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How Chrysler Handled The 2007 Recession In Regard To Their International Strategies

1139 words - 5 pages

Due to the devastating economic crisis in 2008, American automobile industry suffered a disastrous period. In particular, the sales volume of Chrysler went down 30.3% compared to 2007. Without doubt, Chrysler had the most terrible performance among the three giant native auto companies in North American while its market share declined to about 10%. Meanwhile, the cost of Chrysler was related high, which led Chrysler has less competitiveness. In addition, Chrysler also had heavy liabilities, and it made Chrysler’s financial situation worse.
In order to save itself, Chrysler was attempting to seek restructure opportunities. In August and October 2008, Chrysler negotiated with Nissan and General Motors respectively. However, as the poor performance of General Motors in the crisis, the negotiation didn’t proceed then. At the end of 2008, Fiat and Chrysler began to discuss the merger.
On 19th December 2009, Chrysler closed all the manufacture operation to reduce its cost as well as to make its stock meet the market demand. At the same time, Chrysler laid off 32 thousand employees to reduce its expenditure.
Also, Chrysler had asked US government for help. By the end of 2008, US government provided $4 billion to rescue this auto giant. Then the US government pressurized the creditors (the debt valued $6.9 billion) made significant concessions. And four main loan institution with 70% liability agreed settle these debts with $2 billion, which paved the way for a radical restructuring of Chrysler. What’s more, US government required Chrysler apply bankruptcy protection. In this case, bankruptcy protection is not simply property liquidation, but rather to change the legal form to protect the company and to make the company operate more efficiently. While Canada and US auto unions were reached a preliminary agreement with Chrysler. And Daimler would also sell the remaining stock to completely quit from Chrysler. When the unions, creditors and other parties cleared obstacles, Chrysler and Fiat was expected to reach cooperation soon.
On 30th April 2009, Chrysler filed for bankruptcy protection. Meanwhile, Chrysler announced that it would set up alliance with Italian carmaker Fiat. And this alliance became No.6 in worldwide automobile industry (Chrysler ranked 11 while Fiat ranked 13). Thereafter, Fiat increased the holding stock to 58.5%. On 1st January, Fiat took $3.65 billion to buy 41.5% shares from US Voluntary Employee Beneficiary Association (VEBA) to complete 100% acquisition of Chrysler. According to Marchionne, who is the CEO of both Fiat and Chrysler, Fiat-Chrysler will become a much competitive global automobile production group.
In this acquisition, we hold the view that both Fiat and Chrysler could get benefit from each other. For instance, Fiat brought strategic asset for the alliance include: 1), shared the city and compact models with Chrysler in the product platform, which also expand Chrysler’s current product line; 2), shared the...

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