Fiat CEO Sergio Marchionne has said that he is open to further consolidation talks with any interested firms. “A partnership with a European rival is vital,” says Emanuele Vizzini of Investitori SGR, who tells Bloomberg that PSA PeugeotCitroen or BMW are the “natural candidates.” Marchionne is staying mum, but he has aknowledged that many see a Fiat-Peugeot hook-up as a “marriage made in heaven.” For now, however, Marchionne and PSA are denying rumors of hookup talks to the Detroit News. But then, Marchionne has said that Fiat needs to approach its goals “softly and quietly.” So who knows? “The Chrysler deal does nothing to solve the overcapacity problem,” says Credit Suisse analyst David Arnold. An all-European deal could “offset spiraling costs and declining volumes with savings from joint procurement, capital expenditure and research and development,” argues Arnold.
Though a Fiat-Chrysler-PSA merger would create the third-largest automaker in the world, but managing such a firm could be extremely difficult warns Sven Kreitmeir of UniCredit. Specifically because of recent government bailouts of Chrysler and PSA. And already, the French government has come out against a PSA-Fiat-ChryCo union. “I’m not convinced consolidation is the answer,” says French Industry Minister Luc Chatel “What we need to do is improve competitiveness so that we can keep automobile production in France.” Meanwhile BMW plans on continuing cooperation between its MINI brand and Fiat’s Alfa division. Otherwise, it has no comment on the current round of merger speculation.
I keep hearing people muse that Chrysler’s tie up with a foreign company may be grounds to require the loans to be paid back. (As if, but that thread has already been beat to death). I can’t help but wonder what is poor Chrysler to do. They are told that a merger with another company is required for the government to see future in the company. But now, if it cannot be a foreign manufacturer, who then? The GM merger was one of the stupidest ideas I have heard in years. And why would Ford possibly want to go there. Sorry folks, furriners are the only game left. Unless the feds never meant for Chrysler to get a second payment.
“Merger of Equals” Part Deux…[rolls eyes]
In the future, everyone will have once owned Chrysler.
jpcavanaugh:
Since the 20th the “feds” have changed. Bush just wanted to pass the buck so that his legacy wouldn’t be tarnished even more.
Obama, on the other hand, is going to have to live with his decisions, and get reelected with them.
Chrysler, with no future product, 20% foreign ownership already, a relatively small employment base, and Bush equity ties, hopefully will not get a second payment.
no_slushbox: Obama, on the other hand, is going to have to live with his decisions, and get reelected with them.
It would seem to me that a deal with Fiat, if properly structured, could give Obama an out on this one…
I can’t help but wonder what is poor Chrysler to do.
Die. There’s nothing left that is worth saving.
geeber:
We gave another $3 billion of your tax money to Chrysler, just to have the company given to the Italians?
That may appear in a campaign ad, but not one supporting Obama.
@no_slush:
2 words: Sunk cost. Let’s be done with the walking corpse.
I don’t care what people say, the FIAT-Chrysler partnership makes sense (people mocked Renault-Nissan initially. Bob Lutz famously said that Renault buying a stake in Nissan was tantamount to putting $5bn on a ship, sailing it into the middle of the ocean and sinking it!). FIAT and Chrysler could share parts and combine purchasing departments, thereby reducing costs, and they could both help each other with their strengths.
FIAT could help give some style to cars like the Sebring (Goodness knows, it needs it) & give Chrysler access to it’s small car range and Chrysler could help FIAT gain access to the NA market with its dealer network. For me, I think the FIAT-Chrysler can work and that they should forge closer ties (maybe taking Mercedes-Benz’s share, since they valued it at $0). It’ll take a lot of work, but it is possible.
But for PSA or BMW to tie up, that makes less sense. They’d add nothing to the partnership. They only reason PSA and/or BMW would want to get into the mix is to bring costs down (stands to reason, they’re forging partnerships to become bigger and, hence, bring costs down) but for the cost cutting to really make an effect, they’d need to share components across their ranges, then a supplier would be willing to give them a better price. But no supplier is going to give better prices to BMW for a fuel injector made to their specification, a fuel injector made to PSA’s specification, a fuel injector made to FIAT’S specification and a fuel injector made to Chrysler’s specification! For the partnership to work, BMW, PSA, FIAT and Chrysler would need to have the same fuel injector specification so the supplier could use economies of scale to give a better price.
Now that is highly unlikely. If one company knows about German management, their inflexibilities and their lack of willingness to share components, it’s Chrysler……
No Slushbox:
Since the 20th the “feds” have changed.
True. And I also agree that Chrysler may be a dead company walking (and starting to stumble). However, it was reported that Bush and Obama were working together pretty closely on the bailout. I just hope that the Bushbama people didn’t set Chrysler up (with our money) to fail. Either say “no” up front (Bush owed the UAW nothing and it would have solved a huge problem for Obama) or reccognize that a foreign alliance may be the only way. Not saying this one looks very promising, but at least deal with it on the merits.
no_slushbox: We gave another $3 billion of your tax money to Chrysler, just to have the company given to the Italians?
