Fiat (Fix It Again, Tony) and Chrysler in a Marriage of Convenience

Chrysler CEO Bob Nardelli and I share a birthday, but there the
similarity ends. We were both born under the astrological sign of Taurus and the
irony is not lost that this distinction may put us closer to Ford than either
Chrysler or Opinion.  Those of us born
under this sign are said to be dedicated, determined and disciplined, reliable,
patient and tenacious. Somewhere in there is stubborn, but not to worry, that’s
a trademark of the auto industry in general.

Nardelli is a tough guy, but he’s been a top gun
(GE) or CEO (Home Depot) at ever weaker companies over his career, always
landing on his feet after being let go with one of those cash-rich parachutes.

Light bulbs, the two by fours and
now cars—is there an end to all this somewhere and is it a happy ending?

Enter potential merger partner Sergio Marchionne, FIAT Group
CEO and brand new 35% suitor of Chrysler. Daimler Benz couldn’t make a similar marriage
work, but then they had an already large U.S. presence and not much upon which
to build cross-markets. Embarrassingly, Daimler paid some $38 billion to buy
Chrysler in 1998 and recently had to pay a dowry of $650 million to get a private
investor group (Cerberus) to take it off their hands.

Somewhere there is a meeting in the great beyond, where Walter Chrysler
and Henry Ford are both getting drunk.

For his part, astrologically, Sergio is a Gemini—adaptable and versatile,
communicative and witty—how Italian of him. The dark side of his sign is
nervous and tense, superficial and inconsistent, cunning and inquisitive. Can
this marriage be saved? I admit to a long and tireless campaign against the
stubbornness and superficiality of Detroit as the American automobile industry
sank beneath the waves of one failed non-strategy after another.  Detroit held fast to muscle-cars long after the muscle had left the industry.

They brought disaster upon themselves the
old-fashioned way—they earned it.

All that off my chest, Chrysler has been an
engineering giant in the industry and now builds a pretty damn fine (if
somewhat upscale) car, supposing they can survive to see the market come back.
FIAT, for its side of the bargain, has a 20% market share in Europe and none in
America, which is still the world’s largest single buyer of cars. Chrysler hasn’t much
in the way of small, fuel-efficient cars and could use the FIAT line to bolster
their dealer network. Hmmmm . . . might work.

The Washington Post reports,

alliance of the two companies provides no cash to Chrysler, but the company’s
chief executive, Robert L. Nardelli, told stakeholders in a letter that he
hoped the deal would bolster the automaker’s case for an additional $3 billion
of federal loans by strengthening its offerings. The nonbinding agreement is
subject to approval by the Treasury, and Chrysler said it hoped it would be
complete by April.

taking two big automakers who have gaps in both their products and geographic
reach, and you’re filling those gaps,” said David Elshoff, a Chrysler
spokesman. “They fit like pieces in a puzzle.”

That was perhaps an unfortunate metaphor. Being puzzled is
not something you want to admit when you’re courting. Someone at the
Treasury Department might just reasonably begin to ask if there are any other
significant pieces missing; like perhaps unsustainable commitments to health
and welfare obligations. The Italians are not likely to contribute much to that synergy.

Mercedes out almost $30 billion and now Chrysler, divorced after that short marriage, is
trying to stagger to the altar with FIAT and Alfa Romeo.

Romeo, wherefore art thou, Romeo?”

FIAT, itself formerly and briefly married to GM, was
paid some $2 billion to annul that matrimonial disaster. Automobile companies, like
Elizabeth Taylor, seem somehow unfit for marriage, no matter the doggedness of
their intentions.

Nardelli and Marchionne—the names sound like a
couple of expensive desserts at an Italian
restaurant. Yet Marchionne was the author of a remarkable turnaround at
FIAT—known alternatively as Fabbrica
Italiana Automobili Torino
and Fix It
Again Tony
, the latter with a usually benign chuckle. The man booted FIAT into a 20% market share in Europe, but it’s depressing
to think that the American taxpayer is supposed to come up with a $3 billion dowry to get Chrysler to the church on time.

Supposing FIAT actually has hopes for successful
entry into an already crowded and declining (read that plummeting) American
auto market, they could do worse than avail themselves of Chrysler’s 3,372
authorized dealers across the land. Currently faced with the very expensive and
very demoralizing shutdown of huge numbers of dealers, Chrysler might find
blood enough in the FIAT econo-box line to keep the patient alive until help arrives. It
better arrive quick.

again) . . . By mid-February, Chrysler must submit a restructuring plan to
achieve long-term viability, international competitiveness and energy
efficiency. If it doesn’t show progress on that plan, by May 1 the government
can call back the $4 billion loan, effectively pushing the company into

That’s a week from now.

. . . A critical element to the deal is the
acceptance by dealers, who would likely be asked to sell Fiats.

“This is phenomenal,” said Hayden Elder,
co-chair of Chrysler’s national dealer council and the owner of Elder Chrysler
Dodge Jeep in Athens, Tex. “We’ve got a partner now.”

It sounds like, given the alternative, dealer
acceptance is not going to be a problem. Which would be great news for a
stressed industry, were it not for the fact that automobile sales
(worldwide) are at the very tip of the economic spear—and that shaft is in an
almost vertical downward free-fall.
Which might bring a whole new meaning to the term shafted.

2 thoughts on “Fiat (Fix It Again, Tony) and Chrysler in a Marriage of Convenience

  1. Look, the auto industry is in shambles. With the cost of "new models" that come out every year, other high overhead (like high salaries and bonuses)the industry cannot keelp its head above water.
    Instead of "new models" we need "improved upon the old models" and fewer choices. You can't be all things to all people in this day and age and survive.
    Business success has a proven formula. Start out with a basic product, keep its quality up and if accepted in the market and you become successful profit wise keep on doing the same thing.
    Diversify and you are headed for trouble. If your productS market place dwindles in succeeding years it is time to call it quits because NOBODY LIKES IT!

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