President Obama has confirmed that the struggling US car company is filing for Chapter 11 bankruptcy protection
Chrysler failed to meet the Obama administration's deadline for turning itself into a viable business. Negotiations have failed to get support from its lenders over the past few weeks.
Announcing the decision, Obama, who famously owned a HEMI-powered V8 Chrysler 300C before taking office, said: "The necessary steps have been taken to give one of America’s most-storied companies a new lease on life."
Chrysler will use the bankruptcy protection to restructure, and is expected to announce a merger with Fiat soon. During Obama's speech, he said terms had now been agreed in principle with Fiat for the deal to go ahead.
Chrysler Australia and New Zealand are not part of any bankruptcy filing, and continue to market, sell and service its vehicles.
David Smith, General Manager of Chrysler New Zealand, says: “The filing for bankruptcy in the US does not affect the standing of the Chrysler business or our dealers in New Zealand – we are carrying on as normal, selling vehicles and attending to the needs of our customers. It is only the US operations that have filed for bankruptcy as part of President Obama’s plan to establish a vibrant and effective company in the future, in conjunction with new partner Fiat. We certainly look forward to the opportunities that will surely come from this venture.”
Obama also announced that the US government will give additional aid to GMAC so that it can take over lending to Chrysler's customers and dealers from Chrysler Financial, which the government has said is no longer viable. The Canadian government will also provide financial aid in return for a two per cent stake in the restructured company.
The decision is expected to cost the US government an additional $3.5 billion to keep the company running while its affairs are sorted out. The government has also pledged to provide up to $4.7 billion in aid for the restructured company.
The president said Chrysler will continue to operate as normal while it is under Chapter 11 bankruptcy protection, with no imminent job cuts planned until the restructuring is complete.