On this day in 2009, Chrysler and the United Auto Workers (UAW) union reach a tentative deal that meets government requirements for the struggling auto manufacturer to receive more federal funding.
As part of the deal, the UAW agreed to let Chrysler reduce the amount of money it would pay toward healthcare costs of its retired workers. The month before the deal was announced, President Barack Obama issued an ultimatum to Chrysler that it must undergo a fundamental restructuring and shrink its costs in order to receive future government aid. Obama also gave Chrysler a month to complete a merger with Italian car maker Fiat or another partner. Although Chrysler reached a deal with the UAW as well as its major creditors shortly before the one-month deadline, Obama announced on April 30 that Chrysler, after failing to come to an agreement with some of its smaller creditors, would file for Chapter 11 bankruptcy protection, then form a partnership with Fiat. The move made Chrysler the first big automaker to file for bankruptcy and attempt to reorganize since Studebaker did so in 1933.
The Chrysler Corporation was originally established in 1925 by Walter P. Chrysler (1875-1940), an auto industry executive who once headed General Motor's Buick division. In 1928, under Walter Chrysler's leadership, his company acquired the Dodge Brothers Company, thereby becoming the world's third-largest auto maker, after GM and Ford.
After decades of expansion, Chrysler's success came to a halt after the 1973 oil crisis led to skyrocketing gas costs and new government standards for emissions. Chrysler's gas-guzzling vehicles faced stiff competition from smaller, more fuel-efficient imports. By 1979, the company's financial situation had become so dire that a federal government bailout loan was required to rescue it from near-collapse. The company eventually rebounded: In 1984, it launched the minivan, which proved to be a big success, and in the 1990s, it had another hit with the Jeep. However, in 1998, Chrysler, once again experiencing financial problems, merged with German automaker Daimler to form DaimlerChrysler. In 2007, the company was split and hedge fund Cerberus Capital Management paid $7.4 billion for an 80 percent stake in Chrysler.
In 2008, Chrysler, hit hard by the global recession and slumping auto sales, received a $4 billion bailout loan from the federal government. However, on April 30, 2009, the company declared bankruptcy. On June 10 of that same year, the automaker emerged from bankruptcy, selling the bulk of its assets to Fiat and receiving $6.6 billion in exit financing from the U.S. government. That day The New York Times reported: "As envisioned by Chrysler, Fiat and the government, [the sale] will create a new carmaker freed from the old Chrysler's crushing labor costs and debt levels. In Fiat, which will run the company, it will have gained a partner skilled in making and selling small, fuel-efficient cars around the world."