So, this is how it’s gonna go, eh? Chrysler’s going to dress-up the cratered car company long enough to use federal funds to stay alive long enough to strip and flip the company’s assets. Sweet. For some. More specifically, if Fiat’s grabbing 35 percent of Chrysler, can we, the taxpayers, have our $4b back now please? Nope. “The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.” Jeez. Couldn’t they at least contemplate it? Anyway, a joint statement (don’t bogart that BS, my friend) explains the thinking “The alliance, to be a key element of Chrysler’s viability plan, would provide Chrysler with access to competitive, fuel-efficient vehicle platforms, powertrain, and components to be produced at Chrysler manufacturing sites. Fiat would also provide distribution capabilities in key growth markets, as well as substantial cost savings opportunities. In addition, Fiat would provide management services supporting Chrysler’s submission of a viability plan to the U.S. Treasury as required.” That last one’s kinda weird. What “management services” are required to write a viability plan? Emptying the waste baskets?
PRESS RELEASE: Fiat Group, Chrysler and Cerberus Announce Plans for a Global Strategic Alliance
Fiat S.p.A., Chrysler LLC (Chrysler) and Cerberus Capital Management L.P., the private investment majority owner of Chrysler LLC, announced today they have signed a non-binding term sheet to establish a global strategic alliance.
The alliance, to be a key element of Chrysler’s viability plan, would provide Chrysler with access to competitive, fuel-efficient vehicle platforms, powertrain, and components to be produced at Chrysler manufacturing sites. Fiat would also provide distribution capabilities in key growth markets, as well as substantial cost savings opportunities. In addition, Fiat would provide management services supporting Chrysler’s submission of a viability plan to the U.S. Treasury as required. Fiat has been very successful in executing its own restructuring over the past several years. The alliance would also allow Fiat Group and Chrysler to take advantage of each other’s distribution networks and to optimize fully their respective manufacturing footprint and global supplier base.
The proposed alliance would be consistent with the terms and conditions of the U.S. Treasury financing to Chrysler. Per the U.S. Treasury loan agreement, each constituent will be asked to contribute to Chrysler’s restructuring effort including: lenders, employees, the UAW, dealers, suppliers and Chrysler Financial. Such steps would greatly contribute to Chrysler’s long term viability plan. Completion of the alliance is subject to due diligence and regulatory approvals, including the U.S. Treasury.
As a consideration for Fiat Group’s contribution to the alliance of strategic assets, to include: product and platform sharing, including city and compact segment vehicles, to expand Chrysler’s current product portfolio; technology sharing, including fuel efficient and environmentally friendly powertrain technologies; and access to additional markets, including distribution for Chrysler vehicles in markets outside of North America, Fiat would receive an initial 35 percent equity interest in Chrysler. The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.
“This initiative represents a key milestone in the rapidly changing landscape of the automotive sector and confirms Fiat and Chrysler commitment and determination to continue to play a significant role in this global process. The agreement will offer both companies opportunities to gain access to most relevant automotive markets with innovative and environmentally friendly product offering, a field in which Fiat is a recognized world leader while benefitting from additional cost synergies. The deal follows a number of targeted alliances and partnerships signed by the Fiat Group with leading carmakers and automotive suppliers over the last five years aimed at supporting the growth and volume aspirations of the partners involved,” the CEO of Fiat Group, Sergio Marchionne said.
“A Chrysler/Fiat partnership is a great fit as it creates the potential for a powerful, new global competitor, offering Chrysler a number of strategic benefits, including access to products that compliment our current portfolio; a distribution network outside North America; and cost savings in design, engineering, manufacturing, purchasing and sales and marketing,” said Bob Nardelli, Chairman and CEO of Chrysler LLC. “This transaction will enable Chrysler to offer a broader competitive line-up of vehicles for our dealers and customers that meet emissions and fuel efficiency standards, while adhering to conditions of the Government Loan. The partnership would also provide a return on investment for the American taxpayer by securing the long-term viability of Chrysler brands in the marketplace, sustaining future product and technology development for our country and building renewed consumer confidence, while preserving American jobs.”
“This is great news for the UAW Chrysler team and we look forward to supporting and working with them to ensure Chrysler’s long term viability,” said Ron Gettelfinger, President United Auto Workers (UAW).
“We’re on board with this important strategic initiative as it will help preserve the long-term viability of our great company, its brands and of course UAW-Chrysler jobs,” said General Holiefield, Vice President, United Auto Workers (UAW).
Ummm…interesting. Does that mean that we’ll soon see 500’s running around our Interstates? Will they actually be badged as Fiats, or wear a Chrysler nameplate? Couldn’t be much worse than what Chrysler is selling (or NOT selling) these days…
Robert,
You forgot to mention that these two companies are in some ways the ideal hook-up partners.
One is a player ONLY in North America, and one is a player everywhere BUT North America.
Sweet, and the Germans are most delightfully not involved.
Remember, $4B will always be less than what the taxpayers would have to pay if Chrysler shuts its doors. Way, way, less.
