol of American Manufacturing prowess, now is name of a BANKRUPT company. Chrysler was founded in 1925 By Walter Chrysler and its journey encompassed Astronomical highs and shameful lows.Not Surprisingly, Chrysler has found itself on verge of Bankruptcy few times ago also.Some of its iconic Brands included DODGE,JEEP,Chrysler,DODGE TRUCK.3 years after its foundation THE CHRYSLER BUILDING(New York) was built which for a brief history of time was tallest building in world. At one time Chrysler along with FORD and GM commanded roughly 75% of US market share for precisely that reason the term BIG THREE OF DETROIT was coined in an editorial.The company's closest encounter with Bankruptcy was in 1980's. The company was then turned around by iconic Chief LEE IACOCA who was later regarded as one of the most Talismanic CEO's along with Jack Welch of GE. Cracks started emerging in 2000's and then it was acquired by DAIMLER AG of Germany. Then in 2007 following poor performance it was sold off to CEREBREUS PE fund for around 7 Billion US Dollars ( Daimler booked LOSS on this deal). Cerebreus acquired 80% stake.
Surviving on Life Support of US govt since past few months finally filed for Chapter 11 Bankruptcy ( the only plausible option it had) few days ago. The best assets of Chrysler LLC(20%) would now be transferred to an entity which would be headed by FIAT Spa of Italy. Chrysler had to go for Bankruptcy option as talk of Restructuring Debts with bondholders could not go through as they felt that bankrupt Chrysler would provide better chance of Recovery of funds. There were about 45 large secured Lenders to Chrysler which posted 8 Billion US Dollar loss in 2008. Chrysler was not able to do the merger without going for Bankruptcy due to opposition of some of its influential Secured lenders. The merger now would create SIXTH largest car maker of world. The new entity( headed by FIAT,Canadian Govt, US Treasury,Employee association) would bid for Chrysler's assets and liabilities.This new company can hike the stake in Chrysler to 35% after fulfilling some preconditions.

Following this Chrysler would be able to get much needed 4.5 Billion US Dollars. Chrysler earlier also got 4 billion USD along with GM which has received 13 Billion USD till now. But prior to this Chrysler would have to complete Asset Sale to Fiat in 60 days and must win Approval of Auction Rules and any competing bids should be made by 20 May.

This will make way for further support by Canadian Govt. and total funding would touch around 8 Billion US Dollars and Chrysler will not only survive but also thrive after Bankruptcy provided it should clear all the hurdles and time Frames.
This would be Fifth Largest Bankruptcy in history of America according to BloomsBerg.

What remains to be seen is fate of GM. Will it also go to grounds?? Seeing the fate of Chrysler YES is the most probable possibility...free search engine submissiongoogleb45516a28d6817ba.html

3 comments:

  1. I like what you wrote about chrysler, very informative blog.

    ReplyDelete
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