Fiat Acquires 35% of Chrysler

Post by **DPDISXR4Ti** » Tue Jan 20, 2009 11:14 am

A sign of just how dire things are with Chrysler, Fiat basically gets 35% of Chrysler by saying, "Okay, for free, we'll take it". The two have danced before (1990), and it was a mess that eventually both sides bailed out on entirely. It was the beginning of the end for Alfa Romeo marque in the US.

It's anyone's guess how things will work out this time...

http://www.nytimes.com/2009/01/21/busin ... ml?_r=2&hp

20.01.2009 FIAT TO TAKE EQUITY STAKE IN CHRYSLER AS ALLIANCE IS ANNOUNCED

Fiat Group and Chrysler LLC have confirmed in a statement this afternoon that the two companies are to enter into a wide global alliance and that Fiat will take a 35 pct stake in the ailing American carmaker. The statement that followed the suspension of Fiat shares this morning confirms the sensational news that swept the media yesterday that Fiat was in talks with Chrysler.

A joint statement today between Fiat and Chrysler's owners, Cerberus Capital Management LP, announced that they had entered into a "a non-binding term sheet to establish a global strategic alliance". This agreement "would provide Chrysler with access to competitive, fuel-efficient vehicle platforms, powertrains, and components to be produced at Chrysler manufacturing sites."

*Statement Fiat S.p.A., Chrysler LLC (Chrysler) and Cerberus Capital Management L.P. *

Fiat S.p.A., Chrysler LLC (Chrysler) and Cerberus Capital Management L.P., the private investment majority owner of Chrysler LLC, announced today they have signed a non-binding term sheet to establish a global strategic alliance.

The alliance, to be a key element of Chrysler's viability plan, would provide Chrysler with access to competitive, fuel-efficient vehicle platforms, powertrain, and components to be produced at Chrysler manufacturing sites. Fiat would also provide distribution capabilities in key growth markets, as well as substantial cost savings opportunities.
In addition, Fiat would provide management services supporting Chrysler's submission of a viability plan to the U.S.
Treasury as required. Fiat has been very successful in executing its own restructuring over the past several years.
The alliance would also allow Fiat Group and Chrysler to take advantage of each other's distribution networks and to optimize fully their respective manufacturing footprint and global supplier base.

The proposed alliance would be consistent with the terms and conditions of the U.S. Treasury financing to Chrysler.
Per the U.S. Treasury loan agreement, each constituent will be asked to contribute to Chrysler's restructuring effort
including: lenders, employees, the UAW, dealers, suppliers and Chrysler Financial. Such steps would greatly contribute to Chrysler's long term viability plan. Completion of the alliance is subject to and regulatory approvals, including the U.S. Treasury.

As a consideration for Fiat Group's contribution to the alliance of strategic assets, to include: product and platform sharing, including city and compact segment vehicles, to expand Chrysler's current product portfolio; technology sharing, including fuel efficient and environmentally friendly powertrain technologies; and access to additional markets, including distribution for Chrysler vehicles in markets outside of North America, Fiat would receive an initial 35 percent equity interest in Chrysler. The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.

"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 agreement will offer both companies opportunities to gain access to most relevant automotive markets with innovative and environmentally friendly product offering, a field in which Fiat is a recognized world leader while benefitting from additional cost synergies. The deal follows a number of targeted alliances and partnerships signed by the Fiat Group with leading carmakers and automotive suppliers over the last five years aimed at supporting the growth and volume aspirations of the partners involved," the CEO of Fiat Group, Sergio Marchionne said.

"A Chrysler/Fiat partnership is a great fit as it creates the potential for a powerful, new global competitor, offering Chrysler a number of strategic benefits, including access to products that compliment our current portfolio; a distribution network outside North America; and cost savings in design, engineering, manufacturing, purchasing and,"
said Bob Nardelli, Chairman and CEO of Chrysler LLC. "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. 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."

"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," said Ron Gettelfinger, President United Auto Workers (UAW). "We're on board with this important strategic initiative as it will help preserve the long-term viability of our great company, its brands and of course UAW-Chrysler jobs," said General Holiefield, Vice President, United Auto Workers (UAW).

Mike McCreight · Post by **Mike McCreight** » Tue Jan 20, 2009 2:48 pm

O boy!
Does this mean we'll be able to buy Chrysler branded Fiats in the near future? The best of BOTH worlds!

Post by **DPDISXR4Ti** » Tue Jan 20, 2009 3:06 pm

Mike McCreight wrote:O boy!
Does this mean we'll be able to buy Chrysler branded Fiats in the near future? The best of BOTH worlds!

Well, the 1990 agreement (which fell apart before it was done), is what caused my Alfa 164 to come with a crappy Chrsyler radio. In time, that turned out to be a good thing though, as I was later able to source a plug-n-play Infinity CD player from a high-end Chrysler of some sort (if there actually is such a thing).

My best guess is that this is the first step in the end of Chrysler. Fiat will just get Chrysler for free instead of the $40B that Daimler-Benz spent. It still might not be a bargain though.

Whiplash · Post by **Whiplash** » Tue Jan 20, 2009 7:02 pm

I wonder which cars will make it over here?
I think as long as they kill off chryslers boxy looking cars (all of them) it will be an improvement.

yottabit · Post by **yottabit** » Tue Jan 20, 2009 10:01 pm

Hmm... weren't they planning to release an Alfa in the US sometime soon anyway? I remember reading an article on it, but citing how they will have problems do to no dealer infrastructure... well there ya go

Up until this thread I never realized Fiat owned Alfa and others

Very interesting turn of events...

