On April 30, 2009, Chrysler LLC, America’s third-largest car manufacturer along with twenty-four of its affiliated subsidiaries filed a consolidated petition at the Federal Bankruptcy Court of the Southern District of New York, seeking relief under Chapter 11 of the United States Bankruptcy Code. Chrysler succumbed to bankruptcy after experiencing a steep sales decline of 48 percent in one year. The 83-year-old Detroit carmaker put its future in the hands of the courts as it failed to come to an agreement with its creditors for an outside of bankruptcy restructuring plan, within the deadline mandated by the federal government.
The bankruptcy court approved the proposed government restructuring plan and sale of Chrysler’s assets. On June 10, 2009, the sale of most of Chrysler assets to the new Chrysler – New CarCo Acquisition LLC was completed.
The sale allows most of the assets of Chrysler to be purchased by a new entity in which Italian automaker Fiat owns 20% and the autoworker’s union retirement health care 55% of the shares, with the U.S. and Canadian government as minority stakeholders. Secured bondholders were to receive 29 cents on the dollar for their claims. Later, Fiat’s stake was increased to 58.5% following acquisition of the equity interests held by the U.S. Treasury and Canada. The stake was further increased to 61.8% in July 2012.
The United States Treasury and the government of Canada lent around $4 billion to Chrysler prior to bankruptcy, and then agreed to provide $5 billion to fund the bankruptcy, and another $6 billion in exit financing. During the restructuring process, Chrysler stopped most of its manufacturing operations but no major Chrysler plants in the US were shut down.
Chrysler entered and exited bankruptcy in just 42 days, making it one of the fastest major industrial bankruptcies in memory.