News of Chrysler’s death is, apparently, greatly exaggerated! Okay, at least for now, but this move is a great step in a positive direction.
Fiat vehicles when they were here in Canada in the 80’s where “crap”, Salt on the winter roads really destroyed them.
On a recent trip to the European Union I hardly saw any Fiat Product anwhere!
The whole Country of Italy is really a basket case
like there Airline is and there Government changes almost every week, two players destined for God knows where!
This makes Ceberus a minority owner of Chrysler LLC, if it happens. 35% to FIAT, 19.8% still in the hands of Daimler = 45.2% owned by Cerberus.
Now, it’ll be a triple play if they talk the South Korean bankers into letting them have Ssangyong to go along with the deal.
That’s what they need – another bankrupt SUV and large car manufacturer, right? (deep sarcasm)
Fix It Again Tony, goes full circle. The worst quality reputation on both sides of the Atlantic getting together. How ironic.
Geo. Levecque
You saw no Fiats in the EU?? Pull the other one, I live there and you trip over Grande Puntos.
Which Fiats were you thinking of? Mirafioris?
This may be oversimplifying things a bit, but four years ago GM forked over $2 billion to Fiat to avoid having to exercise a purchase option, and now the U.S. taxpayers are “lending” Chrysler, LLC $4 billion, with the result that it is now an attractive property for Fiat.
Ironic that Fiat has managed to – directly or indirectly – squeeze $6 billion from a market in which it has no presence.
In theory, the idea of Dodge 500’s running around sounds almost as good as Ford five hundreds running around, but the reality is sure to differ.
You still have to engineer vehicles to meet US regulations, and Fiat has no product that can directly come over. There really isn’t any platform sharing that can occur, since the two carmakers have nearly zero overlap.
Where will Chrysler get the platforms for the next Sebring? The next Dakota? The next Jeep?Now that they are laying off all their engineers, how will they develop the next 300C or Ram or minivan?
This is a stopgap that solves nothing.
Hey, Sears and Kmart merged years ago – 2 terrible retailers. They are both still terrible, but they’re still here. Why not Chrysler and Fiat.
Fiat has partnered with Ford on the Fiat 500/Ford Ka chassis, so you probably won’t see that design come here as a Chrysler.
Here’s another way to look at the deal. Chrysler says, “Hey Fiat, help us fix our company, and we’ll cut you in on the action.”
What does Fiat have to lose in this deal? If Chrysler fails, which is still very likely because Fiat doesn’t bring cash to the table, then Fiat may end up knowing which assets it wants before anyone else. If Chrysler survives, then Fiat has another place to sell cars.
What does Chrysler get, if it survives? Economy cars that it has told us it can’t afford to build and sell in North America. Does anybody really think there’s substantial market abroad for Chrysler’s big cars and trucks? A few Jeep products maybe, but when gas prices climb again, we won’t see much there.
And even then, it’s not as if Chrysler and Fiat can have a big ceremony tomorrow and throw a big switch and Chrysler’s factories start cranking out fuel-efficient, well-made cars that we all want to drive and save Chrysler. And it’s not as if Chrysler’s inventory can be loaded onto ships tomorrow and sent to Fiat dealers around the world and be snatched up like inauguration swag in the Washington today. We all know that takes years to work out and Chrysler has neither time nor money to make this happen.
Looks like Fiat made a great deal. Although it’s a non-binding agreement, I seriously doubt anybody else is going to come along with a better one, and it’s quite possible this could be another nail in Pentastar’s coffin.
I think it is really a win-win situation:
For Cerberus, because giving away 35% of something that’s worth nothing without any true R&D resources (which Cerberus had stripped away before) doesn’t hurt them financially.
For Chrysler, because should they somehow not go under, they get access to state-of-the-art small engine and Diesel technology as well as better compact platforms than they could ever hope to develop themselves.
For Fiat, because as far as I know they are not liable for any Chrysler debt, so if Chrysler goes tits up they are golden. Plus, if Chrysler survivies, they can achieve massive savings in parts sourcing through higher volumes. Plus Plus, should the US economy recover, they can get access to a widespread dealer network for the return of Alfa to NA.
For the US taxpayer, because shovelling money into a black hole is much more satisfying if there is at least a remote possibility of things working out in the long run…
Which European automaker suggested that the future would contain only 4-5 world-wide automakers?
Who’d of thought they’d volunteer Fiat for destruction?!?!
(Does this mean Ferrari’s will be sold in Chrysler dealerships, or there will be an utterly STUPID Ferrari SUV?)
EDIT: Sorry, forget to say that Senator Corker has been proven RIGHT about the Cerberus/Chrysler dating game.
Why on earth would we the American taxpayers consider this a good thing?
Let’s look at it logically.
Foreigners buy up a storied, grizzled, old line US manufacturer, and gut it, then sell most of it to a bunch of banksters in New York, who are much like a car chasing poodle who finally catches a car. (Now WT NSFW do I do with it?)
We the taxpayers pour billions of dollars into Chrysler with ABSOLUTELY NOTHING TO SHOW FOR IT, not even any ownership equity (not that it is worth anything – Daimler wrote down their 19.8% of Chrysler as worth ZERO). But that’s not the point.
