Abstract

The case details the events that led to the financial crisis at Chrysler Motors LLC (Chrysler), the third largest automaker in the US. Chrysler's inability to launch vehicles in accordance with customers' requirements and poor business strategy resulted in declining auto sales. Moreover, the global financial crisis in 2008 worsened the situation further, Chrysler found it increasingly difficult to continue its operations. To overcome its problems, Chrysler approached the US government for a loan. The company received a federal loan of US$ 4 billion in January 2009 out of the requested amount of US$ 7 billion. In order to get additional federal loan, Chrysler was asked to establish an alliance with Fiat SpA (Fiat) on or before April 30, 2009, restructure its debt and negotiate with UAW (United Auto Workers) and CAW (Canadian Auto Workers) to reduce costs. Chrysler was able to reach an agreement with Fiat and was able to convince UAW and CAW to reduce costs. However, it failed to get all its creditors to agree for debt restructuring. On April 30, 2009, Chrysler, along with its 24 wholly-owned US subsidiaries, filed for bankruptcy protection under Section 363 of Chapter 11 of the US bankruptcy code. As part of its bankruptcy filing, Chrysler announced that it would establish a global strategic alliance with Fiat. The case ends with a discussion on the future challenges for Chrysler.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Analyze the reasons for the financial problems faced by Chrysler.
• Study the rationale for poor business performance of Chrysler in the recent years.
• Evaluate the alliance between Chrysler and Fiat and examine its potential synergies.
• Analyze the future challenges of Chrysler.

Keywords

Chrysler Motors LLC, Bankruptcy Protection, Fiat SpA, Voluntary Employees' Benefit Association, US Treasury Department, Federal Loan, Restructuring Plan for Long Term Viability, United Auto Workers, Canadian Auto Workers, Debt Restructuring, Bob Nardelli, Global Financial Crisis, Business Strategy, Lack of Innovation, Lee Iacocca, DaimlerChrysler Merger, Merger of Equals, Restructuring Plan, Fiat-Chrysler Alliance, Powertrain Technology, Fiat's Global Distribution Network, Strategic Partnership, Winding Up of Operations