Chrysler avoided liquidation and moved closer to emerging from bankruptcy Wednesday after it finalized a deal to sell the bulk of its good assets to Italy's Fiat.
The deal, which places the new company in the hands of Fiat's CEO, clears the way for a new, leaner Chrysler Group LLC to emerge from bankruptcy protection minus billions in debt, 789 underperforming dealerships and burdensome labor costs that nearly sank the storied automaker.
Fiat CEO Sergio Marchionne immediately was named CEO of the new company, which said in a statement that it would soon reopen Chrysler factories that were idled during the bankruptcy process, costing the automaker $100 million per day.
The new company will focus on smaller vehicles, areas in which Chrysler was weak.
"Work is already under way on developing new environmentally friendly, fuel-efficient, high-quality vehicles that we intend to become Chrysler's hallmark going forward," the new company said in a statement.
The Italian automaker won't put any money into the deal but will give Chrysler billions worth of small car and engine technology.
"We intend to build on Chrysler's culture of innovation and Fiat's complementary technology and expertise to expand Chrysler's product portfolio both in North America and overseas," Marchionne said in a statement.
The sale to Fiat SpA marks a victory for the Obama administration, which shepherded Chrysler into Chapter 11 protection on April 30 with the hope that the company would emerge in a matter of months with a new partner.
Marchionne immediately made management changes, including the appointment of Vice Chairman and President Jim Press as deputy CEO and adviser to help with the management transition.
Press, formerly Toyota Motor Corp.'s top U.S. executive, joined Chrysler shortly after it was taken over in 2007 by private equity firm Cerberus Capital Management LP.
In a statement, Marchionne said the organization will be designed to give leaders broad control and increase the speed of decision making.
Chrysler CEO Bob Nardelli bid employees farewell in an e-mail obtained by The Associated Press, while Vice Chairman Tom LaSorda already has retired.
Marchionne, in an e-mail to Chrysler employees Wednesday, expressed confidence that Fiat will be able to turn Chrysler around.
He wrote that he stepped into a similar situation five years ago at Fiat, which at the time was perceived as a failing, bureaucratic automaker that made low-quality cars. Yet most of the people capable of remaking Fiat were there all the time, he wrote.
"We have remade Fiat into a profitable company that produces some of the most popular, reliable and environmentally friendly cars in the world," he wrote. "We created a far more efficient company while investing heavily in our technologies and platforms. And, importantly, we created a culture where everyone is expected to lead. We can and will accomplish the same results here."
The sale's closing involves Chrysler transferring $2 billion - provided by the U.S. government - to its creditors, reports CBS News correspondent Bianca Solorzano.
On Tuesday, Chrysler won its battle to erase its secured debt after the Supreme Court on objections to the sale to Fiat from a trio of Indiana pension and construction funds. The Indiana funds, which hold less than 1 percent of Chrysler's $6.9 billion in secured debt, claimed the sale unfairly favors Chrysler's unsecured stakeholders such as the union ahead of secured debtholders like themselves.
Supreme Court Justice Ruth Bader Ginsburg decided Monday to delay the sale while studying the appeals. But on Tuesday, the court turned down the opponents' last-ditch bid by declining a hearing on the appeals.
Also on Tuesday, Judge Arthur Gonzales approved Chrysler's motion to terminate 789 of its dealer franchises, or about 25 percent of its dealer base.
Many of those dealers closed their doors for good on Tuesday, though some will continue to sell used cars or other brands. Chrysler has maintained that the closures are a necessary part of its plan to cut costs. Jim Press, Chrysler's vice chairman and president, told a Senate committee that the poor performance of many of the dealers slated to lose franchises costs the company $1.5 billion in lost sales each year, along with $150 million in advertising and marketing costs and $33 million in administrative costs.
The dealers had argued that they cover their own costs and little would be gained by terminating their franchises. Chrysler attorneys said the automaker would extend until Monday its program to help the affected dealers send any unsold vehicles to stores that will remain open.
Chrysler's swift passage through about five weeks of bankruptcy proceedings was helped by the involvement of the Obama administration's auto task force, which provided billions in financing and helped negotiate a deal with the company's stakeholders.
Chrysler maintained that if it lost Fiat, the only alternative for the company would have been liquidation, reports CBS News correspondent Anthony Mason.
Under the agreement brokered in the days leading up to Chrysler's Chapter 11 filing, Fiat will receive up to a 35 percent stake in the automaker in exchange for sharing the technology Chrysler needs to create smaller, more fuel-efficient vehicles.
The United Auto Workers union will get a 55 percent stake that will be used to fund its retiree health care obligations, while the U.S. and Canadian governments will receive a combined 10 percent stake. Fiat would get 20 percent, with the possibility of up to 35 percent.
Meanwhile, the automaker's secured debtholders would get $2 billion in cash, or about 29 cents on the dollar, for their combined $6.9 billion in debt. Some debtholders, including the Indiana funds, balked at the deal, saying as secured lenders they deserved more. The funds also challenged the constitutionality of the Treasury Department's use of money from the Troubled Asset Relief Program, or TARP, to supply Chrysler's bankruptcy protection financing. They say TARP was earmarked for the financial industry and diverted to the auto industry without Congressional authority.
Consumer groups and individuals with product-related lawsuits also contested a condition of the Chrysler sale that would release the company from product liability claims related to vehicles it sold before the asset sale to Fiat. Compensation for such claims would have to come from the parts of the company not being sold to Fiat. But those assets have limited value and it's unlikely there will be anything to pay out.