So now come the Italians (after soaking GM for $4 billion a few years ago over a broken engagement) who will be “willing” to take 35% of this company for not one red cent. And with an “agreement” which enables them to not have to put in a penny towards revitalizing the company despite 35% ownership.
And we taxpayers get to continue to pay, no doubt, in taxes, in suffering the inevitable inflation (later) because the idiots in charge in Washington DC keep on printing up monopoly money and call them “dollars”, and of course, if we’re stupid enough, we get to pay for one of these “nice” cars if we buy one.
Welcome to Bizarroland.
Somehow, this reminds me of the saying about the deaf leading the blind… I don’t know how that came up in my mind…
So now we’re down to the Big 2.45? This is getting complicated.
Throw the politicians some changes, with the words small car thrown in there somewhere, and they will give away our money by the billions forever.
This sounds like the best chance Chrysler has at avoiding CH7. But, I think the real winner here is FIAT. I’m guessing Cerberus isn’t going to give FIAT 35% of Chrysler, they’re going to pay (with our money) FIAT to take it. Further, FIAT stands to get even more of our money to upgrade existing models with Chrysler-ish bodies and regulatory updates.
Still, even with an almost total elimination of Chrysler’s US engineering and management, and a substantial improvement in the desireability of their cars, it will be very difficult for them to make a profit selling vehicles originally designed for the Euro market and manufactured in UAW staffed plants, while supporting Chrysler’s legacy costs. Reference, the Ford Focus.
@menno:
Why is that a bad thing?
The US-taxpayer “loses” 35% of assets worth nothing and gets a (albeit small) hope that all the money spent wasn’t comlpetely futile. Fiat’s small engines, Diesel technology and compact platforms are miles ahead of everything Chrysler could hope to develop themselves (especially considering Cerberus has almost competely shut down R&D funding).
Fiat gets vital economies of scale for development and parts sourcing.
Win-Win!
God, I can just see it now…a 500 with a huge ugly Dodge nose on it…
/vomit
Damn, it could be sunny outside but some of you folks will complain you might get skin cancer!
“Fiat vehicles when they were here in Canada in the 80’s where “crap”, Salt on the winter roads really destroyed them.”
“Fix It Again Tony, goes full circle. The worst quality reputation on both sides of the Atlantic getting together. How ironic.”
Time for an update folks. The FIATs of today are as different from the Strada of 1982 as a 300 sedan is different from a rear-drive M body LeBaron of 1980. And most people under 40 probably don’t remember Fiat ever being in North America.
As for Chrylser? They have NEVER been at the bottom of any JD Powers initial or 3 year ranking. EVER. But other companies have – and they are not American companies. When Dumbler “merged” with Chrysler they had better reliability than Mercedes.
I love the little 500. That looks like a great city car. Bring in GEM and you could have a great electric car. The possibilities are endless. You may be able to rebadge some Alfa offerings as Chryslers. This venture would definitely fill up at least one assembly plant, give Chrysler an option for its Project D car, and give Chrysler an entry in the small/mini car segment. Current Alfa-Romeos have some Aussie V6 Holden motors because the old Alfa V6 was too costly to fit the new European emissions standards. I could imagine the Phoenix V6 under the hood of an Alfa.
Like the speculated alliance with Renault-Nissan, this signals the possibility of a real give-and-take partnership. Hopefully, this will be executed differently than the Chrysler-give-and-Daimler-take dynamic during the Daimler plundership years.
This deal signals the end of Cerberus’ attempt to restructure Chrysler. Cerberus will most likely attempt to regain control of GM and Chrysler financial but their dealings with the manufacturing side of the automotive business are done. Fiat will have the option to acquire 55% of Chrysler and Daimler stated at Detroit that it was willing to resume talks with Cerberus its 20% stake in Chrysler.
On a recent trip to the European Union I hardly saw any Fiat Product anwhere!
Really? I was in Rome and the Amalfi(sp?) Coast last summer and I saw Fiats everywhere. I agree with your assessment about Fiats a decade ago, they were real turd-blossoms but Italy anyway, still seems big on them.
dwford :
Fiat has partnered with Ford on the Fiat 500/Ford Ka chassis, so you probably won’t see that design come here as a Chrysler.
That platform was used in the Fiat Panda years before the Ford partnership. There’s zero Ford influence in the basic engineering, just some chassis finetuning for the Ka to make it handle a bit better than the 500.
I’d be more worried about the Grande Punto, the Idea, the Lancia Musa, the Lancia Ypsilon and the Alfa MiTo, all sharing the Opel Corsa platform… and the Fiat Croma and Alfa 159, Brera and Spider, all sharing the GM Epsilon platform.
Fiat does have a very good off-road platform and all kinds of platforms for all kinds of trucks through the Iveco division.
You may be able to rebadge some Alfa offerings as Chryslers.
Terrible idea. Alfa’s are only desirable cars BECAUSE THEY’RE ALFAS.
