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Fiat gives the middle finger to unions

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Fiat CEO warns Chrysler unions: cut costs or we walk

REUTERS

April 15, 2009

By Gilles Castonguay

MILAN (Reuters) - Fiat SpA's chief executive, facing a two-week deadline to work out a partnership with Chrysler LLC, warned the troubled U.S. carmaker's unions he would ditch the idea unless they agreed to cut labor costs.

In a clear message to U.S. and Canadian unions, Sergio Marchionne told Wednesday's Globe and Mail newspaper a deal on the partnership had only a 50-50 chance of succeeding because of lack of progress in talks with union leaders.

"Absolutely we are prepared to walk. There is no doubt in my mind," Marchionne said in an interview posted on the Toronto newspaper's website.

The Chrysler unions had to agree to match the lower labor costs of plants run by Japanese and German carmakers in the United States and Canada, he said, adding that Canadian unions were especially resistant to the idea.

Nomura analyst Michael Tyndall said Marchionne was probably not bluffing in talking tough with the unions.

"He's playing hardball," he said, adding that the unions' position would make the deal too costly for Fiat. "We want them (Fiat) to walk away ... I don't see any benefits in this deal."

Under the latest version of the proposed partnership, first announced in January, Fiat would take an initial 20 percent stake in Chrysler in exchange for the technology to make small cars and access to foreign markets.

The two carmakers are under pressure to reach a deal on the proposal with Chrysler's unions and bondholders before an April 30 deadline set by the U.S. government.

Chrysler has been warned by Washington that it would go into bankruptcy if it fails to complete the deal, designed to save the smallest of Detroit's Big Three car makers.

But its lenders have so far refused efforts to eliminate most -- if not all -- of the $7 billion owed to them.

If a deal is reached, Chrysler would get at least $6 billion in extra government funding, having received $4 billion so far.

Fiat would get access to the U.S. market and gain the scale it needs to survive the worst industry crisis in decades. It would bring to North America its popular Cinquecento (500) car next year, while its premium Alfa Romeo brand would make cars in Canada or the United States, Marchionne said.

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Good, I'm glad he's not pussy footing around.

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Good, I'm glad he's not pussy footing around.

+1 Seems like this guy has a pair.

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Now we'll see if the unions are smart enough to agree, or decline and loose their jobs all together.

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Now we'll see if the unions are smart enough to agree, or decline and loose their jobs all together.

Well Id rather take a cut and keep my job then lose it. Espically right now the way things are. Now if the economy wasn't in the crapper then it might be a different story.

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Hey what do you expect? Afterall Obama gave a 30 day deadline, so Sergio holds all the cards. It was very naive of the President to do this. So Fiat will get a sweet sweet deal or pass....

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Hey what do you expect? Afterall Obama gave a 30 day deadline, so Sergio holds all the cards. It was very naive of the President to do this. So Fiat will get a sweet sweet deal or pass....

The union needs to know what it feels like to be bullied while they have no control. They have been doing it to companies for decades when they held all the power. The tables simply have turned.

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At this Point I expect Chrysler to go into Bankrupcty, there are many reports out today that the people who hold the Billions in debt want it for both GM and Chrysler as it will give them huge write off's that can be spread over the next few years to off set profits as the economy comes back.

On that note, I suspect we will see a vastly differant company emerge if they do at all. End play could be we see Dodge sold off to on out of country company that wants in on the truck business and recovery and Jeep sold to someone who wants a solid 4x4 business and chrysler becomes a history lesson.

Sad, but the end result of greed and stupidity by upper mgmt and Unions. The unions will be crying foul, Canada has alrady said they will cover the union pensions. Another burden on the tax payers there. I suspect like the US did for the over paid airline unions we the tax payers will get stuck with their Union pensions also. Hopefully if that does happen they keep it the same as they did to the airlines and that is they will only honor 75% of the persons monthly income and NO benefits, meaning they have to come up with their own insurance just like the rest of us who only have 401K programs.

Going to be an interesting year in the Auto Business.

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+1 Seems like this guy has a pair.

Haha, it's a very Italian way to deal with things... kind of like when they tried to do Survivor in Italy--people said, "You give us more food or screw you, we won't go on tv."

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Pair or not, I don't see this happening.

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Pair or not, I don't see this happening.

So you see them in Bankruptcy proceedings by next month?

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The CAW is already posturing pretty heavily, and I have a feeling this announcement could sour the situation even more. Heck, in my opinion, this gives the union brass more verbal ammo because it makes the union look like it's being pushed around from all sides, and not just North America.

