Fiat Acquires 1/3 of Chrysler

[NOS2006]

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.

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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.

[Intrepidation]

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.

[Robert Hall]

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.

[FAPTurbo]

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

[MyerShift]

I hope this is good.

[pow]

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

[Intrepidation]

Well technically one Alfa Romeo is here already.

[MyerShift]

Well technically one Alfa Romeo is here already.

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!

[Intrepidation]

I love the (C, but yeah the face doesn't work as well on the MiTo.

[MyerShift]

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.

[Z-06]

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

[ZL-1]

You'll love FIAT interiors

[regfootball]

fiat 500's and Ka's built in the same plant? Chrysler and Ford together in bed?

[Paolino]

Well technically one Alfa Romeo is here already.

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.

[Shantanu]

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.

[ocnblu]

It was a relief for me to read this today at work. I wish both companies much longterm success in this venture.

[Satty]

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

[ocnblu]

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.

[Shantanu]

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.

[Satty]

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?

[Intrepidation]

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.

[Satty]

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.

[Intrepidation]

Your analogies are priceless.

[2QuickZ's]

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!

EDIT: Linked wrong pic. Fixed.

Edited January 21, 2009 by 2QuickZ's

[Daryl Z71]

Why couldn't GM do something like this?

[PurdueGuy]

Why couldn't GM do something like this?

Cooperate with a European company? Which one you want, Saab or Opel? I think GM is big enough that it doesn't need any more access to foreign markets, or sharing among divisions or whatnot to achieve economies of scale. IMO, GM just needs to focus on doing what it does better, not be distracted by complicated deals where it hopes to capitalize on some other company's strength, rather than address it's own weaknesses...

One thing we can hope this does, is kill off the deals between Chrysler and Chinese automakers for small cars.

[Blake Noble]

Why couldn't GM do something like this?

Chances of GM and FIAT getting in bed together again: zero. Remember the fiasco between the two that happened around the beginning of the decade?

[Daryl Z71]

Chances of GM and FIAT getting in bed together again: zero. Remember the fiasco between the two that happened around the beginning of the decade?

Nope never heard about it how about you inform me lol. Anyway I didn't mean GM and Fiat it could be anybody, but now that I read more its probably not a good idea anyway.

[Sixty8panther]

I can't even begin to comment on some of the things being said here....

In any case I hope Chrysler comes out of this alive and well, they have

(more so than GM or Ford) really tried to give RWD to the masses as of

late, and while they have plenty of junk in their showrooms right now it

can be forgiven with the existance of the Charger, Challenger, 300C,

Ram & Viper.

[Intrepidation]

I can't even begin to comment on some of the things being said here....

In any case I hope Chrysler comes out of this alive and well, they have

(more so than GM or Ford) really tried to give RWD to the masses as of

late, and while they have plenty of junk in their showrooms right now it

can be forgiven with the existance of the Charger, Challenger, 300C,

Ram & Viper.

Well dude, Chrysler NEEDS small cars to sell in the states because when prices go back up, which you can bet your ass they will, that's what people will buy again. Chrysler needs a balanced lineup, to get that it needs a small car or two slotted below the Caliber. It also needs more dealers in Europe. Fiat can give it that. That will help Chrysler stay alive and continue to offer us RWD cars, and the next gen RWD large cars. So just look at it that way. :wink:

[cire]

The 500 and the Bravo II would be great additions to some part of Chrysler's lineup. I really don't see either car being badged as a Chrysler or Dodge product. I think a "Fiat by Chrysler" designation might be suitable for the cars as a ploy to get some real traffic into Chrysler showrooms again. I wish Chrysler well with their new partnership.

[Satty]

I'd buy a Fiat 500. I wouldn't buy a Chrysler 500 by Fiat.

[MyerShift]

Hmm. While I like the idea of Chrysler getting help, and possibly seeing new FIAT's here like the Bravo and Panda, if they were badged as Chryslers, what would they be branded?

Well, The Plymouth Panda has a certain catchiness to it, but that can't happen.

Dodge Bravo?

Chrysler Bravo?

Plymouth Bravo?