Strip the Alfa character and styling out and slap a Chrysler grille on, and you’re left with mediocrity.
Don’t be surprised to see them go for some sort of temporary waiver to get the cars here sooner. Given the current climate, they might actually get it approved.
How about this – the new Chysler 300 Imperial – aka a rebaged Quatroporte.
I think it might be fun, so long as cerebus does not dodgeify the product too much. If nothing else, it would provide Fiat a low cost way to reenter the USA, dealers already there, had for a bargain price. It also gives Chrysler as in to the EU, same story.
I cant wait to see Abarth in the USA!!! ANd little 500’s. Gorgeous ALfas!!! What i dont see is chrysler products in the EU, they seem too large and thirsty for the intended market.
I am also puzzled by the no Fiats in the EU remark. I go there frequently, they are all over the place, along with many other makers that have no presence here.
FIAT and Chrysler? (new deal)
Chrysler and Daimler? (old deal)
FIAT and Ford? (Next Ka platform)
Chrysler and Mitsubishi? (platform sharing)
Chrysler, Mercedes and Freightliner? (Sprinter sharing)
Chrysler, GM and BMW? (plug-in Hybrid technology sharing)
Chrysler and Hyundai? (truck diesels from Hyundai)
Chrysler and VW? (Caravan and Touran minvan twins)
FIAT and PSA? (platform sharing)
FIAT, Renault-Nissan rumored hook-up? and now Chrysler? That sounds like Global Motors to me…maybe that Lido Iaccoca guy was right so many years ago.
We need a family tree map just to keep track of it all… Maybe TTAC can draw one up? Ironically, there’s a really good one at the Walter P Chrysler Museum charting the family tree and history of Chrysler JIC you need an example..
Can anyone else think of a relationship here? I’m sure I’ve missed some.
I think it’s a genius move for Fiat, not because it enables them to sell their cars in the US, but because with that deal they DON’T have to.
Think about it: Why do European automakers try to sell in the US in spite of expensive regulation and low sales prices? Volume.
Modern car development is extremely expensive, so selling 1 million or 2 million of a particular development (platform, engine etc.) can make the difference between losses and earnings. By offering Chrysler (essentially a non-competitor in Fiat’s current markets) they can achieve huge savings in parts sourcing and development costs (per unit).
In that scenario, entering the US market themselves and potentially cannibalizing Chrysler sales in the process would be counterproductive for Fiat.
@Stu Sidoti :
Add Volkswagen to the Sprinter sharing. The Crafter has a different front clip and VW engines and transmissions, otherwise it’s identical… up to Mercedes radios with VW blue lighting.
@jerseydevil :
What i dont see is chrysler products in the EU, they seem too large and thirsty for the intended market.
At least in Germany, they are available… at least some of them.
PT Cruiser with Mercedes 2.2 diesel
Sebring sedan and convertible with VW 2.0 diesel
Caliber with VW 2.0 diesel
Avenger with VW 2.0 diesel
Compass with VW 2.0 diesel
Journey with VW 2.0 diesel
Voyager with ViaMotori 2.8 diesel
Wrangler with ViaMotori 2.8 diesel
Nitro with ViaMotori 2.8 diesel
Grand Cherokee with Mercedes 3.0 diesel
300C with Mercedes 3.0 diesel
300C station wagon with Mercedes 3.0 diesel
You get the picture… Chrysler is the only of the Detroit 2.x who has significant overlap between the North American and Euro market – they just stick European engines in their stuff.
The problem about this tactic is that they can only sell on price.
Considering how little Chrysler has to offer and the position they are in, I can understand the reasoning. Business as usual will see Chrysler go out of business. This may not prevent that, but in a lot of ways they do complement each other. Desperate time call for desperate measures. If this gives them a better chance, so be it.
Mirko Reinhardt :
January 20th, 2009 at 9:18 am
“dwford :
Fiat has partnered with Ford on the Fiat 500/Ford Ka chassis, so you probably won’t see that design come here as a Chrysler.
That platform was used in the Fiat Panda years before the Ford partnership. There’s zero Ford influence in the basic engineering, just some chassis finetuning for the Ka to make it handle a bit better than the 500.
I’d be more worried about the Grande Punto, the Idea, the Lancia Musa, the Lancia Ypsilon and the Alfa MiTo, all sharing the Opel Corsa platform… and the Fiat Croma and Alfa 159, Brera and Spider, all sharing the GM Epsilon platform.
Fiat does have a very good off-road platform and all kinds of platforms for all kinds of trucks through the Iveco division.”
…so in a back channel sort of way, this is the GM-Chrysler merger, but without the benefit of back office consolidation. Chrysler gets access to GM chassis technology for free, Fiat get a hope that the 35% stake will be worth something, and GM gets screwed by Fiat again. Brilliant!
I would buy a Chrysler 159 tomorrow, just as long as it still looks like the Alfa 159.
This car would be the perfect replacement for the Acura Integra that is no more. Just thing about it a Chrysler replacement for an Acura…
A boy can dream can’t he?!?!?