That may appear in a campaign ad, but not one supporting Obama.
One, he can claim that the first phase of the bailout deal was completed before he took office. Which, technically, is the truth. (By 2012, only the posters on this board and the hardcore anti-Obama folks will remember that he worked with Bush on the first phase of this bailout.)
Two, he can say that by allowing the Italians to take a stake in Chrysler, he prevented the need for even more bailout money being shoveled to Chrysler to keep it going.
Three, he isn’t up for election again until 2012. At least with Fiat involvement, there is a better chance that, by 2012, Chrysler factories will still be in operation, producing vehicles and employing Americans.
The only voters who will care that said vehicles are rebadged Fiats instead of “true” Dodges and Chryslers will be the allpar.com crowd, and there aren’t enough of them to swing the election.
This is the point of bankruptcy liquidation:
-Fiat can buy distribution, and put up real Fiat signs at the dealerships.
-Nissan can buy the Ram.
-VW or Magna can buy the minivan plant.
GM is a going concern (although a horribly structured one), Chrysler is not.
Killing Chrysler should not require any more tax money.
This is all I have to say to Fiat wanting $3 Billion just for us to give them Chrysler.
jkross22:
I think you misread my posts, I’m saying we should not put any more good money after bad.
Dear god I hope BMW does not get involved with Chrysler. As if they aren’t unfocused enough already.
I still don’t understand why, if the Chrysler-FIAT merger has the potential to generate profit, FIAT should not be investing a significant amount of its own funds.
The question of PSA/BMW getting in bed with Chrysler does not merit a response. However if I was Obama I would be very happy to pay Fiat a large sum of money to take this tar baby off my hands. Surely we have bigger distractions than saving a dead car company.
As I predict Fiat will be the new owners of Chrysler, one has to presume they will do the following
Kill most of the models, ditch the Chrysler Brand completely, Dodge only makes trucks. Export the Dodge everywhere. Sell off Jeep, if no takers, keep Wrangler (surely TATA would want Jeep?). Close most of the plants, unless Obama forces you to keep some duds for political face. Sell lots of small nasty Fiats to those that have purchased big nasty Chryslers.
Bob Lutz famously said that Renault buying a stake in Nissan was tantamount to putting $5bn on a ship, sailing it into the middle of the ocean and sinking it!
Ha, ha. Fair point and a good quote. I’ll have to remember that one. Now Renault-Nissan, despite Japan, Inc. doing so badly, is a better prospect than GM could ever hope to be.
Worth repeating:
“This is the point of bankruptcy liquidation:
-Fiat can buy distribution, and put up real Fiat signs at the dealerships.
-Nissan can buy the Ram.
-VW or Magna can buy the minivan plant.”
BMW made a dog’s breakfast out of Rover much in the same way as Daimler did with Chrysler. I can’t imagine BMW even remotely wanting to hook up up with any type of consortium that has links to the American patient at this point.
FIAT is an unproven entity in the US. I doubt that they’ll have the volume needed to keep Chrysler dealers happy or in business. Their fix it again Tony reputation will precede them in a North American market flooded with Asian imports.
Everything Nardelli has proposed on paper is vaporware at this point. Chrysler and Dodge needs wow them products this year, not in 2011. The FIAT link up could be really problematic if the dollar goes South verses the Euro.
This is pointless…
Oh hell, why not get Chrysler to hook up with Whirlpool or Mattel? Or maybe the Tinkertoy people? Do they still make Tinkertoys?
Katie you’re absolutely right.
God forbid (please!) that BMW get involved with any of this. I just know the Germans will f*** up anything they touch. DC was just an example. And I want to enjoy my quirky, reliable, fun and beautiful Fiats the rest of my life.
German corporate culture is so twisted. I mean, there’s been people in VW Brazil who’ve been here for 15 years and don’t speak a word of Portuguese. With attitudes like that how in the world could they hook up with any other foreign companies? Engineering prowess and whatnot be damned. Unless their culture changes. (I’m sorry if that is a very broad and stereotypical statement, but they’ve proven it time and again).
As to PSA, how on earth would that work? Peugeot and Citröen largely make clones. Clones, which overlap entirely with Fiat’s own line. Anyway, the French government has already spoken and though their decision is political and xenophobic (and not technical or reality-based) in this case it’ll prevent greater harm.
Cheers to all.
BMW to hook up with PSA? Fuhgeddaboutit! Maybe there are beancounters who think that makes sense, but the rest of us know that it’s all about the product – and the rest is about “feel” and image. Hardcore BMW buyers are very conscious about the DNA of their rides, and a hookup with PSA would spoil that – totally! So, being one of those hard core buyers, I say once more to the powers that be; think of something else, this idea must be euthanized!
If it’s PSA, maybe we’ll get Citroens sold in Chrysler dealerships!
Uh, wait, forget that idea!