Chrysler in Trouble

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Executive Summary

The automobile market is one of the most lucrative markets in the world. They have focused on international expansion since the late 1900s. This market has very successful international companies such as Mercedes-Benz, Lexis, Hyundai, Chrysler, Camry, Fiat, etc. All of these firms have held a position in the automobile industry. Even in economic hardships when demand for automobiles was decreased, the market did not faze them. Two firms prominent in this industry are Chrysler and Fiat which have both held successful positions in the late 1900s. Due to decreased market demand and lackluster products both firms have drastically diminished their market appeal. This has led to decreased profits which have led to European based company Fiat leaving the United States in the 1980s. American based firm Chrysler had to deal with sales drops and lack of demand. An alliance between both firms could potentially increase their customer base and future profits. This could be a very lucrative business venture for both firms if successful. Chrysler an American corporation has held a strong position in the automobile industry in the earlier 1900s. Fiat an Italian corporation has one of the strongest corporations in Italy. Among the three most substantial United States automobile makers, Chrysler is the smallest one. This means that Chrysler’s stand in the automobile market needs much improvement. With the vast growing nature of the United States and international automakers, Chrysler has to improve their performance and appeal to even compete at their level. Chrysler filed for bankruptcy protection under section 364 of chapter 11 of the US bankruptcy code. Chrysler announced that it would establish a global strategic alliance with Fiat. CEO of Fiat Sergio Marchionne will take over as presidency of Chrysler as well. People want to know how the new management will not only affect the corporation but also the stakeholders that have invested in both companies.

Introduction

The Chrysler Corporation was founded by Walter Chrysler in 1924 out of what remained of the Maxwell Motor Company. Chrysler greatly expanded in 1928 when it acquired the Dodge Brothers Company and began selling vehicles under those brands; that same year it also established the Plymouth and DeSoto automobile brands. In the 1970s a number of factors including the 1973 oil crisis impacted Chrysler's sales, and by the late 1970s, Chrysler was on the verge of bankruptcy. Lee Iacocca was brought in as CEO and is credited with returning the company to profitability in the 1980s. In 1987, Chrysler acquired American Motors Corporation, which brought the profitable Jeep brand under the Chrysler umbrella. In 1998 Chrysler merged with German automaker Daimler-Benz AG to form DaimlerChrysler; the merger proved contentious with investors and Chrysler was sold to Cerberus Capital Management and renamed Chrysler LLC in 2007. Like the other Big Three automobile manufacturers, Chrysler was hit hard by the automotive industry crisis of 2008. Chrysler received billions of dollars in loans from the United States government in late 2008 and early 2009 to prevent it from shutting down. Chrysler filed for Chapter 11 bankruptcy reorganization on April 30, 2009. Chrysler should create a new company with Fiat in which Fiat would initially have a 20% stake, which would later be increased up to 35%. The Voluntary Employees Benefit Association (VEBA) would have a 55% stake in it, the US Treasury department an 8% stake. The Canadian and Ontario governments would have a combined 2% stake, with the Canadian government holding 1.33%, and the Ontario government holding the remaining 0.67% stake.

Chapter One
Situation Analysis

1.1 Industry Overview
The U.S. motor vehicle manufacturing industry' employs 880,000 workers, or approximately 6.6% of the U.S. manufacturing workforce, including those who work in the large motor vehicle parts manufacturing sector, as well as...
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