Last time I looked, Dodge and Chryler brands were about size. Big body, big engine Rams, Caravans and Durangos. What does the Dodge brand stand for when you substitute tiny rebadged Fiats?
That Panda got a Hemi?
I think not. There’s no scale efficiencies here, because there is no overlap. This three-headed dog don’t hunt.
According to my understanding of the press release, what has been signed is merely a letter of understanding. The letter stresses that Fiat will not invest a dime in Chrysler, yet holds the option of acquiring a greater percentage of Chrysler in the future.
Rather than welcoming this deal, we have to ask the question: How does this help Chrylser stay afloat with no capital flow to Chrysler?
The answer would be, it does nothing. Unstated in the deal, then, is how Chrysler will stay afloat while it and Fiat are ‘sharing small car mumbo-jumbo.’ The deeper answer is that, why exactly should Fiat invest anything? One thing that has been proven is that taxpayers will be forced to give Chrysler free cash, and will do so forever.
Fiat need do nothing. Therefore, Fiat has nothing to lose in this. Taxpayers have lots more to lose, since Chrysler will ask forever for 6 more months of taxpayer funding, year after year after year. Congress & the administration will give it.
Lancia Thesis = new Chrysler “100” C/D class car?
Have a peek. Assemble it in the newly disused Delaware plant, with 5 cylinder 2.4 litre Lancia (Fiat) engine. (Or a Dundee Michigan built “world engine” 2.4 litre 4 cylinder engine?)
All it needs is a waterfall grill. I suspect that with waivers and some quick engineering, it could be in “production” from kits by 2010.
Trouble is – it’s UGLY – at least to my eyes.
Well, you know the old saying. One person’s “ugly” is another’s “distinctive”.
http://www.lancia.com/cgi-bin/lancia.dll/LANCIA_COM/models/models.jsp?BV_SessionID=@@@@1741397892.1232462690@@@@&BV_EngineID=cccdadegfhhmmeecefecejgdfkhdfjl.0&categoryOID=-1073793434
As for the Fiat Sedici, it’s merely the same car as the Suzuki SX4 Crossover – which isn’t exactly setting sales records in North America now.
The Fiat Bravo might make a good little Dodge, except it’s a hatchback and a lot of North Americans equate hatchback with “cheap car”, plus, Chrysler already has a hatchback of this size.
The Fiat Grand Punto might make for a nice new “Dodge Omni” but is 1.4 litres and 95 hp enough for North American “needs”? (And can you even get it with an automatic?)
As for the Fiat Doblo – well…. we only JUST got rid of the Pontiac Aztek….
Here’s the UK Fiat site.
http://www.fiat.co.uk/showroom/?id=15107#showroom/home
I dunno. I’m not convinced yet. I think it absolutely reeks of desperation on both the part of Fiat (hoping they’ll get in on the US tax money gravy train, I suppose) and Cerberus (how do we lose this clown-outfit?!)
ca36gtp :
God, I can just see it now…a 500 with a huge ugly Dodge nose on it…
/vomit
How about a Jeep version to complement the Compass?
Apologies to anyone eating breakfast or lunch while reading this.
@menno :
Lancia Thesis = new Chrysler “100″ C/D class car?
Trouble is – it’s UGLY – at least to my eyes.
The face is “distinctive”, but you can re-engineer that on the cheap. The side profile and tail end of the Thesis are gorgeous – those thin taillights…
The Fiat Bravo might make a good little Dodge, except it’s a hatchback and a lot of North Americans equate hatchback with “cheap car”, plus, Chrysler already has a hatchback of this size.
Fiat also has the Linea sedan, which is a Grande Punto with a generous wheelbase stretch into midsize territory – and it doesn’t look bad actually.
It’s cheap too.
The Fiat Grand Punto might make for a nice new “Dodge Omni” but is 1.4 litres and 95 hp enough for North American “needs”? (And can you even get it with an automatic?)
The Grande Punto is available with both a lot less and a lot more than 95 hp.
Automatic… I’m sure they have one of those auto-manuals, but I bet they could engineer a cheap auto in quickly.
Rather than welcoming this deal, we have to ask the question: How does this help Chrylser stay afloat with no capital flow to Chrysler?
If Fiat takes 35% of the equity of the entire company, then they’re stuck with paying 35% of the liabilities.
In effect, Fiat would be paying for the company, but it’s the equivalent of buying a car by taking over the payments. By assuming the burden of the expenses, they are effectively paying for the business, but the price accounts for the fact that the liabilities exceed the assets.
I would presume that this deal is conditional in part on Cerberus selling the rest of the business. It’s a matter of time before Nissan jumps in to take another piece, and this may well lead to Tata taking another. Nissan wants the Dodge truck line, Tata wants to enter the US, and Fiat already has a JV with Tata, which makes them a natural partner for this.
They’ll also want more US government money, so we do need to be careful that the new owners have a viable plan to make this work.
This sounds like the best chance Chrysler has at avoiding CH7. But, I think the real winner here is FIAT. I’m guessing Cerberus isn’t going to give FIAT 35% of Chrysler, they’re going to pay (with our money) FIAT to take it. Further, FIAT stands to get even more of our money to upgrade existing models with Chrysler-ish bodies and regulatory updates.
