Fiat Tries to Get the Chrysler Deal Done

By Brendan Moore

04.21.2009

fiat-group-logo-small1The clock is ticking down to April 30, the government’s deadline for Chrysler to craft some sort of partnership with Fiat, and no one can say that Fiat isn’t doing it’s best to get the deal done. Of course, they want the deal on their terms, but they are trying to get it all wrapped up before the government’s drop-dead date.

Sergio Marchionne, the CEO of Fiat, is in the US again, with visits scheduled to Detroit and Washington, D.C.

There are, however, problems.

The autoworkers unions in the both the US and Canada are resisting making any more concessions, concessions that Fiat says it needs for any merger with Chrysler to work.

Chrysler’s creditors are balking at the haircut Chrysler, Fiat and the federal government wants them to take and have instead proposed their own more creditor-friendly terms which are very different than the ones initially proposed.

These are not minor problems, and either one of them could easily derail any deal. On the other side of the ocean, though, everyone seems pretty happy. From Europe’s point of view, the Fiat-Chrysler seems to be a foregone conclusion, and Fiat’s stock has climbed upward as a result. The unconfirmed report in Automotive News last week that Fiat would also do a deal with GM’s Latin American and European arms also pushed the stock up. Italian politicians have lined up behind the deal, and so have the Italian unions, since they believe access to the American market will result in more Fiat Group cars being sold, which in turn means the Italians have to build more cars.

Prime Minister Silvio Berlusconi has publicly stated that he is in favor of the deal and Miniister of Industry, Claudio Scajola, stated at a press conference last week that a Fiat-Chrysler deal “would benefit the entire Italian industrial system.”

All is not rosy in Italy, though, as Fiat is expected to post poor first-quarter trading results, with a loss of approximately $142 million USD. The company has been profitable every quarter since 2005. Fiat’s first-quarter performance is not expected to affect the proposed deal for Chrysler in any way.

COPYRIGHT Autosavant – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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5 Comments

  1. Even if Fiat-Chrysler sells no Chrysler vehicles except Jeeps and the trucks, they come out ahead. They get a nice dealer network and another shot at the US consumer. You know they’re going to get their part of Chrysler for free, so it’s all good for Chrysler.

  2. Don’t the unions realize that unless they make concessions there won’t be ANY jobs for them to negotiate about? Their stubbornness will just put ALL of Chrysler’s people out of work. I normally support the unions, but this time they’re just wrong.

  3. Even if Fiat doesn’t put up any money up front, it’s far from free as they’ll be assuming Chrysler’s debts. Plus, it’s going to take a significant amount of time and money to bring Fiat models to the American market.

  4. Jimbo, in spite of what Bob Nardelli originally said, Fiat made abundantly clear that they would not be assuming a proportionate share of Chrysler’s debt as part of their tentative agreement. From Chrysler’s correction:

    “As a potential result of the ongoing discussions taking place related to the Fiat alliance, Fiat would become an equity holder with the same rights and responsibilities as all other equity holders in a newly restructured company. To clarify, this does not mean Fiat would assume responsibility for any of Chrysler LLC’s debt.”

  5. If fiat and chrysler make a deal they need to move up the
    speed for fiat product .There is an urgent need for small
    ( A and B segment car in north america ) What a great merger .

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