Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Chrysler Completes Final Step of Bankruptcy
Author: Joel R. Glucksman
Date: February 12, 2014
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During the recent recession, the demand for automobiles diminished significantly. Coupled with the “legacy” costs that Detroit’s automakers carried, particularly those concerning their accrued but unfunded pension and healthcare obligations to retired employees, the American auto industry nearly tanked, leading both General Motors and Chrysler to file for protection under Chapter 11 of the bankruptcy law. Chrysler however, one of those companies, recently completed the final step of its emergence from bankruptcy by paying $5 billion to a United Auto Workers Trust, according to Bloomberg.
The UAW health-care trust had provided these funds five years ago, to assist during Chrysler’s financial rescue. The company is now owned by Fiat, which bought the 41.5 percent share of the company that was held by the trust.
“Fiat and Chrysler together have satisfied all the monetary commitments that were made to Chrysler in 2009,” Chief Executive Officer Sergio Marchionne said in the statement. “None remain outstanding.”
With its bankruptcy case in the past, Marchionne plans to transform Fiat/Chrysler into a manufacturer that can compete with the likes of General Motors or Volkswagen AG. The primary listing – or main stock exchange – for the company is going to be moved to New York, where it will be renamed Fiat Chrysler Automobiles NV. Shares will also be traded on the Milan Exchange.
Now that the U.S. auto industry has pulled itself out of the recession, Fiat actually relies on its U.S. business for profit, as losses in Europe are piling up due to a six-year market contraction in the region. It will be interesting to see how the losses in Europe compare to the profits in the U.S. moving forward. If things get bad enough, could Fiat Chrysler Automobiles be headed for another bankruptcy – this time due to its European side?
- Practices: Bankruptcy & Creditors' Rights, Corporate Transactions & Business, Bankruptcy Litigation
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