Still, even with an almost total elimination of Chrysler’s US engineering and management, and a substantial improvement in the desireability of their cars, it will be very difficult for them to make a profit selling vehicles originally designed for the Euro market and manufactured in UAW staffed plants, while supporting Chrysler’s legacy costs.
Good analysis, but they’ll deal with this by building vehicles in Mexico. The UAW will also have to cut a deal, because the union’s alternative is to deal with a Chapter 7, combined with an asset sale to the new partners that burdens them with none of the liabilities, which would wipe out the union completely. The new Chrysler management will be able to use Nissan-Dodge’s future truck production as a bargaining chip.
My question: What else would you expect Chrysler execs to do at this point? Are there any better options if immediate liquidation is not allowed by Chrysler’s corporate masters?
I think you’re all missing the point. If Nissan gets their hands on the remaining 45%, the Axis powers will have finally taken power on American soil!
Without their own engineering and design let Chrysler die. They will do America a favor!
eh, with a slightly larger engine, I actually like the Grand Punto. Rented one not too long ago…unforunately, it was the 1.4, but my daily drive is a 20 mile commute in stop-n-go, so in reality, that wouldn’t be so bad. Now if some of the Alfas can find their way back here…
As I said in another thread, the way to go might be as follos:
“Mama mia! Santa pacienza!
Menno et al:
Usually you are very right, but may I respectfully disagree with you guys on this one? Fiat is now a world-class maker, in terms of quality, reliability plus they have that little unidentifiable drivability/handling/fun magic powder that they still seem to apply liberally in every car. And “weird-ass” design? Really? Tastes may very, but rarely have I seen Italian design called thus.
Actually, this makes sense. If they do it like the Renault-Nissan Alliance. Fiat calling the shots. And getting a much needed entry gate into America. And if they come slashing and burning through the excess dealers, factory capacity, excess labor etc.
Think maybe a ressurected Plymouth selling Fiat-engineered small cars, Dodge keeping only trucks and SUVs, Jeep back to its roots, and Chrysler still providing kick-ass American-style monster V8 and V6 cars (one or two cars and a minivan only).
And also selling imported Alfas for good measure.
Sounds like America could be in for a lot of fun.
But there are a whole lot of ifs.”
We’ll see how this hits the ground. Hope it works because that will guarantee that I’ll always be able tobuy from my favorite brand, Fiat.
And guys, these aren’t the 60s, 70s, or 80s anymore. Think about it, Fiat came to Brazil a little over 25 years ago. As of the last 7 years they’ve wrestled the leader in sales title from VW (that held it for over 40yrs) and are actually little by little putting more and more distance from themselves and the now perennial 2nd place VW. If the cars were so terrible, how could they survive in Brazil? A country that has from snowy climes (yes in the South) to the Amazon rain forrest? Stupid humidity and heat (have you ever been to Rio?). And have you ever seen the “quality” of our roads? BMWs, Mercedes, Audis et al all start making noise and complaining but after a few years! If nothing else Fiat cars hold themselves up better than most!
Chrysler BTW has been and left production in this country twice. Couldn’t handle the competition. I wonder what’s going to happen to the Versa sedan that was supposed to be sold down here with a Chrysler badge?
As you can see, we all have many questions about this. We’ll have to see how it goes. Hopefully everybody wins.
Now that Chrysler is majority owned, 55%, by EU companies, will the government care to/ have any continued interest in funneling more money into them? Will this not make tham a foreign automaker, very similar to Mazda who until recently was 66% owned by Ford? No one would have ever considered bailing out Mazda!
Right… because Chrysler has such a glorious history of collaborating with Italian automakers.
Anyway, my other point:
Nowhere does it say that Fiat’s 35% is coming ONLY from Cerberus’ stake. They could, in fact, be bailing out Daimler. Or they could be doing it on percentages.
Sadly, I think Fiat has made great strides with its design and build quality and is now essentially chaining itself to an anchor of bad reputation. The last thing they need is to re-enter the US market in the showrooms of the laughing stock of US companies. Good luck with that.
Fiat gets a piece of Chrysler. Chrysler gets nothing in return, except for an alibi for more tax money: “look at us restructuring!”
And here’s another thing I just thought of (even though I know some of you will just laugh and make comments that, to be kind, I’ll just say just “smell” of prejudice, just smell of, are not infact, ok?):
Brazil and Mexico have a free trade agreement on cars limited by quotas. In other words, limited only by numbers exportation and importation to and from both countries is tax-free.
So, since they are recent Euro-zone products, you might just get the Grande Punto and Linea much sooner than you expect!
As to brand rejection, like some have said above, these cars are not your grandparents’ Fiats. Young people in America are much more open now to foreign products than their forebearers. Fiat had trouble in Brazil with old-timers, too. You know what they do? They just ignore them because they know they’ll never get most of them to open up their narrow minds. Those who do enjoy a fine, fuel efficient and fun ride.
