Chrysler was struggling to stay afloat even after receiving financial aid in the form of a federal
loan of US$4 billion in January 2009, out of the requested amount of US$7 billion. However,
with declining sales, it had become increasingly difficult for Chrysler to continue with its operations.
Therefore, in its Restructuring Plan for Long-Term Viability, submitted on February 17,
2009, the company asked for another US$2 billion federal loan over and above the US$7 billion
loan it had requested earlier. For Chrysler to get an additional federal loan, the U.S. government
had made it a condition that the company should establish an alliance with Fiat on or before
April 30, 2009. The company was also required to restructure its debt and negotiate with UAW
(United AutoWorkers)8 and CAW(Canadian AutoWorkers)9 to reduce costs. Although Chrysler
was able to reach an agreement with Fiat and had convinced UAWand CAWto reduce costs, it
failed to get all its creditors to agree to debt restructuring. The company finally had to file for
bankruptcy protection. Commenting on the company’s bankruptcy filing, Bob Nardelli (Nardelli),
Chairman and CEO of Chrysler, said, “Even though total agreement was not possible, I am truly
grateful for all that has been sacrificed, on the part of many of Chrysler’s stakeholders to reach an
agreement in principle with Fiat. My number one priority has been to preserve Chrysler and the
thousands of people who depend on its success. While I am excited about the creation of the
global alliance, I am personally disappointed that today Chrysler has filed for Chapter 11. This
was not my first choice.”10
While some analysts were apprehensive about Chrysler’s viability, others were of the
view that Chrysler would come out of the bankruptcy soon. According to Lee Iacocca
(Iacocca), former Chairman and Chief Executive Officer (CEO) of Chrysler, “It pains me to
see my old company, which has meant so much to America, on the ropes. But Chrysler has
been in trouble before, and we got through it, and I believe they can do it again.”11