Chrysler Group LLC officially has succeeded Chrysler LLC – on paper.

A U.S. bankruptcy court has approved the sale of Chrysler LLC’s primary assets to Fiat SpA, a decision that paves the way for Fiat Auto Group to begin steering the troubled auto maker back toward profitability.

The deal has Fiat claiming 20% of the new auto maker, while a trust established to cover the health-care benefits owed to unionized U.S. Chrysler workers and retirees will control 55%. The U.S. and Canadian governments will retain ownership of the rest of the company – stakes acquired through taxpayer-financed loans.

Proceeds of the transaction will go to Chrysler LLC creditors.

But Chrysler Group cannot begin operations in earnest until the court’s ruling, issued late Sunday, passes muster in the appeals process.

“The plan has to be fair and equitable to all the creditors, and everybody who is a stakeholder in the company,” says Sreedhar Bharath, assistant finance professor at the University of Michigan’s Ross School of Business.

Detractors already are lined up. National Automobile Dealers Assn. Chairman John McEleney says an announced strategy to eliminate 789 of Chrysler’s 3,100 dealers “does not meet even meet minimal standards of fairness.”

While NADA supports a Chrysler-Fiat alliance, saying it “restores a sense of certainy,” McEleney asks the court in a statement to “take special care not to trample on recognized rights under state franchise laws.”

Another key test will come when the ruling is applied to an objection filed by two Indiana state pension funds and a state construction fund that purchased some $42.5 million in Chrysler debt last year. Once these and any other appeals are resolved, a process Bharath predicts will happen quickly, “it is an automatic exit from bankruptcy,” he says.

“With this approval, the new Chrysler Group is created and can prepare to launch as a vibrant new company formed with Fiat,” Chrysler LLC Chairman and CEO Robert Nardelli says in a statement.

Work is “already well under way to develop the next generation of environmentally friendly, fuel-efficient high-quality vehicles,” the auto maker adds.

The U.S. government’s commitment to the alliance is contingent on plans to produce greener vehicles. Historically, Chrysler’s product mix has been weighted heavily toward light trucks, which hurt the auto maker’s overall fuel-economy ratings.

The future product generating the most buzz is the Fiat 500, a highly efficient minicar that has taken Europe by storm. Expectations are Chrysler Group will build the car in Mexico for sale through Chrysler dealerships.

The alliance also gives Chrysler access to Fiat small-car platforms and small-displacement engines. These products and technologies will spur the creation of unique Chrysler vehicles.

Alfredo Altavilla, Fiat’s chief executive for powertrain technologies and head of business development, told bankruptcy court last week he expects Chrysler Group to begin producing Fiat vehicles in about 18 months. Fiat engine production will begin in North America some six months later, he added.

Furthering Chrysler’s strategy to combat anticipated gasoline price hikes, the auto maker announced last week plans to launch test fleets of all-electric and plug-in hybrid versions of its core-brand Town & Country minivan. The announcement marked Chrysler’s first public confirmation of the plug-in product, though the auto maker’s initial electrified offering is expected to be an all-electric sports car.

Meanwhile, Chrysler’s transition to a Fiat-led organization closes a chapter on private equity’s involvement as a vehicle designer, manufacturer and distributor.

Two years and 18 days ago, Cerberus Capital Management LP acquired the Chrysler assets from DaimlerChrysler AG. The deal made Chrysler the first modern-era auto maker to be owned by private equity.

Nardelli displaced Tom LaSorda as Chrysler CEO. And when Chrysler Group emerges from the Chrysler LLC bankruptcy, Fiat CEO Sergio Marchionne will replace Nardelli.

The former General Electric executive and one-time Home Depot CEO will join Cerberus as an advisor.

emayne@wardsauto.com