BTW, recent surveys say that in Brazil Fiat is fast approaching VW as the most admired brand among consumers 18 to 30. That alone explains their growth here.
Cheers.
Robbie, I think the idea is that Chrysler gets to keep their NAFTA-zone manufacturing plants operational by producing Fiats for N. American sale. This pays the bills at the plants that rack up whether they’re producing or not.
Chrysler also gets to send product to dealers even if they are Fiats. Daimler’s looking to offload their stake in Chrysler and if Fiat buys they’re straight-out majority owner and Cerberus would be happy to turn over operational responsibility.
@ Pch101:
“If Fiat takes 35% of the equity of the entire company, then they’re stuck with paying 35% of the liabilities.”
Like how Cerberus is paying 80% of Chrysler’s liabilities now?
How does this work? How does Fiat begin selling cars here in the USA in time to save Chrysler?
For this to make sense from a PRODUCT standpoint either there is about to be:
1. a roll-back of US auto safety regulations (the lawyers will LOVE that)
2. a roll-back of US auto emissions standards (Um, we’re inaugurating a gentleman who campaigned on the “greening” of the US economy)
3. Fiat will invest billions to re-design their cars and sell them here (in the midst of a global economic turndown)
Some of the cars in that gallery would be attractive in some of the segments here in the States. But, given that none of the above options are likely or attractive and given that this relationship (I won’t call it marriage) ties together two brands very well known for poor quality I would submit that Nardelli has found himself Cerberus’ first buyer in the liquidation of Chrysler’s assets.
Alright, Chrysler is now a majority foreign (20% German, 35% Italian) owned failed company. No more money.
Now we really need to call Chrysler’s loans in March.
“If Fiat takes 35% of the equity of the entire company, then they’re stuck with paying 35% of the liabilities.”
Nope, not for interests in corporations or LLCs, such as Chrysler LLC.
Fiat’s risk in this venture is limited to what it paid for the 35% interest; which is zero.
The Detroit automakers have nothing on Fiat’s skill in stealing money from taxpayers through a corrupt government.
“The Detroit automakers have nothing on Fiat’s skill in stealing money from taxpayers through a corrupt government.”
no_slushbox nailed it!
In Italy, Rick Wagoner would have just been inaugurated President!
SherbornSean:
“Last time I looked, Dodge and Chryler brands were about size. Big body, big engine Rams, Caravans and Durangos. What does the Dodge brand stand for when you substitute tiny rebadged Fiats?”
You didn’t look past 2005. Before then Dodge ALWAYS had a small car. Omni, Shadow, and Neon, which had it’s fans. It’s not totally out of consideration for Dodge to sell a small fuel efficient model. I would love for it to be a Plymouth, but that’s a topic for another time.
FromBrazil:
“…Fiat came to Brazil a little over 25 years ago. As of the last 7 years they’ve wrestled the leader in sales title from VW (that held it for over 40yrs) and are actually little by little putting more and more distance from themselves and the now perennial 2nd place VW. If the cars were so terrible, how could they survive in Brazil?”
Now I like FIAT, but to be fair if we talk about FIAT having beter reliability than VW we aren’t saying much. VW’s most reliable vehicle in the US is probably the Chrysler made Routan. What I most hope to see is FIAT’s quality and Chrysler’s reliability in the same car. If FIAT is more reliable than Chrysler is now (I don’t know how you can compare surveys of cars that are not driven under the same laws and conditions) than maybe FIAT can help with that. One area Chrysler can definately help is in flex manufacturing. FIAT could build two entirely different platforms in one factory. That would save them money but wouldn’t “spread the wealth around” jobwise.
It will not work…Chrysler’s problems remain: High labor costs, high legacy costs, old factories, too much capacity, unattractive line-up.
FIAT is obviously gambling here. They don’t have much to lose. If the price for gas rises again, they’re looking at the Chrysler dealer network to sell their small vehicles, maybe even use some of Chrysler’s factories to build their cars.
What FIAT did was to get a foot in the door of the American market. And very cheap at that. But right now there’s no room for FIAT, Alfa Romeo or Lancia on the US market. If the market recovers quick (don’t bet on it) and the gas prizes go back to pre-recession times (it will, but probably not anytime soon) then FIAT is the big winner here. If they won’t, the loss is still reasonable. For Chrysler on the other hand nothing has changed, other than they can get fully developed FIAT parts. But even from there, developing a new car is costly and time-consuming.
Nope, not for interests in corporations or LLCs, such as Chrysler LLC.
Fiat’s risk in this venture is limited to what it paid for the 35% interest; which is zero.
If Fiat became partners in the existing entities such as Chrysler LLC, your point would be false. As a managing member of the existing LLC, they would have joint and several liability for the costs. They might have their own internal agreements with Cerberus and Daimler as to who is responsible for what, but the creditors don’t have to care about those terms.
If a new entity was created for this venture or if they invested in some other entity that is independent of Chrysler LLC, then yes, Fiat may be carved out from those burdens. This would depend upon the structure.
It will not work…Chrysler’s problems remain: High labor costs, high legacy costs, old factories, too much capacity, unattractive line-up.
