DETROIT (AdAge.com) -- It's official: Chrysler's going bankrupt.
Despite an 11th-hour alliance between it and Italy's Fiat, along with a number of concessions by the United Auto Workers union, Chrysler will file "almost immediately" in Manhattan for reorganization under Chapter 11 bankruptcy proceedings, senior White House officials said today.
The government is calling for a "surgical short bankruptcy" it hopes the marketer will emerge from in 30 to 60 days. In the meantime, the government will provide the automaker with additional loans, although the amount wasn't revealed. Chrysler will get a new board, but management will run the company, senior administration officials said.
The government attempted to keep Chrysler out of bankruptcy, but the clock ran out today as about half of Chrysler's lenders and bondholders refused the federal auto task force's request to reduce the Chrysler debt they held.
An undisclosed number of Chrysler dealers will be eliminated under bankruptcy restructuring, the officials said. Uncle Sam also determined that Chrysler Financial "did not have the resources to support Chrysler," so a deal was struck for GMAC to be the financing source for Chrysler; the government will provide more financial support to GMAC.
Unclear what will happen with agencies
Although the officials did not directly address what will happen to Chrysler's ad and media agencies, as well as media companies it does business with, they said vendors will continue to be paid in an orderly course during the Chapter 11 proceedings. Chrysler's main agency partner is Omnicom Group.
Under the terms of the deal with Fiat, the Italian automaker will get a 20% stake in Chrysler and can gain 5% more in increments by meeting three criteria: distributing Chrysler products outside North America (where Chrysler is a small player); building a new, fuel-efficient engine at a U.S. Chrysler plant; and building a car that gets 40 miles to the gallon at a Chrysler factory in the U.S.
"Chrysler will continue to sell cars and honor warranties" while in bankruptcy, the officials said. "Everything should go on normally, and the company will emerge strong and viable." But they cautioned, "It would be foolish to say there's no risk at all" regarding the outcome.