CHRYSLER RESTRUCTURING (APRIL 2009)

As a result of the comprehensive restructuring plan agreed to by many of Chrysler LLC stakeholders, Chrysler LLC and Fiat S.p.A have reached an agreement in principle to establish a global strategic alliance. This agreement creates a new, global car company that will take over a majority of Chrysler's operations. With the completion of this alliance, Chrysler will be repositioned for long-term success.

This alliance will enable Chrysler and Fiat to move forward as part of a new company with significant strategic advantages, together this will bring an exciting range of new fuel-efficient small and compact vehicles.

Chrysler initiated discussions with Fiat more than a year ago to develop plans for a global product alliance. Chrysler and many of its stakeholders worked tirelessly to agree upon concessions that will result in a significantly lower cost base and enable fulfilment of a broader strategic alliance. Despite substantial progress on many fronts, Chrysler LLC  were not able to obtain the necessary concessions from all their lenders.

As a result, under the direction of the U.S. Treasury and with the support of the US President, Chrysler LLC filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy code for the Southern District of New York.

The American system of Chapter 11 of the U.S Bankruptcy Code is not the same as bankruptcy or insolvency in the UK. Most importantly, Chapter 11 is not the liquidation of a company and its assets.

The purpose of entering into Chapter 11 is to allow a company protection from its creditors and to allow it to restructure its debts and reorganise its business in order to emerge stronger. Chapter 11 is a means of improving a company's financial health and to enable it to continue to operate while under protection.
Chrysler LLC have submitted a motion under Section 363 of the Bankruptcy Code requesting the court to swiftly approve the agreement with Fiat and the sale of Chrysler's principal assets to the new company we are forming with Fiat. The benefit of this type of filing is speed. It will allow a leaner new company to emerge in a matter of 30 to 60 days, well positioned for long-term viability.

It's also very important to note that Chrysler's UK operation is not part of any bankruptcy filing.
Chapter 11 bankruptcy protection is only applicable to US companies and will not affect Chrysler UK’s day-to-day operation. Chrysler UK Ltd continues to market, sell and service vehicles and will honour all warranties, and at the same time work with their colleagues in the US and at Fiat to build a vibrant new company with less debt, a stronger balance sheet and a richer product portfolio.
As such we (Anthony Betts Motor Group) will continue to carry out all warranty work. We will naturally continue to service all Chrysler, Jeep and Dodge vehicles along with the supply of parts. For further information please see our Chapter 11 fact sheet

Chapter 11: Fact Sheet

What is Chapter 11?
Chapter 11 provides a company with time, under protection of the court, to reorganize its business and/or capital structure before having to meet the financial claims of its creditors. Unlike an insolvency proceeding or liquidation (Chapter 7), companies that file for Chapter 11 generally continue to operate their business with the goal of emerging from the process as a viable and financially healthier enterprise.

Why?
Companies file for Chapter 11 for a number of reasons, but generally they are seeking to protect their assets while trying to address financial problems - such as excessive debt, insufficient liquidity, unreasonable contractual obligations, and/or unmanageable liabilities. The process also is sometimes used by companies to sell assets free and clear of any obligations.

How?
Chapter 11 is a legal process by which a company files a petition with a federal bankruptcy court to reorganize under Chapter 11 of the U.S. Bankruptcy Code. The filing triggers a legal mechanism known as an "automatic stay," which temporarily prevents creditors from taking action against the company to collect any monies or property they are owed from before the filing. The automatic stay also temporarily prevents lawsuits against the company from moving forward. The automatic stay can only be lifted with specific court authorization, which for most matters does not occur until the conclusion of the Chapter 11 proceeding.
How does it affect employees?

It is customary under a Chapter 11 proceeding for a company to receive court authorization to continue to provide employees with their regular compensation and benefits. In addition, U.S. federal law generally protects the funds in 401(k) savings plans and in qualified defined benefit pension plans from the claims of a company's creditors.

How does it affect customers and suppliers?
A company that files for Chapter 11 generally is able to continue to meet its obligations to its customers as usual. Likewise, the company generally is able to pay suppliers for goods and services provided after the filing under existing terms. However, the "automatic stay" generally prevents a company from paying suppliers for goods and services provided before the filing without specific court authorization. For this reason, it is not unusual for many of a company's suppliers to be creditors in its Chapter 11 proceeding.

How does a company emerge from Chapter 11?
The Chapter 11 process ends after the Court has confirmed a Plan of Reorganization, which provides for a distribution of the company's economic value to its creditors and, possibly, equity holders. This plan is usually developed by the Company in conjunction with its creditors.

What is a Section 363 Bankruptcy?
Section 363 refers to the section of the U.S. Bankruptcy Code that allows a company to enter a court-supervised process to sell assets quickly as the best means to protect value for the benefit of all stakeholders. Unlike a typical bankruptcy proceeding, which can often take a few years to resolve, the advantage of 363 bankruptcy is speed. Through the 363 process, a company is able to emerge from bankruptcy in approximately 30 to 60 days.
Additional information on bankruptcy can be found at:
http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter11.html
http://sec.gov/investor/pubs/bankrupt.htm