Hmm.

[Cory Wolfe]

I think this will be interesting to follow and see how this 'partnership' works out. I don't think it can really hurt Chrysler any more than they've hurt themselves.

[CMG]

I'd buy a Fiat 500. I wouldn't buy a Chrysler 500 by Fiat.

You don't have the money to buy the brochure Satty, so rest easy....

[Satty]

You may be on to something there. Fiat wont ship a brochure to the U.S. and so far I've had no luck on eBay. And I'm sure as hell not going to hunt down someone in Europe and get them to send me a brochure. SO I guess I'll just have to ....oh, wait...would you look at that, I can download the brochure. Guess that means you were wrong. Again.

[CMG]

You may be on to something there. Fiat wont ship a brochure to the U.S. and so far I've had no luck on eBay. And I'm sure as hell not going to hunt down someone in Europe and get them to send me a brochure. SO I guess I'll just have to ....oh, wait...would you look at that, I can download the brochure. Guess that means you were wrong. Again.

Sure.

See if you can download the CAR.

It's the only way you will ever own either of those choices, ain't it?

LOL

[Satty]

Well if Fiat never sells the 500 in the U.S. its likely I'll never own one. Hmmm...it appears the 500 is available in Mexico for about $234,900 MXN, which a quick exchange shows is roughly $16,000 USD. Hell the "Vintage" trim is roughly $19,000 USD. I wonder, if I buy one in Mexico, register it in Mexico then drive across the border if the border potrol will shoot me.

Too bad Fiat doesn't import to Canada, since you're my best bud in the world CMG, I know you'd help me out with getting it across the border.

[Robert Hall]

Well if Fiat never sells the 500 in the U.S. its likely I'll never own one. Hmmm...it appears the 500 is available in Mexico for about $234,900 MXN, which a quick exchange shows is roughly $16,000 USD. Hell the "Vintage" trim is roughly $19,000 USD. I wonder, if I buy one in Mexico, register it in Mexico then drive across the border if the border potrol will shoot me.

Too bad Fiat doesn't import to Canada, since you're my best bud in the world CMG, I know you'd help me out with getting it across the border.

Fiat's in Mexico? Cool..didn't realise they were in NA at all. Maybe I'll see some here in AZ...I see Mexico plated cars around frequently..

[Satty]

I was surprised too. I know the sell in South America, but I didn't know they had outlets in Mexico, Costa Rica and Panama.

Edit: Link to Fiat Mexico

Wow, my Spanish is rusty.

Another edit: I think I'm in love with the Bravo.

When my mom lived in England, I looked into getting a Cooper D imported. Turns out thats a hellacious process even though the Cooper D would have the exact same crash test results as the regular Cooper. Stupid EPA.

Edited February 3, 2009 by Satty

[regfootball]

i hope the fiat 500 comes here, if for no other reason than to kill mini sales.

[ZL-1]

The 500 would appeal to a different crowd, as the Mini is a much better driver. The 500 is just a retro-styled Fiat Panda, the Mini is a little go kart.

EDIT - I posted this sentence once, but I'll do it again just for fun: "you'll love Fiat interiors "

Edited February 3, 2009 by ZL-1

[FAPTurbo]

I don't see why people would be upset at this deal. At least there's one company that sees value in Chrysler, and I think it's certainly better than the brand being acquired by the Chinese.

Plus, it can give Chrysler some unique, and interesting small cars... something that they haven't had, since like, ever?

[Oracle of Delphi]

Hmmm, I see a lot of Italian hand gestures coming Chrysler's way soon. Should be fun to watch ... A dopo ...

[CMG]

Too bad Fiat doesn't import to Canada, since you're my best bud in the world CMG, I know you'd help me out with getting it across the border.

If you ever, in your entire lifetime- come up with $16,000 and STILL want to buy a Fiat...?

I'll help you out Satty. Despite the fact that it would be against my better judgement...

:AH-HA_wink:

[Satty]

I'm definitely going to start picking pennies up off the street now. Thats only 1,600,000.

[FAPTurbo]

lol e-beef

[Satty]

lol e-beef

Its whats for dinner.