Sign in to follow this  
Followers 0
NOS2006

Fiat Acquires 1/3 of Chrysler

48 posts in this topic

http://www.iht.com/articles/2009/01/20/bus.../21chrysler.php

DETROIT: Chrysler and Fiat, two carmakers who have struggled to expand outside their home markets and need more global scale to compete against larger rivals, said on Tuesday that they have agreed to an alliance through which Fiat will control at least 35 percent of the troubled American company.

The deal would allow Chrysler to use Fiat's technology and vehicle platforms to build more fuel-efficient, small and midsize cars at its factories and sell them in North America. Fiat would give Chrysler access to distribution networks in other parts of the world, particularly Europe. The companies said they expect "substantial cost savings opportunities" but did not specify an amount.

"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 chief executive of Fiat SpA, Sergio Marchionne, said in a statement.

"The agreement will offer both companies opportunities to gain access to most relevant automotive markets," Marchionne said, "with innovative and environmentally friendly product offering, a field in which Fiat is a recognized world leader while benefiting from additional cost synergies."

Chrysler's agreement with Fiat comes several months after merger talks with General Motors were abandoned as the global vehicle market deteriorated.

Multimedia

Video: Auto slowdown worries a Michigan city

» View

Related Articles

Porsche bids for Scania, because it must

France weighs support programs for ailing automakers

Today in Business with Reuters

Europe may take greater direct control over banks

For Obama, a rare chance for a bold start

Bank loss drags down European shares

Last year, Chrysler reached a deal to build pickup trucks for Nissan-Renault, which would in turn build small cars for Chrysler. But the status of that arrangement is now unclear, as Renault is a chief rival of Fiat in Europe.

Chrysler, which last month received a $4 billion loan from the U.S. government to help it avoid bankruptcy, said the partnership would be a "key element" of the viability plan that it must submit by March 31 and that Fiat would help develop the plan. Formation of the partnership would require approval of the United States Treasury and federal regulators.

Fiat, which stopped selling cars in the United States in 1983, does not plan to "make a cash investment in Chrysler or commit to funding Chrysler in the future," the companies said.

Fiat would have the option to ultimately increase its stake in Chrysler to 55 percent, a person with knowledge of the talks said on Monday, returning the Auburn Hills, Michigan-based automaker to foreign control only a short time after the end of its ill-fated 1998 merger with Daimler of Germany. A private equity firm, Cerberus Capital Management, bought 80.1 percent of Chrysler in 2007.

"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," Chrysler's chairman, Robert Nardelli, said in the statement.

"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."

Chrysler said it would ask employees, dealers, suppliers and lenders, including Chrysler Financial, to make sacrifices in support of its restructuring. Chrysler and General Motors, which also received government loans, recently began negotiations with the United Automobile Workers union to find ways to make their labor costs more competitive with foreign-based rivals like Toyota and Honda

"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," the UAW's president, Ron Gettelfinger, was quoted as saying in the companies' statement.

A partnership with Fiat could help Chrysler convince its skeptics in Congress that the company is viable as it seeks more money. During recent hearings in Washington on aid for the Detroit automakers, Senator Bob Corker, Republican of Tennessee, expressed doubt that Chrysler would last much longer independently.

"They have not invested in technology and those kinds of things necessary to be a stand-alone," Corker said last week during a tour of the Detroit auto show. "My hope is that they will in fact merge and again be a viable part of Michigan and our country."

The two companies have courted in the past. In 1990, with his company facing deep losses, then-Chrysler chief executive Lee Iacocca held negotiations with Fiat's then-chairman, Giovanni Agnelli, about a possible business arrangement. Although a deal was widely expected, nothing came out of those discussions.

Fiat left the American market in 1983, after its cars repeatedly ended at or near the bottom of quality surveys (one widely circulated joke within the industry was that the company's name stood for Fix It Again, Tony.) Its sports car brand, Alfa Romeo, left the American market in 1994. Fiat had been planning to bring Alfa back to the United States this year, but delayed the decision last fall, after the economic crisis that hit the automobile industry world wide.

Fiat had a tumultuous relationship with General Motors earlier this decade. In 2000, GM took a 20 percent stake in Fiat for $2.4 billion, in a deal that was supposed to involve technology sharing and other steps. It agreed to a five-year put option that would require it to pay Fiat if it did not take a greater stake in the company. In 2005, GM paid $2 billion to get out of the transaction.

Micheline Maynard contributed reporting from Detroit, Andrew Ross Sorkin from New York and David Jolly from Paris.

0

Share this post


Link to post
Share on other sites

I don't mind this at all. This would give Chrysler access it needs to good small car platforms and save it lots of money, and give Fiat access to Chrysler plants and dealer networks. This alliance has the potential to be very good for both companies.

0

Share this post


Link to post
Share on other sites
I don't mind this at all. This would give Chrysler access it needs to good small car platforms and save it lots of money, and give Fiat access to Chrysler plants and dealer networks. This alliance has the potential to be very good for both companies.

Yes, I see more potential upside than downside. The alternative is a complete failure of Chrysler at this point, I'm afraid.

0

Share this post


Link to post
Share on other sites

If this means the Fiat 500 comes NA-side, then this will be totally cool.

0

Share this post


Link to post
Share on other sites

I hope this is good.

