The Presidential Task Force on Automobiles (PTFOA) has given Chrysler 30 days to tie-up with Fiat or it will recall federal loans and throw the company into bankruptcy. If they DO do the deal, they get a $6 billion “loan.” I’m no corporate negotiator, but the move seems to give all the power to Fiat, an automaker with its own share of troubles. Well, not ALL the power, according to The Detroit News:
“Chrysler’s deal with Fiat has been restructured, a government official said, to reduce its initial ownership stake down from 35 percent. Fiat wouldn’t be able to obtain a majority of Chrysler until the new $6 billion in government loans were repaid, the official said. The fact sheet also notes that there are guarantees of U.S.employment in the plan. “After extensive consultation with the administration, (Fiat) has committed to building new fuel efficient cars and engines in U.S. factories,” the fact sheet said.
Why Fiat would want to marry Chrysler is beyond me.
If it happens and somehow works out and remaining Chrysler workforce keeps job, great.
I would think Fiat would get a better deal buying Chrysler out of bankruptcy court.
Bring the Fiat 500 regardless.
Why wouldn’t Fiat hook up with Chrysler? Well, I say that without knowing all of the specifics, of course. I say if it costs them no money to take a stake in Chrysler, which gives them a dealer network and factories in which to build cars in the U.S., and basically offers them no startup costs other than training employees, then it sounds like Fiat is getting a pretty peachy deal to me. The $6B of our money is a little icing on the cake. If Fiat can do all of this and make Chrysler’s bottom line look good for a while, good for them. My question about the whole thing is what’s Fiat’s downside? If Chrysler takes the dough, and a year down the road is over and done, what are Fiat’s obligations, or are there any at all? If there are none, Fiat’s stupid to not take the deal.
It won’t matter. The offspring of this shotgun will take too long to be born. And once born, these babies will never sell. That’s $6 billion we’ll never see again, and it’s money that could have been used for something useful.
I was kind of expecting a picture of Italian Wedding Soup or a shotgun, nice contrast to the subject matter at hand.
This is just the Wall Street – Washington axis up to the old tricks.
So, Cerberus comes out whole – no surprise there.
The US Govt PAYS $6B to make Chrysler a foreign-owned company (the MSM seems to completely ignore Daimler’s 20% stake) just so long as there is some vague promise (and we all know how well Washington forces Detroit to keep promises!) that they will employ US workers until the loans are repaid. I know that last bit isn’t technically in there, but once that happens, there is no leverage over the company any longer.
This is just a REALLY expensive, taxpayer-financed way to kill Chrysler without making Cerberus get a haircut.
I am curious as to just what sort of deal Washington is looking to get from Fiat. Do they want Fiat to assume the debts and liabilities of Chrysler? That’s what it seems, and if that is the case then Bankruptcy is a forgone conclusion at this point.
Anyone know what the government’s idea of an acceptable Fiat deal is??
Why would FIAT take this deal? So they have to run Chrysler on $6B until they can get their cars federalized and retool Chrysler plants to assemble them, all while trying to sell Chrysler’s current lineup until said FIATs arrive? Its gonna cost more than $6B to do that. That $6B wont even get Chrysler to the end of this year. Instead FIAT could simply wait for the plug to be pulled and pick up any Chrysler assets they want for basically nothing.
I want Fiat to return, but not under conditions of a guaranteed jobs program.
So, they will pay Fiat 6 billion dollars to get rid of this awful mess? After that, it’s not the governments problem anymore…
Why would FIAT take this deal?
To gain market share and a source of capital for increasing sales.
Fiat wants to grow the business, and the decline in North America is a way to reenter the US market and do that. I’m skeptical that it will actually work, but you can see that there have been hints of something like this for awhile:
https://www.thetruthaboutcars.com/quote-of-the-day-last-domestic-standing-edition/
@ PCH 101:
I understand why they want Chrysler’s assets, but why take them with US gov strings and while having to continue building Chryslers when they can get them without these liabilities later? I don’t think the $6B is anywhere near enough.
I think this seems to be a pretty good deal for Fiat. As for Chrysler, well, at least some of the workers might be able to keep their jobs if this thing works out, that’s about the best one could hope with Chrysler being what it is. Looking at product lineup it complements itself well, Chrysler will be the truck division and Fiat the car master. Once the oil and gas go back up again, as they surely will, small cars like Fiat builds would have a lot better staying power in NA.
I understand why they want Chrysler’s assets
They don’t want Chrysler’s assets. They want access to Chrysler’s distribution network and an agreement that guarantees a certain amount of sales.
Major automakers have two main choices — grow or die. Fiat is trying to grow. This may not be the best way to do it, but this is still probably Fiat’s best opportunity to take a possible leap forward. If the alternative is for them to whither on the vine, then doing a Hail Mary and giving the Chrysler deal a shot may be their best option, despite the uncertain outcome.
Fiat knows as well as we do that there will me lots of government sugar available in the name of “saving jobs.”
I have a question… If Chrysler ends up going C11 after the merger, what does Fiat get for its 35%? I mean, are they just somehow trying to get themselves in a better position for the inevitable?
The North American market is the big prize. Right now, there are only a few companies that play in the market. Fiat wants to be one of them, and the simpliest way to do so it to latch on to somebody already here, IE, Chrysler. Now, the question is, do they want it bad enough to subsidize Chrysler forever? Kudos to Obama for pressing this question.