by Nick Christie

Created on: May 05, 2009

On April 30, 2009 Chrysler was forced to declare bankruptcy due to the refusal by creditors to lower the corporation's debt. This does not mean the end of Chrysler however. Talk of a merger between Chrysler and Fiat is in the works which will give Fiat a 20 percent ownership in the company with the option of increasing to 35 percent ownership. If this deal goes through it will allow Fiat access to Chrysler's market and technologies and likewise give Chrysler access to the popular and affordable Italian automakers platforms. President Obama has stated that "the bankruptcy process will be quick, efficient, and controlled." The bankruptcy process and the merger with Fiat are both due to close within 30-60 days.

The Treasury Department will be granting Chrysler $8 billion in loans on top of the $4 billion it has already received to keep the company afloat during and after the bankruptcy process. Officials say that $3.3 will be used to keep things running normally during the bankruptcy, and $4.7 billion to allow the company to operate after the bankruptcy process is over. Most of Chrysler's plants have shut down temporarily due to the part suppliers cutting off shipment to the plants for fear of not being paid for the parts, but Chrysler maintains that the shutdowns are only temporary. Most hourly workers will be paid 80% of their normal pay during shutdowns due to unemployment benefits and supplemental pay from union contracts.

After the bankruptcy process is complete, Chrysler's loan division, Chrysler Financial, which provides loans to dealers and customers will be shut down. Loans after the bankruptcy will be handled by GMAC and Chrysler's parent company Cerberus Capital Management (which will have no stake in Chrysler after the bankruptcy). The number of Chrysler's dealerships will also be cut, during and after the bankruptcy process. CEO Robert Nardell will also be stepping down after the deal with Fiat is complete, the person to replace him will be voted on by Chrysler's new board of directors. The new board of directors will be decided by the main shareholders of the company after the entire bankruptcy process is over.

Fiat is going to be offering management services to Chrysler, which include restructuring of finances and cost cutting measures. Fiat also plans to use the American plants to produce and sell their cars that are already very popular in Europe. Fiat is a very stable company with very reliable and inexpensive vehicles and plans to incorperate these ideals into their partnership with Chrysler. Hopefully Fiat will be able to bring new life to one of Americas oldest auto manufacturers, but the struggles of the automotive industry are proving to be far from over.

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