JIM LEHRER: Chrysler finalized the sale of its assets today to Italian automaker Fiat. The U.S. Supreme Court cleared the way last night when it refused to hear objections from Chrysler bondholders.
The new Chrysler Group starts without billions of dollars in debts and labor costs that weighed down the old Chrysler. It also shed nearly 800 dealerships in the bankruptcy process. The head of Fiat will run the new company. He said today Chrysler’s plants will reopen soon.
In Washington, White House press secretary Robert Gibbs welcomed the announcement.
ROBERT GIBBS, White House press secretary: I think it gives everybody confidence. Obviously, we had great confidence in the restructuring plan that had been put together as part of the deal that’s now been finalized with Chrysler and Fiat. It gives Chrysler a restructured opportunity to move forward.
JIM LEHRER: As part of that deal, the U.S. Treasury will lend the new Chrysler $4.7 billion, and the U.S. and Canadian governments will control 10 percent of the company. Fiat will own up to 35 percent, and the United Auto Workers union gets 55 percent.
Now Jeffrey Brown has more on our lead story.
JEFFREY BROWN: And with Chrysler emerging from bankruptcy, what now for a future with Fiat? For that, we turn to John Wolkonowicz, a senior analyst at the economic forecasting firm IHS Global Insight, and Francesco Guerrera, a U.S. finance and business editor for the Financial Times.
Well, Mr. Guerrera, start with the bankruptcy itself. There were objections and obstacles, but did the company and the government get what they wanted out of this?
FRANCESCO GUERRERA, Financial Times: They got exactly what they wanted, which was a quick in-and-out of bankruptcy. It was crucial, in their view, to the survival of Chrysler so that people didn’t flee, both the employees and the customers. They got what they wanted. Now they can start resuscitating the company.
Creating new products
JEFFREY BROWN: And, Mr. Wolkonowicz, what happens then to make Fiat and Chrysler a success? What's the next battle there?
JOHN WOLKONOWICZ, IHS Global Insight: Well, the next battle is creating new products that American consumers get excited about. That's a real challenge.
JEFFREY BROWN: Well, tell me more. What do they have to do?
JOHN WOLKONOWICZ: Well, you know, they have to deliver products that meet the new CAFE regulations while still giving consumers what they want, so that means fuel-efficient power trains, primarily.
JEFFREY BROWN: Is there reason to think that they can do that? What will Fiat be bringing to allow them to do that?
JOHN WOLKONOWICZ: Fiat brings small-car platform technology and engine technology for smaller engines, very crucial to where Chrysler has to go.
JEFFREY BROWN: Now, Francisco Guerrera, today, Fiat's CEO, Sergio Marchionne, sent an e-mail to Chrysler -- to the employees, that is -- saying that he had done something like this five years ago when he came to Fiat and helped turn around that company. What do we know about him and the Fiat experience?
FRANCESCO GUERRERA: He's a very, very respected business manager, both in Italy and in Europe as a whole, precisely because he took Fiat, virtually on the brink of financial trouble, and turned it into one of the winners in this very difficult auto industry. So it's true, he has done it before.
The question he has now, he has to do it in a tough U.S. market with a tough U.S. economy in a market where he cannot just simply replicate the Fiat cars, the small cars that they like so much in Europe, because, you know, no matter what you say, Americans don't like driving those small cars. So he has to reinvent himself, as well as the company.
CEO had turned Fiat around
JEFFREY BROWN: Well, but tell -- but Fiat for a long time had a pretty bad reputation, right? So how did he turn it around? And what lessons might apply in this case?
FRANCESCO GUERRERA: So he had it -- I'm Italian, so I know all about Fiat's bad reputation internationally. So he did two things. One is, he improved the quality of the product. There was a real problem with the reliability of the Fiat cars and people didn't want to buy them because of that.
And, two, he improved its financial condition, and he did that by keeping a tight rein on costs and dealing with issues such as the unions, which he will have to deal with at Chrysler, as well.
JEFFREY BROWN: And staying with you, what do you see them bringing in terms of technology? Because they're not bringing money in this deal. They're bringing small-engine, small-car technology. What exactly does that mean?
FRANCESCO GUERRERA: I think they will bring small-car technology and they will bring the small-engine technology. I think what they also bring -- and that's crucial for a company like Chrysler -- is design flair. They're going to get cars, hopefully, that will get Americans' hearts racing, because Chrysler has produced so many dull cars over the past few years that that's really the root of their problems.
JEFFREY BROWN: Well, Mr. Wolkonowicz, what do we know about Americans' hearts racing to Italian design in this case? What's known about things like this tried before or what Americans might be getting in this case?
JOHN WOLKONOWICZ: You know, back in the 1990s, under Tom Gale, who was then head of Chrysler design, Chrysler was the acknowledged design leader in this market. It really helped their market share. I think this tie-up with Fiat, it could give them design leadership once again.
Anyone who hasn't seen them, look on the Internet at what Alfa Romeo is offering the European market today. Those cars are going to be here in a few years.
JEFFREY BROWN: Staying with you, Mr. Wolkonowicz -- what about management? I mean, there's clearly an effort -- and they signaled it already today -- to kind of streamline management and find a new way to get things more efficient, decisions faster. What's possible -- what do you see happening in that regard?
JOHN WOLKONOWICZ: From what they've done so far, it looks very good. They're focusing on brands. They're focusing on stripping away all of the unnecessary layers of management. This looks like a very efficient operation, typical of Mr. Marchionne.
JEFFREY BROWN: Now, in the meantime, the termination -- Mr. Wolkonowicz, I'll stay with you first here -- in the meantime, the termination of all these dealerships, Chrysler dealerships, will proceed, right?
JOHN WOLKONOWICZ: Yes, it will. The bankruptcy court approved that, and that goes forward without change.
JEFFREY BROWN: And what about, as Jim Lehrer said in our news summary introduction, these factories will reopen fairly soon. Do we know about how quickly and which ones?
JOHN WOLKONOWICZ: They haven't announced that yet, but I would assume in some cases it needs to start up very quickly. Some key products, like the new Challenger muscle car, are in very short supply.
Dealing with two constituencies
JEFFREY BROWN: Mr. Guerrera, what do you see, in terms of how quickly things will happen with the closing down of dealerships and the opening up, the reopening up of factories?
FRANCESCO GUERRERA: It has to happen quickly, because Chrysler, otherwise, will start just withering and the people will just move away from its products.
I think the biggest problem for Marchionne and the new management team is the fact that they have to deal with constituencies, very, very powerful constituencies with opposing or conflicting aims, including two governments -- the U.S. and the Canadian government -- the unions, and, of course, the employees and the dealers.
So they have to strike compromises all the way here, and it's going to be tough to do it quickly.
JEFFREY BROWN: And last thing, Mr. Guerrera, of course, everybody now watching is G.M., as it goes into bankruptcy. Are there implications here, anything learned as we look forward to that one?
FRANCESCO GUERRERA: I think G.M. creditors, employees and shareholders should look at Chrysler and think that's the best-case scenario for them. If they manage to get in and out of bankruptcy this quickly, they would have achieved a lot.
The problem for G.M. is the financial issues are much bigger, the company is much bigger, the problems are much bigger, and there is no buyer. So I think, you know, you're going to see a lot more problems when G.M. tries to go into bankruptcy.
JEFFREY BROWN: All right, we'll leave it there. Francesco Guerrera, John Wolkonowicz, thank you both very much.
JOHN WOLKONOWICZ: Thank you.