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The CAW is already posturing pretty heavily, and I have a feeling this announcement could sour the situation even more. Heck, in my opinion, this gives the union brass more verbal ammo because it makes the union look like it's being pushed around from all sides, and not just North America.

The govt still can't force a company from another country to cave in to the Union. The Union will need to back down, because the govt isn't coming to their rescue. The govt won't continue bailing out a company with billions just because a union doesn't want to face the times. The only other option is bankruptcy, and there's no telling if that will mean liquidation or restructuring.

Also, if the govt were to give in after the whining from the union, there will be a backlash from the other 99% of the population who is fighting to keep their much lower paying jobs, or currently looking for work.

Edited by CaddyXLR-V
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The govt still can't force a company from another country to cave in to the Union. The Union will need to back down, because the govt isn't coming to their rescue. The govt won't continue bailing out a company with billions just because a union doesn't want to face the times. The only other option is bankruptcy, and there's no telling if that will mean liquidation or restructuring.

Also, if the govt were to give in after the whining from the union, there will be a backlash from the other 99% of the population who is fighting to keep their much lower paying jobs, or currently looking for work.

I think the other American people would get tired of this too. They aren't gonna be very happy when most of them don't have a job, and the Unions won't take a pay cut to keep theirs. People really won't be happy with the government if they keep throwing money at them because the Union won't back down. Alot of people out there are taking cuts and losing their jobs, I think it's time the unions did too.

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The union needs to know what it feels like to be bullied while they have no control. They have been doing it to companies for decades when they held all the power. The tables simply have turned.

Well lets see. Have the tables turned for the Better? When the "Unions were in control, as you say " for years and years everybody made a profit and the company soldiered on. I think they will have to give some major concessions or it will die. Yes times have changed ( Recession # 1 )Still does not change the fact that BHO gave them 30 days to get the deal done and if your Fiat again you hold all the cards. You make it sound like a street fight. " I'll show you mentality " Peoples livelyhoods and there families are at stake here

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Well lets see. Have the tables turned for the Better? When the "Unions were in control, as you say " for years and years everybody made a profit and the company soldiered on. I think they will have to give some major concessions or it will die. Yes times have changed ( Recession # 1 )Still does not change the fact that BHO gave them 30 days to get the deal done and if your Fiat again you hold all the cards. You make it sound like a street fight. " I'll show you mentality " Peoples livelyhoods and there families are at stake here

Your mistaken. The American companies fell further, and further behind. That is part of the reason they are in the situation they are in now.

They should have allowed the company to get stronger, before they took as much as they could from them. They were basically stealing from the safes in a sinking ship.

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Bear in mind that Fiat's positioning is not only for the Union, but for all other debt-holders....Chapter 7 liquidation means that everyone holding that debt will get pennies on the dollar. Trade partners will get stiffed on parts and supplies. Even the dealers have to know that everyone will be asked to make a huge sacrifice or its over.

I can't imagine doing this deal if I'm Fiat, but Marchionne has proven to be a clever, resourceful CEO, so my guess is that the value in Chrysler (Jeep, trucks, minivans, LXs) is sufficient to make the deal make sense.

If I were him, I'd approach Saturn about the dealer group to sell in the US and wait it out in Europe until one of the German or Japanese companies come calling...because they will before the recession is over.

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Well lets see. Have the tables turned for the Better? When the "Unions were in control, as you say " for years and years everybody made a profit and the company soldiered on. I think they will have to give some major concessions or it will die. Yes times have changed ( Recession # 1 )Still does not change the fact that BHO gave them 30 days to get the deal done and if your Fiat again you hold all the cards. You make it sound like a street fight. " I'll show you mentality " Peoples livelyhoods and there families are at stake here

I agree with Caddy. People's livelihoods are at stake...in the current economy. Just because their unions have pushed and pushed doesn't mean they deserve every dime they've won over the years. And, sure, car companies were making money in good times...but that money should be able to weather the bad times, like now. When you make a few billion in the good times and lose tens of billions in the bad, isn't something out of kilter?

Chrysler will collapse without the help of someone like Fiat. And if the unions aren't willing to negotiate, they will lose their jobs. The comment "We want them (Fiat) to walk away ... I don't see any benefits in this deal" shows the lack of understanding of the situation. Fiat walks away, the union members lose their jobs. You'd have to be blind not to see the benefits of the deal.

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I agree with Caddy. People's livelihoods are at stake...in the current economy. Just because their unions have pushed and pushed doesn't mean they deserve every dime they've won over the years. And, sure, car companies were making money in good times...but that money should be able to weather the bad times, like now. When you make a few billion in the good times and lose tens of billions in the bad, isn't something out of kilter?