They may be able to work around some or most of that. The devil will be in the details. My guess is that the US facilities would build trucks, minivans and a car or two, perhaps?), and that just about everything else would be either built by Nissan’s US plants or else offshored to Mexico (Fiat) and India (Tata.) Of course, this presumes that Nissan and/or Tata join in the fun.
“Geo. Levecque :
January 20th, 2009 at 7:52 am
On a recent trip to the European Union I hardly saw any Fiat Product anwhere!”
ROFLMAO – do you now that FIAT have changed its logo in 2006, right?
Current logo
Terrible idea. Alfa’s are only desirable cars BECAUSE THEY’RE ALFAS.
Strip the Alfa character and styling out and slap a Chrysler grille on, and you’re left with mediocrity.
Mediocrity would still be a step up from Chrysler’s current range of vehicles.
Pch101:
You are confusing LP and LLC.
There are no “partners” in an LLC, and none of the members have any personal liability. “Like shareholders, a member’s liability to repay the LLC’s obligations is limited to his or her capital contribution.”
Conveniently for Fiat the capital contribution was zero.
Fiat getting 35% of the membership interests in Chrysler LLC is no different than it getting 35% of the stock in a corporation, no personal liability comes with it.
If Chrysler LLC goes bankrupt none of its creditors will have any recourse against any of the Chrysler LLC members unless the creditors able to “pierce the veil”, which is very unlikely.
“Like shareholders, a member’s liability to repay the LLC’s obligations is limited to his or her capital contribution.”
Your explanation is erroneous. LLC’s have both “managing members” and “members.” Managing members do have liability. They are the equivalent of general partners in a partnership.
“Members” typically invest money, but have no management authority. They are required to play a passive role in exchange for the lack of liability. If a member behaves like a managing member, that member will lose its protected status and be treated as a managing member for liability purposes.
As an operator of the business, Fiat would not be playing a passive role and would have liability. Unless Fiat plays no role in managing Chrysler LLC, they are going to be stuck with the liability. Otherwise, if Fiat acts only as a member, it would be entrusting Chrysler’s managers to act on its behalf, because it could not as a member decide on much of anything.
Pch101:
You have it wrong. Fiat will have no personal responsibility no matter what.
Designating managing members is one way to structure an LLC; if an LLC is structured that way even the managing members have no personal liability.
Here is US Department of Commerce link if you don’t trust my above Wikipedia links:
http://74.125.95.132/search?q=cache:vDqYVMMXycMJ:www.mbda.gov/%3Fsection_id%3D5%26bucket_id%3D123%26content_id%3D2383%26well%3Dentire_page+LLC+managing+member+liability&hl=en&ct=clnk&cd=2&gl=us
From the US Department of Commerce link:
“Additionally, there is a managing member, who also enjoys the rewards of limited liability and is typically the person responsible for managing the business.”
LLC’s are a very poplar because they provide all of the limited liability protection of a corporation, but are not double taxed (i.e. taxation on the corporate profits and then taxation on the dividend income) unless they are publicly traded, which Chrysler isn’t.
Cerberus doesn’t know how to run a car company, but they do know how to financially structure one.
Designating managing members is one way to structure an LLC
It isn’t “one way”, it’s mandatory. All LLC’s have at least one managing member. There is not a single LLC in the country that doesn’t have at least one managing member.
If Fiat wants to have an entity that manages Chrysler LLC, then that entity will be stuck with dealing with trials and tribulations of Chrysler LLC unless and until the LLC files bankruptcy. That’s what makes a managing member a managing member.
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Pch101:
I’m just trying to set the record straight on how sweet a deal this is for Fiat.
It looks like you’ve agreed that managing members, if they are designated, have no personal liability.
However, managing members do not even need to be designated. An LLC operating agreement can be structured so that every membership unit has an equal vote, and officers are chosen based that vote or directors are elected like in a corporation.
For example, there are these publicly traded LLCs, which have no managing members:
http://finance.yahoo.com/q?s=FCJ
http://finance.yahoo.com/q?s=CPNO
So above are two LLCs that do not “have at least one managing member”, I can cite more if you would like.
Since Chrysler LLC is private I am not privy to its structure, but I would bet that it has no “managing members”, and is instead run like a corporation, with one vote per membership unit.
Hey, maybe Alfa can make an SUV and they can rebadge it as a Jeep, and heck, why not a Dodge too?
Alfa Mafioso/Dodge Guido/Jeep Linguine coming right up!
If you think ‘the deal’ (as Lido would say) is going to bring you nice Alfas at decent prices, think again.
More Leeisms: If you can buy a better rebadge, buy it! … such as the upcoming Buick Forbidden City or Pontiac Pikachu.
Or not. I’m for the Ford Kär/Mercury Malmö (Volvo rebadges).
to honour Fiat’s dollarless investment, I am canceling my order for a 2009 Jetta TDI – forfeiting the deposit – and ordering 2 Ka’s for my driveway…i.e., KaKa in my driveway
p.s. is there gift tax on Cerebus’ gift to Fiat?