Fiat arrives and Chrysler is quietly born again

This time, there were no acrobats and fireworks. This time, no ice cream on the front lawn of Chrysler headquarters in Auburn Hills, Mich. No video featuring best wishes from celebrities. This time — Chrysler's third takeover in 11 years — the mood was government green. There was no public display Wednesday to celebrate the birth of Chrysler Group, now run by Italy's Fiat Group and not in bankruptcy court.

"It's really not the time for celebration," says Brad Coulter, a turnaround expert at O'Keefe & Associates. "If anything, it's a sigh of relief. Hopefully this is finally the answer for Chrysler."

Chrysler's orphaned assets — the closed plants and other non-productive units — were left behind in bankruptcy court awaiting liquidation.

Newco and Oldco, Chrysler people and industry analysts call the two Chryslers.

The automaker thought it was Newco just 20 months ago when private equity firm Cerberus Capital Management took over, promising a new beginning for the troubled automaker. It was Cerberus that assembled the lavish celebration.

When Cerberus bought the company in August 2007, auto sales were strong, particularly for trucks and SUVs, Chrysler's forte. It already was losing money, but its market share still was 12.9%. That fell to 11%, however, last year and just 10.2% through May, according to Autodata.

Sergio Marchionne becomes Chrysler's new CEO while remaining CEO of Fiat Automobile and the Fiat Group that owns it. In an upbeat e-mail to employees Wednesday, he said the challenges facing Chrysler are similar to those he faced — and overcame — at Fiat after he took over the company five years ago.

Fiat "was perceived by many as a failing, lethargic automaker that produced low-quality cars and was stymied by endless bureaucracies," Marchionne said. "But most of the people capable of remaking Fiat had been there all the time."

Cerberus, now completely divested of Chrysler, spent $7 billion to buy the automaker, then refused to spend more to get it through the steep falloff in sales last fall. The private equity fund told the U.S. Treasury in December that it was "not a deposit-taking institution that can act as an ATM machine for its portfolio companies."

So, the U.S. government stepped in with $9 billion in emergency loans. It now owns 8% of the revamped company, and Canada, which also is helping, owns 2%. Fiat owns 20% and the United Auto Workers union's retiree health care trust owns 55%. The remaining 15% is being held in reserve by the U.S., to be doled out to Fiat if it meets certain performance goals.

Cerberus hired Bob Nardelli, former Home Depot CEO, less than two years ago to lead Chrysler. In his goodbye e-mail to employees Wednesday, Nardelli said: "What I have learned along the way is that Chrysler people have the resolute heart of a scrappy underdog. ... This is a company that has been knocked down many times, but never knocked out."

In past decades, Chrysler tried more than once to reinvent itself at times of financial distress, once even calling itself "the New Chrysler."

Eventually, Germany's Daimler took it over in 1998, under the guise of "a merger of equals." The honeymoon lasted just long enough for the two automakers to develop deep loathing of one another. Daimler sold 80.1% of its Chrysler stake to Cerberus, then wrote down the other 19.9% to $0 on its books and finally dumped that, too.

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