Chrysler will collapse without the help of someone like Fiat. And if the unions aren't willing to negotiate, they will lose their jobs. The comment "We want them (Fiat) to walk away ... I don't see any benefits in this deal" shows the lack of understanding of the situation. Fiat walks away, the union members lose their jobs. You'd have to be blind not to see the benefits of the deal.

Exactly. Even as recent as a few years ago when GM turned a small profit, the Union used that as proof they should get raises.

If Toyota makes a 10B profit, and GM makes 1B, the Union still sees that as proof they should get their share of it, even though they already make more than the Toyota workers. The rest of the country sees that as a company falling behind.

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Chrysler will collapse without the help of someone like Fiat. And if the unions aren't willing to negotiate, they will lose their jobs. The comment "We want them (Fiat) to walk away ... I don't see any benefits in this deal" shows the lack of understanding of the situation. Fiat walks away, the union members lose their jobs. You'd have to be blind not to see the benefits of the deal.

I believe Chrysler can survive a Ch 11 bankruptcy, they may not be as large, but i am confident they can make it, after all they essentially have done it before.

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I believe Chrysler can survive a Ch 11 bankruptcy, they may not be as large, but i am confident they can make it, after all they essentially have done it before.

Again, it's back to the government. Someone needs to put up the financing to keep them running through bankruptcy. If the Unions and debt holders won't give in, what lender is going to put up the money? The only one that would is the government, and they will most likely force some changes as well. No one will come out of bankruptcy with 100% of what they went in with, including the union. They may end up with even less than what Fiat would be willing to give.

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I can't imagine doing this deal if I'm Fiat, but Marchionne has proven to be a clever, resourceful CEO, so my guess is that the value in Chrysler (Jeep, trucks, minivans, LXs) is sufficient to make the deal make sense.

If I were him, I'd approach Saturn about the dealer group to sell in the US and wait it out in Europe until one of the German or Japanese companies come calling...because they will before the recession is over.

I think you are probably right. If Marchionne can get a killer deal; U.S. govt financing and dept and labor relief, then he will do the deal much like GM did with Daewoo. If its not a steal, he'll be looking at Saturn as an outlet for his cars. So its either Chrysler or Saturn that will be about as American as Toyota.

:confused0071:

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I think you are probably right. If Marchionne can get a killer deal; U.S. govt financing and dept and labor relief, then he will do the deal much like GM did with Daewoo. If its not a steal, he'll be looking at Saturn as an outlet for his cars. So its either Chrysler or Saturn that will be about as American as Toyota.

:confused0071:

In theory, Chrysler also gives Fiat platforms for large cars and trucks, something that would be useful for 3rd World countries (trucks) where Fiat is strong and Alfa (RWD cars). Add in the minivan, a few modern US plants and infrastructure---could work if US market recovers to 13-14mil by 2011. Chrysler could claw back some share from a shrunken GM and Fiat could sell Euro cars for less than the current crop in the US...but those are some big ifs...Mr. Marchionne's gotta have a big pair to go for such a plan.

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I believe Chrysler can survive a Ch 11 bankruptcy, they may not be as large, but i am confident they can make it, after all they essentially have done it before.

When Chrysler had its problems 30 years ago, they had radical new products in the pipeline. Today, they don't have that. When they were building low-gas mileage, low-quality RWD cars, they returned with economical, relatlively high-quality FWD cars...one after the other. How would they do that today? Their cars are reliable (albeit, relatively low quality) and, by design, what the market wants (FWD/AWD small cars, RWD/AWD large cars, big trucks, minivans) with nothing radical in the pipeline.

Chrysler is a network of dealerships and assembly lines ready for a large company to revamp (read: take down the unions). Fiat and Citroen-Peugeot are just about the only companies who could fully take advantage of this situation.

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Chrysler is a network of dealerships and assembly lines ready for a large company to revamp (read: take down the unions). Fiat and Citroen-Peugeot are just about the only companies who could fully take advantage of this situation.

?

Fiat and PSA do not have the cash to properly invest in Chrysler. Marchionne is smoking the same funny stuff that Schremp did if he believes Chrysler is salvagable. The French companies have already gotten bailed out. They should be ready for another life line from Mr. Sarcozy.

How much longer before Fiat is in the same situation Chrysler is in right now?

The above is nice in theory but not with the balance sheets those companies have. Especially when this global auto market remains weak for a long time. Just what the US market needs, more brands running around - looking more and more like low margin, low market share Europe.

Fiat/PSA would be better off buying Saturn and Spring Hill.

Companies need to go away.

Edited by evok
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