Tuesday June 9, 09:22 PM
Fiat vows to stick with Chrysler, stock drops
MILAN (AFP) - Italian auto maker Fiat (Milan: F.MI - news) vowed on Tuesday to stick with plans to forge an alliance with distressed US group Chrysler (Xetra: 710000 - news) despite a US Supreme Court decision to put a temporary freeze on the transaction.
"Fiat is committed (to the tie-up with Chrysler) even after June 15," a Fiat spokesman told AFP. The company is entitled to pull out of the deal after that date if Chrysler's recovery plan has not been fully approved by then.
"We would never walk away," Fiat head Sergio Marchionne, who is due to become chief executive of Chrysler under the partnership plan, was quoted by his spokesman as saying in reaction to the Supreme Court order.
The order however threatens to upset finely-laid plans backed by US President Barack Obama for a massive reorganisation of the US auto industry and casts doubt on the bankruptcy filings made by both Chrysler and General Motors (NYSE: GM - news) .
The setback sent Fiat shares down despite the Milan stock exchange going up overall. Fiat's stock closed down 1.39 percent at 7.43 euros per share.
Hit by the global economic crisis Chrysler filed for bankruptcy in April and a New York court on May 31 approved the company's reorganisation, agreeing to allow the tie-up with Fiat after the White House gave its blessing to the deal.
But the US Supreme Court on Monday put a temporary freeze on the plan, which would allow Chrysler to emerge from bankruptcy as a new entity.
Despite Fiat's optimism, Chrysler and US officials warned the court order could cause the tie-up plan with the Italian auto giant to collapse.
A group of Indiana pension funds had opposed Chrysler's sale to Fiat and filed the emergency appeal with the Supreme Court.
The court's order will now allow the justices to consider whether to allow a full hearing on the legal issues.
Without the stay, the deal could have been closed on Monday.
The White House sought to play down the significance of the order, with one official saying it was merely "an administrative extension" designed to give more time to the court to determine the merits of the request.
The deal with Fiat is backed by governments in the United States and Canada, where tens of thousands of jobs are at stake.
Obama previously said the deal had "a strong chance of success" and added that Chrysler would emerge "stronger and more competitive."
Chrysler has slashed 32,000 jobs since 2007 and industry experts fear there could be tens of thousands more layoffs during the bankruptcy as the historic US automaker shuts down nearly a quarter of its dealers.
The rescue plan would give Fiat a 20-percent share in the new Chrysler with a possibility of increasing that share to a controlling stake as early as 2013 as long as Chrysler repays its massive government loans by then.
In return, Fiat will allow access to its technology to enable the US car maker to make the smaller, greener cars that are increasingly in demand.
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
