Chrysler 2008 Annual Report Download - page 66

Report on Operations Significant Events Subsequent to Year End and Outlook 65
Significant Events Subsequent
to Year End and Outlook
Significant Events Subsequent to Year End
On 20 January 2009, Fiat S.p.A., Chrysler L.L.C. (Chrysler)
and Cerberus Capital Management L.P., the private investment
majority owner of Chrysler L.L.C., announced the signing of a
non-binding term sheet for the establishment a global strategic
alliance. On the basis of the term sheet, the alliance, to be a
key element of Chrysler’s viability plan, would provide Chrysler
with access to competitive, fuel-efficient vehicle platforms,
powertrains, and components to be produced at Chrysler
manufacturing sites. Fiat would also provide distribution
capabilities in key growth markets, as well as substantial cost-
saving opportunities. In addition, Fiat would provide
management services, as required, in support of Chrysler’s
submission of a viability plan to the U.S. Treasury. The alliance
would also allow Fiat Group and Chrysler to take advantage of
each other's distribution networks and to fully optimize their
respective manufacturing footprints and global supplier bases.
As consideration for the Group’s contribution of strategic
assets – consisting of product and platform sharing (including
city and compact segment vehicles), technology sharing
(including fuel efficient and environmentally friendly
powertrain technologies), and access to additional markets
(including distribution for Chrysler vehicles in markets outside
of North America) - Fiat would receive an initial 35 percent
equity interest in Chrysler. The alliance does not contemplate
that Fiat would make a cash investment in Chrysler or commit
to funding Chrysler in the future. The proposed alliance would
be consistent with the terms and conditions of the U.S.
Treasury financing to Chrysler and completion is subject to due
diligence and regulatory approvals, including the approval of
the U.S. Treasury.
On 27 January 2009, Magneti Marelli and SAIC Motor
Corporation Ltd., through its subsidiary Shanghai Automobile
Gear Works (SAGW), signed a joint venture agreement in China
for production of hydraulic components for the Freechoice™
Automated Manual Transmission (AMT) made by Magneti
Marelli. Under the agreement, Magneti Marelli and SAGW will
take equal interests. The joint venture will be located near
Shanghai and is due to be operational in the second half of
2009. At full capacity, the new entity will be capable of
producing components for about 350,000 gearboxes a year.
During January 2009, the three leading credit rating agencies
announced that they had placed Fiat’s long and short-term
ratings under review: Moody’s Investors Services placed the
ratings under review for possible downgrade; Standard &
Poor’s Rating Services placed them on CreditWatch with
negative implications (together with the long-term rating for
CNH Global N.V.) and Fitch Ratings placed them on Rating
Watch Negative.
Outlook
As foreseen at the end of the 3rd quarter, the final 3 months of
2008 confirmed a significant and widespread deterioration of
trading conditions across most of our businesses and most of
our geographies. This deterioration has made it even more
difficult to forecast with some degree of accuracy the
performance of our sectors in 2009. This uncertainty has been
compounded by a severe tightening of credit in all major
markets, both at the consumer and corporate level, and has
began to create a liquidity squeeze which will ultimately impact
the industrial development of most businesses, including and
especially ours.