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Fiat closes Chrysler deal

Fiat CEO Sergio Marchionne will head the new company. The Italian carmaker will provide small-car and fuel-efficient engine technology in return for an initial 20% stake in the U.S. automaker.
Associated Press
7:47 AM PDT, June 10, 2009

DETROIT -- Italian automaker Fiat says it has closed a deal to take over Chrysler's good assets, forming a new company and clearing the way for the struggling Chrysler to emerge from bankruptcy protection.

Fiat signed on to the deal early today after the U.S. Supreme Court late Tuesday refused to hear an appeal of lower court rulings that approved the asset sale.
The deal means that Fiat CEO Sergio Marchionne will take over control of Chrysler.

The Italian automaker won't put any money into the deal but will give Chrysler sorely needed small-car and fuel-efficient engine technology.

Chrysler says the agreement with Fiat is the best deal it can get for its assets and is critical to the company's plan to emerge from bankruptcy protection.
Fiat plans to trade the U.S. automaker its small-car and environmentally friendly engine technology, as well as management expertise, in exchange for an initial 20% stake in Chrysler that will grow to 35% in 5% increments.

Marchionne, who was in Detroit on Tuesday laying the groundwork for the transition, will become Chrysler's chief executive.

Responsible for Fiat's turnaround from a loss-making company with a string of failed models, he is also expected to bring fundamental changes to the Chrysler management structure, such as doing away with hierarchy and implementing a quicker decision-making process.

Fiat plans to launch its hugely popular Fiat 500 (Cinquecento in Italian) in the United States, as well as the Alfa Romeo brand.

Marchionne also remains interested in Germany's Opel, part of General Motors Corp.'s European operations, in case negotiations fail with the leading bidder, Canadian auto parts supplier Magna International Inc.
http://www.latimes.com/business/la-fi-fiat-chrysler11-2009jun11,0,2728470.story



GM Former Board Member Jerry York Says GM, Chrysler Will Survive
June 09, 2009: 07:15 PM ET
ROCHESTER HILLS, MICH. -(Dow Jones)- Former General Motors Corp. (GMGMQ) board member Jerry York said he expects GM and Chrysler LLC to survive in the future after their reorganization in the bankruptcy process.
"They are finally doing some things that need to be done," York said following a speech at Oakland University. "These guys are focused."
York's comments come after he tried to warn GM that it needed to embrace change. He spent nine months on the board in 2006 where he represented billionaire investor Kirk Kerkorian who was the auto maker's largest shareholder. York quickly became one of the leading advocates for GM to consider joining the Renault-Nissan alliance. GM scuttled the merger idea and York left the board. York said he wouldn't return to the board of directors even if asked.
GM filed for bankruptcy protection June 1 and is now relying on aid from the federal government as it attempts to restructure itself. Former board Chairman and Chief Executive Officer Rick Wagoner left the company at the end of March. Frtiz Henderson replaced Wagoner as CEO. York said he understood the government's decision to force Wagoner out.
"The government is sitting there and they are doling out $20 billion and from the reports in the press, Rick was not buying that bankruptcy was the right solution, so he had to go," York said
He declined to comment on the appointment of Edward Whitacre Jr. as GM's new chairman. Whitacre was the former CEO and chairman of telecommunications giant AT&T Inc. (T). Whitacre takes over the chairman post after GM emerges from bankruptcy protection.
York said it was a smart move to bring in an automotive outsider pointing to the work done by former Boeing Co. (BA) CEO Alan Mulally who is now the CEO of Ford Motor Co. (F)
"They need some new blood," York said. "The auto industry is inbred."
York, who also worked as Chrysler and served as its chief financial officer in the early 1990s, said Fiat SpA (FIATY) should do a better job running Chrysler than its former partner Daimler AG (DAI). Chrysler is awaiting word for the Supreme Court on whether it can merge its assets with Fiat.
"Daimler did a god awful job," York said. "Daimler should be shot for what it did. Look at this thing. They left this company in a mess. The styling is bad and the quality is terrible."
Earlier, John Casesa, managing partner at Casea Shapiro Group, said he believes that GM and Chrysler will be salvaged through the bankruptcy process although Chrysler will continue to shrink in size and GM will have to deal with the potential loss of some of its foreign subsidiaries. The auto maker is currently working to sell off its Opel division.
Casesa, who was a longtime automotive analyst, also said GM and Chrysler had no other choice but to turn to the federal government for aid and President Barack Obama's administration has moved quickly and effectively to help restructure these companies.
Governments, both in the U.S. and around the world, will be bigger players in the automotive industry in the future as well as consumer perception of the car companies, Casesa said. There will be smaller cars in the future and suppliers will be "vastly" more important when it comes to adding value to vehicles through products and innovation.
-By Jeff Bennett, Dow Jones Newswires; 248-204-5542; jeff.bennett@ dowjones.com;
http://money.cnn.com/news/newsfeeds/articles/djf500/200906091915DOWJONESDJONLINE000690_FORTUNE5.htm



