Fiat Now in Driver's Seat In Chrysler Acquisition
March 30 2009 - 12:30AM
Dow Jones News
The future of Chrysler LLC seems irretrievably tied to an
Italian company boasting its own turnaround success after flirting
with disaster earlier in the decade.
Fiat has been reborn with a knack for producing cool, small
cars; its desire to return to the U.S. market after a 20-year break
marks the best, perhaps only, hope for Chrysler.
The planned Fiat-Chrysler alliance outlined in January may have
been given a "fail" by the U.S. auto task force, but the companies
at least can resit the exam in 30 days.
Documents released by the Obama administration show that
Chrysler can't survive without merging with Fiat SpA. The U.S.
government also has no plans to provide any additional funding to
Chrysler unless it links with Fiat.
It's a position, auto industry analysts say, that Fiat isn't
likely to pass up. For giving Chrysler access to its small car
technology, research and platforms, Fiat would have a quick way to
make and deliver its cars in the U.S. without starting from
scratch.
Chrysler would benefit by getting access up to $6 billion in
federal low-interest loans with the partnership and a way to sell
its cars outside North America.
"It makes sense for them," said IHS Global insight analysts
Rebecca Lindland. "The appeal here is that it is still cheaper for
Fiat to come into the U.S. through Chrysler."
Under tentative terms worked out between the two auto makers,
Fiat has agreed to give Chrysler access to technology, platforms
and research worth $10 billion. In return, Fiat could take a 35%
ownership stake in the company.
Fiat chief Sergio Marchionnne has already met with the Obama
Administration's automotive Task Force and has voiced his approval
of such a deal. He has also updated the committee on what would be
done if Fiat were to partner with the company.
In the meantime, Chrysler's cost-cutting efforts initiated
between the company and its union in the U.S. and Canada will
continue.
"I think a lot of it will now be led by General Motors Corp.
(GM)," said Jeremy Anwyl, Edmunds.com chief executive officer. "The
unions and auto makers want pattern bargaining so that no one
company has an advanatage over another. The UAW already has an
agreement with Ford Motor Co. (F) and is in talks with GM and
Chrysler. That will continue."
-By Jeff Bennett; jeff.bennett@dowjones.com; 248-204-5542