(Thu 11 Jun 09)

The process of creating a new company from the ashes of the bankrupt Chrysler is now fully under way. Chrysler LLC has sold "substantially all of its assets, without certain debts and liabilities" to the new business, known as Chrysler Group LLC, which has in turn issued 20% of its shares to Fiat.

Further equity interest has been allocated to the United Auto Workers Retiree Medical Benefits Trust (55%), the US Treasury (8%) and the Canadian Government (2%). You'll notice that this does not add up to 100%, but it does take into account the fact that Fiat's share will eventually reach 35% in three jumps of 5% each if Fiat achieves three milestones built into the agreement, namely providing a platform for a 40mpg vehicle to be built in the US, providing a "fuel-efficient family engine" and giving Chrysler access to its worldwide distribution network, with a particular emphasis on Russia and Latin America.

In principle, Fiat's stake can exceed 50%, but that will not be allowed to happen until all the taxpayer money used to help prop up Chrysler in recent years has been repaid.

Sergio Marchionne, CEO of Fiat, will assume the same position at Chrysler Group, and Robert Kidder is expected to be named Chairman. The new Board of Directors will have nine members, three appointed by Fiat, four by the US Government, one by the Canadian Government and one by the United Auto Workers Retiree Medical Benefits Trust.

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