Whitacre Named New GM Chairman
By Kendra Marr
Washington Post Staff Writer
Wednesday, June 10, 2009
General Motors announced yesterday that Edward E. Whitacre Jr., former chairman and chief executive of AT&T, will take the helm of the revamped automaker.
GM expects Whitacre to become chairman of the board when the restructured automaker emerges from bankruptcy protection late this summer.
"He's demonstrated leadership in a very important industry that was going through change," said interim GM chairman Kent Kresa, who led the candidate search. The Obama administration picked Whitacre from Kresa's list of front-runners.
Whitacre, 67, has led AT&T and its predecessor companies from 1990 to 2007. He started his telecommunications career at Southwestern Bell, and grew the company through several mergers and sales, including that of AT&T in 2005.
"The fact that he had done so many acquisitions and integrated them so well says a lot about his ability to form culture, create excitement and keep the organization humming and moving forward," Kresa said.
Whitacre is on the boards of ExxonMobil and the Burlington Northern Santa Fe Corp. He holds an industrial engineering degree from Texas Tech University.
"I am honored to be able to serve GM at this critical juncture and take part in its reinvention," Whitacre said in a statement.
Kresa, along with current board members GM chief executive Frederick A. Henderson, Philip A. Laskawy, Kathryn V. Marinello, Erroll B. Davis Jr. and E. Neville Isdell, will "serve as the nucleus" of the new GM board, the company said in a statement. The six remaining board members will "most likely retire no later than the approval of the sale of GM assets to the new entity," GM said.
Kresa is leading the search for four more directors to serve on the new GM board and has been regularly consulting with Steven Rattner, chief of President Obama's auto task force. Ultimately, the Obama administration will have a say in who serves on the panel. The United States will own a majority stake in the new GM.
The Canadian government and the United Auto Workers' retiree health care trust will nominate one director each, bringing the total to 13 directors.
http://www.washingtonpost.com/wp-dyn/content/article/2009/06/09/AR2009060901172.html?hpid=topnews



Detroit News Commentary by Jerry Kroth

We hear about General Motors' struggling, bailouts and bankruptcy, and we hear about how Toyota, Honda and Nissan will fill the vacuum created by any GM or Chrysler bankruptcy.

But what we don't hear ought to pique your interest: Last year Japan imported a whopping 8,000 Fords. That's right, 8,000 Fords were sold in Japan while Toyota alone sold 2 million automobiles here in America. Honda sold a million. According to Frank Fillipo of Autoblog, poor GM only sold 2,000 cars in Japan last year.

Why? The average GM car in the United States costs about $25,000, but in Japan the same car costs $50,000. A big mark up, plus tons of other obstacles and restrictions. No one calls that protectionism, but that is exactly what it is.

There is an overwhelming pressure to keep foreign imports out of Japan, whether its so-called "inferior" American cars, "infected" Washington apples or "tainted" American meat. Eleven Saturn vehicles were sold in Japan -- a car made jointly by the U.S. and Japan -- and a piddling 12 Rolls Royces. I guess Rolls Royce is considered inferior as well.

Peter Mandelson, the European Union's external trade commissioner, said last week that Japan was "the most closed developed market in the world and that imbalances ... were truly staggering." The social pressures within Japan and the complex layer-cake of bureaucratic restrictions keep all imports marginalized, not just our cars.

To be specific: The Japanese car market of 4.5 million vehicles begrudgingly allowed 6 percent of their car market to be made up of non-Japanese manufactured vehicles. In South Korea, the situation is even worse. It imported 9,000 U.S. cars but sold 800,000 cars in ours. If you think a Kia outperforms a Malibu, good luck.

Imagine a refreshing change -- a new law requiring that Japanese and Korean car manufacturers only allowed to sell the same number of cars in the United States that they reluctantly import into their countries. In other words, the playing field would finally be leveled.

