Chrysler in Trouble

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Case Details:

Case Code : BSTR338
Case Length : 21 Pages
Period : 2008-2009
Pub Date : 2009
Teaching Note :Not Available
Organization : Chrysler Motors LLC
Industry : Automobiles
Countries : US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"For too long, Chrysler moved too slowly to adapt to the future, designing and building cars that were less popular, less reliable and less fuel efficient than foreign competitors." ¹

- Barack Hussain Obama, President of the United States, in April 2009.

"More than anything the consumers are very hesitant to do business with a manufacturer in bankruptcy." ²

- Peter Grady, Executive at Chrysler, in May 2009.

"This partnership (with Fiat SpA) transforms Chrysler into a vibrant new company with a wealth of strategic advantages. It enables us to better serve our customers and dealers with a broader and more competitive line-up of environmentally friendly, fuel-efficient high-quality vehicles." ³

- Bob Nardelli, Chairman and CEO of Chrysler LLC, in May 2009.

Chrysler Files for Bankruptcy

On April 30, 2009, Chrysler Motors LLC (Chrysler), the third largest automobile manufacturer in the US, filed for bankruptcy protection under Section 363⁴ of Chapter 11⁵ of the US bankruptcy code in the Manhattan Bankruptcy Court along with its 24 wholly-owned US subsidiaries.

Chrysler in Trouble - Next Page>>

1] Larry Mcshane, "Obama Administration Official: Big 3 Automaker Chrysler LLC Will File for Chapter 11 Bankruptcy," http://www.nydailynews.com, April 30, 2009.
2] Emily Chasan and Chelsea Emery, "Chrysler Bankruptcy Has Dealers on "Razor's Edge"," http://in.reuters.com, May 05, 2009.
3] Tim O'Brien, "Bankrupt Chrysler US Announces Alliance with Fiat," http://www.motorreport.com.au, May 01, 2009.
4] Section 363 refers to the section of the US 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 its 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 (Source: http;//www.chryslerrestructuring.com).
5] Chapter 11 of the United States Bankruptcy Code permits reorganization under the bankruptcy laws of the US. It can be filed by any business, whether a corporation or a sole proprietorship, although it is mostly used by corporate entities. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time.

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