Post by **John Brennan** » Wed Jan 21, 2009 12:27 am

Well, y'a know... you can't buy a Packard, a Hudson, a Rambler, or a Pierce-Arrow anymore, either. Times change, "icons" come and go. There's nothing writ into the Constitution that says we have to have Ford or General Motors, either (at least, there didn't use to be!). It's too bad, because I thought the Mercedes DNA in the Chrysler gene pool made for some refreshingly nice cars. That 300 and its siblings are, to me, some of the best examples of modern American cars out there. American car companies should have seen the handwriting on the wall long enough by now-- the world is chock-a-block with excellent cars designs, so there's no dearth of examples to be followed, or lessons to be learned. One thing I don't understand is why there are so many examples of Domestic-based manufacturers who reserve their best designs for the foreign markets-- what's up with that?

Post by **DPDISXR4Ti** » Wed Jan 21, 2009 1:02 am

yottabit wrote:Hmm... weren't they planning to release an Alfa in the US sometime soon anyway?

Yes, the 8C was to lead the way for Alfa's return (pic below). But it was the first step of an incomplete strategy. Given the price of the 8C, it was (and still IS), going to be sold through Ferrari dealers. The rest of the product roll-out was to follow, through an ever-changing dealer strategy, which has very likely just shifted again.

pacwest · Post by **pacwest** » Wed Jan 21, 2009 3:30 am

There seems to be a disconnect between what the big 3 think we want and what we want.

It gets reinforced when a European manufacturer pulls out. But Ferrari and Porsche sell well in America. I think the big 3 try to tell us what we want and we are forced into buying their crap. If the market was opened up they'd play better and build a better machine. Marketing machine, design machine...

I dunno man. Fiat got a billion from the GM abortion. Fiat and Renault could be some serious players 5 years from now.

merkurmaniac · Post by **merkurmaniac** » Wed Jan 21, 2009 8:59 am

What I read that Chrysler wants the small, super efficient cars that Fiat sells in Europe. The 2008 Town and Country minivan that I bought gets the same mileage that my 1996 eagle vision (Dodge INtrepid) used to get. I dunno if Chrysler sells any high mileage cars, I know that their jeeps don't do well in MPG. Chrysler seems to have a lot of trouble figuring out what Honda, Toyota, VW and others know. This was evidenced by the last round of marketing by them during the gas price spike. Recall that they began offering some kind of program where they would pay the mileage difference for a year or two when you bought one of their guzzlers. That told me that they thought it was easier/cheaper to bribe customers than provide efficient cars. They probably are thinking that they can merge some FIats into their mix and bring up their CAFE rating. This would let them keep selling Jeeps, Aspens, and all the other stuff that gets terrible mileage.

I love my minivan, but Chrysler seems to be really behind in the powertrain execution from an efficiency standpoint. When Toyota was selling tons of prius's, Chrysler was rolling out the latest Magnum Hemi Big Ass SUV things. Good call guys.

I had been planning on buying a Volt, but I do prefer the look of the 200C that Chrysler is saying they will have by 2010 also. We'll see.

Post by **DPDISXR4Ti** » Wed Jan 21, 2009 9:21 am

pacwest wrote:I dunno man. Fiat got a billion from the GM abortion.

$2B actually. That was one crazy effed up deal.

Freejack · Post by **Freejack** » Wed Jan 21, 2009 10:07 am

merkurmaniac wrote: They probably are thinking that they can merge some FIats into their mix and bring up their CAFE rating. This would let them keep selling Jeeps, Aspens, and all the other stuff that gets terrible mileage.

One of the problems with that strategy is the two fleet rule for CAFE ratings. Any imported products will fall under one fleet, while the domestic (and Canadian IIRC) product falls under another. Bringing in small euro-built cars does nothing to help the US fleet CAFE requirements.

That in combination with exchange rates can lead to a significant disincentive for a domestic maker to bring in any of their small euro-market vehicles.

Jake

pacwest · Post by **pacwest** » Wed Jan 21, 2009 10:19 am

The diesel fuel price and perception of diesel fuel in the US needs to change.
We have the same price structure here but have FAR more diesels. We get it about diesels.

If the US got on the diesel car wagon, that would open up a real "new world" of cars for everyone.

Quik TA · Post by **Quik TA** » Wed Jan 21, 2009 6:02 pm

pacwest wrote:The diesel fuel price and perception of diesel fuel in the US needs to change.

Yea, but that one time in 1994 I was riding with my dad and a dump truck in front of us blew out all sorts of black smoke that smelled bad.

Quik TA · Post by **Quik TA** » Wed Jan 21, 2009 6:03 pm

So I'm never buying a diesel.

j/k

Post by **John Brennan** » Wed Jan 21, 2009 7:41 pm

pacwest wrote:The diesel fuel price and perception of diesel fuel in the US needs to change.
We have the same price structure here but have FAR more diesels. We get it about diesels.

If the US got on the diesel car wagon, that would open up a real "new world" of cars for everyone.

Hear, hear!

They've also got to stop charging more for a fuel that is so much cheaper to make...