GM, Ford and Chrysler would start filling the vacuum created by the sudden absence of Toyotas, Nissans and Hondas from American showrooms. If Japan could only sell to us what it purchased from us, it would be limited to 5.5 percent of the U.S. car market and not a fraction more, and Korea would be limited to a mere 2 percent.

Thousands of American jobs would be saved; thousands more created. The Rust Belt would experience a renaissance.

Instead of Detroit, let's have Toyota City take it on the chin for a change.

Sure, the Japanese would protest that they had to start letting their showroom dealers start selling Fords and Chevys at competitive prices. Maybe a trade war would start; maybe they'd cash in their T-bills, but it is just as likely that the bigwigs of Toyota, Nissan, Honda and Kia would hurriedly ask parliamentarians to open markets to allow more American cars to be sold there so more of their cars could be sold here.

Maybe Congress and the media are opposed, but in the days of Jimmy Hoffa and Walter Reuther, a healthy strike by autoworkers and sympathetic truckers could shut our country down until we saw some real action. Maybe its time to clog the turnpikes, slow interstate commerce to a crawl, and demand that fairness in trade finally be implemented. If now is not the time, well, just how close does the patient have to get to death before we decide to stop the bleeding?

Jerry Kroth is an associate professor of psychology at Santa Clara University in California and a former Detroiter.

Submitted By Don Brice



Former AT&T CEO to become new GM chairman
General Motors says former AT&T CEO Edward Whitacre Jr. will become automaker's new chairman
Tom Krisher, AP Auto Writer
On Tuesday June 9, 2009, 3:07 pm EDT
DETROIT (AP) -- A former CEO and chairman of telecommunications giant AT&T Inc. will lead General Motors Corp.'s board after the automaker emerges from bankruptcy protection, GM said Tuesday.
Edward Whitacre Jr., 67, eventually will replace Kent Kresa, who will remain GM's interim chairman until the reorganized automaker emerges as a new company that's majority-owned by the U.S. government.
Whitacre was chairman and chief executive of AT&T and its predecessor companies from 1990 to 2007. During his tenure, he led the company through several acquisitions and sales.
Whitacre sits on the boards of Exxon Mobil Corp. and the railroad company Burlington Northern Santa Fe Corp.
GM said Whitacre will join the nucleus of a new board that will include Kresa and current members Philip A. Laskawy, Kathryn V. Marinello, Erroll B. Davis Jr., E. Neville Isdell and CEO Fritz Henderson.
The remaining six members of the current GM board will "most likely retire" by the time most of GM's assets are sold to the new GM in bankruptcy court, the company said in a statement. Kresa is leading a selection process to pick four new directors, while the Canadian government, which also is providing financial aid to the company, will pick a board member and a United Auto Workers union retiree health care trust will select another.
That will bring the board of the new company to 13 members, one more than the current board.
Kresa, a GM board member since 2003, was named interim chairman in March when the Obama administration's auto task force forced out Rick Wagoner as chairman and CEO. Henderson, GM's former president and chief operating officer, was named CEO and continues in that role.
GM has been operating under Chapter 11 bankruptcy protection since June 1 as it seeks to reorganize and shed unwanted assets. So far it has received about $20 billion in loans from the U.S. government.
"The appointment of Ed Whitacre as chairman represents a very auspicious beginning for the New GM," Kresa, a former chairman and CEO of Northrop Grumman Corp., said in the statement. "We look forward to working with him to complete the reinvention of GM and maximize the enormous potential of this new enterprise."
Whitacre made his name by building regional phone company Southwestern Bell into the largest telecommunications provider in the country, snapping up the AT&T brand along the way.
Telecom industry analyst Victor Schnee at Probe Financial said Whitacre's appointment to GM was "bizarre."
"The guy accomplished a number of things in telecom and we all thought the book was closed," Schnee said.
Whitacre was "old-school empire builder," Schnee said, and deserves credit for investing early and heavily in wireless.
But in terms of long-term visions for the industry, Whitacre was not much better than GM's management, in Schnee's opinion.
"What happened was that wireless came along and created one of the most amazing growth markets in the world, and therefore bailed out sinking ships like Verizon and AT&T," Schnee said.
Kresa told reporters on a conference call Tuesday that he picked Whitacre with input from Steven Rattner, chairman of the Treasury Department's auto task force.
The government, he said, wants to be very involved in picking GM's board, but after that, does not want to be part of GM's day-to-day operations.
Whitacre, Kresa said, had experience that was attractive to the government.
Kresa said he has been searching for candidates who have experienced innovation and corporate cultural change and have seen success.
"We are looking at candidates who have been involved in companies where there has been a dramatic change in the marketplace and the way the company has to address the market," Kresa said. Leadership qualities are above all others, Kresa said.
In Whitacre's 17 years at the helm of AT&T and its predecessors, he presided over the company's growth from a regional telephone provider to the nation's largest provider of wireless, broadband and traditional phone service.
AT&T, formerly known as Southwestern Bell and then SBC Communications, was the smallest of the seven "Baby Bells" spun off in the 1984 government-ordered breakup of the national AT&T monopoly.
A second board will be appointed to run the old GM to wind down its remaining assets, Kresa said.
Under terms of a proposed bankruptcy agreement, the U.S. and Canadian governments will own nearly 75 percent of General Motors, with the U.S. holding a 60 percent controlling stake and Canada with 12.5 percent. The UAW would get a 17.5 percent stake and bondholders would end up with the remaining 10 percent. Existing stockholders would be wiped out.
Kresa also said GM would resume compensating board members at a more normal level. The board has been working for $1 per year since GM began taking government loans last year. He did not specify what a normal level was, but nonemployee board members previously received $200,000 per year, with $140,000 of that deferred in shares of GM common stock.
AP Technology Writer Peter Svensson and AP Auto Writer Dan Strumpf in New York contributed to this report.
http://finance.yahoo.com/news/Former-ATampT-CEO-to-become-apf-15480404.html



