The United Auto Workers (UAW) union and Chrysler reach a tentative arrangement on December 26th, 2009 that satisfy the requirements of the government for the struggling auto manufacturer to get added federal funding. Part of the arrangement permitted Chrysler to decrease the amount of funds it would give to retired workers’ healthcare costs. Before the deal was announced a month earlier, President Barack Obama gave Chrysler an ultimatum that it must commence a restructuring fundamentally and reduce its costs in order to be eligible to get government aid in the future.
The President also gave a month for Chrysler to finish a merger with another partner or Italian car maker Fiat. Chrysler was successful in reaching an arrangement with the UAW as well as its major creditors just before the deadline of one month had expired; nevertheless, Obama stated on April 30th that Chrysler would have to create a partnership with Fiat after having to file for bankruptcy protection under Chapter 11.
The reason for this was that Chrysler was unsuccessful in reaching an agreement with some of their smaller creditors. Since Studebaker had to do so in 1933, no other major automaker was forced to attempt to reorganize and file for bankruptcy until Chrysler had to do so. Walter P. Chrysler (1875-1940) originally established the Chrysler Corporation in 1925 and was previously an executive in the auto industry that was once in charge of General Motor’s Buick division. Under Walter Chrysler’s leadership in 1928, the Dodge Brothers Company was acquired by his company which cemented him as the third biggest auto maker in the world after Ford and GM.
Chrysler was able to expand for decades until its success came crashing to a halt after the 1973 oil crisis; this led to new standards for emissions by the government and skyrocketing costs for gas. The gas-guzzler vehicles that Chrysler created had to compete against more fuel-efficient imports that were smaller. This eventually would lead to the company in 1979 facing a financial situation that was so dire that in order for it to be rescued from a near-implosion; the federal government had to offer a bailout loan. Eventually, the company bounced back with two innovations such as the success of the minivan in 1984 and again during the 1990s with the creation of the jeep. Sadly, history repeated itself again in 1998 as Chrysler was once again going through financial difficulties; the result was a merger with German automaker Daimler that gave birth to Daimler-Chrysler. This lasted until 2007 where the company had split and Cerberus Capital Management, a hedge fund, acquired 80 percent stake in Chrysler by paying $7.4 billion.
Slumping auto sales and a global recession hit Chrysler hard in 2008 and needed to receive from the federal government a bailout loan of $4 billion; however, the company was forced into bankruptcy on April 30th, 2009. The company was able to emerge from bankruptcy later that year on June 10th as it sold off to Fiat the bulk of its assets as well as receiving $6.6 billion from the U.S. government through exit financing. The New York Times reported later that day the following: “As envisioned by Chrysler, Fiat and the government, [the sale] will create a new carmaker freed from the old Chrysler’s crushing labor costs and debt levels. In Fiat, which will run the company, it will have gained a partner skilled in making and selling small, fuel-efficient cars around the world.”