0

Share this post


Link to post
Share on other sites

<In fake stereotypical Italian accent> I looka' forward to seeing an Alfa Romeo 159 and FIAT 500 over herre! </In fake stereotypical Italian accent>

0

Share this post


Link to post
Share on other sites
Well technically one Alfa Romeo is here already. :P

Whoopee! Lol.

I would really want to see here in the States and ASAP without the bulbous 8-C "inspired" front end.

In its current guise, the 159 is one of the most attractive sedans, and with the Brera, coupes in the world!

0

Share this post


Link to post
Share on other sites
I love the 8C, but yeah the face doesn't work as well on the MiTo.

I hear that that nose will be on the 149 as well.

0

Share this post


Link to post
Share on other sites

Better news for Chrysler. Good foot in the door for Fiat and Alfa.

0

Share this post


Link to post
Share on other sites
Well technically one Alfa Romeo is here already. :P

It's taking them for f-in ever.

I remember taking my state Content Specialty Test in Italian (hardest test I ever took) and one of the articles was about Alfa Romeo canceling their plans to enter the US at this time... that was years ago.

0

Share this post


Link to post
Share on other sites

I've always known that GM would survive, and that's not just because I'm a GM fan.

I've also known that the core Jeep brand (Liberty, Wrangler, Grand Cherokee) would survive. But Chrysler as a whole I wasn't sure about.

Wall St. was saying that it was done for. The government wanted to force a merger with GM. Compared to a) liquidation or b) merger with GM, this will preserve far more of the Chrysler identity and more importantly, jobs in the Detroit area.

Fiat also has minimal global overlap with Chrysler, no dealerships in the U.S., and strength with small FWD cars. Which are all good things, because Chrysler still has good RWD, truck, SUV, and minivan offerings.

0

Share this post


Link to post
Share on other sites
It was a relief for me to read this today at work. I wish both companies much longterm success in this venture.
0

Share this post


Link to post
Share on other sites

Remember what happened last time Chrysler got involved with a European company?

0

Share this post


Link to post
Share on other sites
I remember when AMC/Chrysler and Renault got together for a few years. Then there was Diamler, which gave us the wonderful LX cars, but not much else exciting.
0

Share this post


Link to post
Share on other sites
Remember what happened last time Chrysler got involved with a European company?

The Daimler Chrysler deal made no sense whatsoever.

Mercedes already had a successful presence in America, with its own dealerships.

The major advantage to these kinds of deals is cost sharing. A platform might cost $4 billion. An engine might cost $2 billion. These development costs alone can make up thousands of dollars of the cost of a car. If you combine two car companies into one big company, you can cut many of these costs in half, which means more money. Unfortunately, Daimler never pursued this seriously as they didn't want overlapping technologies to damage their Mercedes brand.

With Fiat, things will be different, assuming Chrysler is able to pull through the next 2 years, and some new products can be implemented.

0

Share this post


Link to post
Share on other sites

This is probably the most cost effective way for Fiat to get a dealer network, plus they get access to Chrysler's production facilities, but doesn't anyone else see that Fiat could just be using Chrysler to re-establish itselfin the U.S., then drop it like the dirty ho it is?

0

Share this post


Link to post
Share on other sites
The Daimler Chrysler deal made no sense whatsoever.

Mercedes already had a successful presence in America, with its own dealerships.

The major advantage to these kinds of deals is cost sharing. A platform might cost $4 billion. An engine might cost $2 billion. These development costs alone can make up thousands of dollars of the cost of a car. If you combine two car companies into one big company, you can cut many of these costs in half, which means more money. Unfortunately, Daimler never pursued this seriously as they didn't want overlapping technologies to damage their Mercedes brand.

With Fiat, things will be different, assuming Chrysler is able to pull through the next 2 years, and some new products can be implemented.

Daimler bought Chrysler to learn how to share parts among its own cars. Before this every Mercedes was built with different parts. The idea behind the "merger" was that Chrysler got access to technology and platforms the Mercedes had and Mercedes got access to learn how to more efficiently and cost effectively build vehicles. Mercedes got what it wanted, Chrysler got some bits from the old E-Class and then was gutted and left for dead. Daimler and their increasing ugly vehicles can rot.

This is probably the most cost effective way for Fiat to get a dealer network, plus they get access to Chrysler's production facilities, but doesn't anyone else see that Fiat could just be using Chrysler to re-establish itselfin the U.S., then drop it like the dirty ho it is?

Since Fiat only controls 35% I'm sure they can't just do that without Chrysler getting what it wants in return. Chrysler actually has control of what goes on, unlike while it was being controlled by Daimler.

0

Share this post


Link to post
Share on other sites

It all goes back to my dirty ho remark. Think of Fiat as the John. He shells out a few bucks, gets his rocks off and goes back to his wife. The ho, on the other hand, gets f@#ked, gets some cash, and goes on to get f@#ked again. The ho never deals from a position of strength, is never really able to demand anything of the John other than what the John agreed to beforehand.

0

Share this post


Link to post
Share on other sites
In its current guise, the 159 is one of the most attractive sedans, and with the Brera, coupes in the world!

I couldn't agree with you more. I fell in love with the 159 while in Italy a couple of years ago. They make badass looking police cars, too!

Italy070.jpg

EDIT: Linked wrong pic. Fixed.

Edited by 2QuickZ's
0

Share this post


Link to post
Share on other sites

Why couldn't GM do something like this?

0

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now
Sign in to follow this  
Followers 0