GM To Quit Medium-Duty Truck Business

By Tom Krisher, AP Auto Writer
Manufacturing.Net - June 08, 2009
DETROIT (AP) -- After unsuccessfully trying to find a buyer for four years, General Motors Corp. is giving up on its medium-duty truck business, saying that it will wind down manufacturing by the end of July.
That means GM will stop making the GMC Topkick and Chevrolet Kodiak commercial trucks at its Flint, Mich., Assembly Plant by July 31. The plant employs 2,100 people but also makes Chevrolet Silverado and GMC Sierra pickups.
Company spokesman Jim Hopson said 398 people work on the medium-duty assembly line, and GM is working with the United Auto Workers union to determine what happens to them.
"We'll continue to try our best to keep the employment levels as high as possible," he said.
The factory last year made more than 22,000 medium-duty trucks for GM and Isuzu Motors Ltd., and almost 73,000 pickups.
Hopson said GM will work with dealers to sell down the remaining Kodiak and Topkick inventory over the next 18 months or so.
The DMAX factory in Moraine, Ohio -- a joint venture between GM and Isuzu -- also will be affected. The plant near Dayton makes engines for the Topkick and Kodiak, as well as for pickups and heavy-duty trucks. GM says the staffing of that plant, which employs 544, is under review.
Medium-duty trucks normally are built for commercial use such as dump trucks and tow trucks. GM's main U.S. competitors in the segment are Navistar International Corp., Isuzu, Freightliner, Volvo Truck, Peterbilt, Kenworth and Mack.
Hopson said the market segment has been hit hard by the economic downturn. Sales dropped 30 to 40 percent from 2007 to 2008 and have dropped by a similar percentage so far this year.
"We definitely are being affected by the economic conditions just like everyone else," he said.
GM hasn't been competitive in the global medium-duty business, CEO Fritz Henderson said at an event to unveil a new battery lab at the automaker's Warren Technical Center.
"We're a one-truck company in a global truck world," he said. "We compete with companies that have a full portfolio of them on a global basis. In the end we just couldn't make it work."
Dealers will be given up to 18 months to sell their remaining products, Hopson said.
GM has 470 dealers that sell medium-duty trucks, 129 of which sell them exclusively, spokeswoman Susan Garontakos said. All will get letters Monday notifying them of the decision, she said. Many of the dealers sell heavy-duty trucks or other GM vehicles, she said.
GM in December 2007 signed a tentative deal with truck and engine maker Navistar to sell the medium-duty business, but the deal fell through. The company also was in negotiations with Isuzu but couldn't reach a deal.
"We just never could get to a level of agreement that was mutually beneficial to both a buyer and General Motors," Hopson said.
AP Auto Writer Kimberly S. Johnson in Warren, Mich., contributed to this report.
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