When Julius Caesar crossed the Rubicon in 49BC, on his way to Rome to start a civil war, he is reported to have said: “The die is cast.”
For the Obama administration, the driving force behind Chrysler’s chapter 11 bankruptcy, the significance of Chrysler’s engineered demise is similar. Analysts have forecast wide-spread turmoil across the industry as a result, though none has yet predicted civil war.
The key to the success of the measure is the smoothness of the passage through bankruptcy. GM, Ford and workers across the US are concerned that if the wind-down becomes disorderly then Chrysler will bring down its suppliers on the way out, and that could take them out as well.
Fiat has been lined up to take a 20 per cent stake in the bankrupt Chrysler, the UAW would get just over half, and the balance would go to the US government.
This deal should allow Fiat to cherry-pick Chrysler’s model range and bring the Fiat 500, Panda and Punto to customers in the US by 2011.
It will also allow Chrysler to break long-standing contracts with its dealers, many of which are covered by state law.
Bob Nardelli has already made it clear that Fiat and a new board of directors would pick a new CEO for the company. Fiat boss Sergio Marchionne has recently said that he would be prepared to do the job if asked.
The lack of a concrete strategy until now means that many US drivers have reportedly moved away from Chrysler purchases, towards Ford, which has strived to emphasise that it has accepted no government bailout cash.
This loss of sales may have further jeopardised Chrysler’s February recovery plan, which was predicated on a 10.7 per cent market share in 2009-2012. The report also contained a preferred restructuring deal with Fiat, in which the Italian company would own 35 per cent of Chrysler, and it’s thought this could now rise as high as 50 per cent.