By on January 5, 2012

Usually, when you bring a car from Europe to be made in the U.S., you need to bring something else: Money. You know, for buying real estate for a plant, machinery, that kind of thing. Except when you are Fiat. In that case, a thankful U.S. government hands you yet another 5 percent of Chrysler, as a token of its appreciation, for what amounts to be a token act.

As announced last December, Fiat made good on its promise to build its Alfa-based Dodge Dart in the U.S. According to Reuters,

“Chrysler and Fiat formally committed on Wednesday to the U.S. Treasury Department to produce the 2013 Dodge Dart sedan at a U.S. Chrysler plant.”

With that simple commitment, Fiat has increased its stake in Chrysler to 58.5 percent. By announcing its intentions to build “a highly fuel-efficient car” at a U.S. plant, Fiat reached the final milestone with the Treasury. The government is out of the automaking business, at least as far as Chrysler is concerned. Fiat shares ownership of Chrysler with the UAW. The UAW’s retiree health care trust holds the 41.5 percent. left over after Fiat’s 58.5 percent.

Actually, it is not the new Dodge Dart that got Fiat the last chunk of Chrysler, it is a special anemic edition of said Dart. Equipped with a 1.4-liter turbocharged FIRE engine that also powers versions of the subcompact Fiat 500, THAT Dart is expected to get the required unadjusted combined fuel economy rating of at least 40 mpg. Never mind that the EPA-issued windows sticker probably will say something like 30 mpg. Who are you going to sue, the government?

The 2013 Dart will be built at Chrysler’s plant in Belvidere, Ill.

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21 Comments on “Molto Grazie!Treasury Hands Fiat Another 5 Percent Of Chrysler...”


  • avatar
    OldandSlow

    It is looking like Brazil and the US will have to keep FIAT afloat in 2012.

    FIAT sales numbers are way down in Europe. So, hopefully both the Dart and that 1.4 turbo are up to the job for the US market, where the competition is already entrenched. They don’t have the luxury of another sales flop, i.e. the Caliber.

    The 500 is a good car for what it is, but it’s too small to be other than a niche player in the US. Throwing money and managerial resources at re-establishing the FIAT brand through independent dealerships will be costly.

  • avatar
    GS650G

    The best part of the deal is if it fails the US taxpayer will just bail it all out again, especially with the UAW holding 40 percent. They could make paper cars with lawnmower engines and not worry about profits.

  • avatar
    jaje

    Could Fiat build a new plant in the US and call it Chrysler but not have UAW labor? That would make sense for Fiat in the long run as no longer have the threat of strikes, the ability to hire / fire their own employees, promote / award great employees, and make it a merit based job rather than seniority who paid dues to the organization. I’m a little ignorant of the UAW’s stranglehold on new plants in the US and whether they are forced to use union labor.

    Of course this would be ironic as UAW owns part of Chrysler – but UAW can look at this in the long run – they’d have a plant that is world competitive and wouldn’t have to negotiate with greedy union labor organizations. lol

  • avatar
    PenguinBoy

    Well done Sergio! Against all odds, he has taken a failed automaker and turned it around into a profitable, viable business. According to the article posted yesterday, “Chrysler is up 37 percent in December and 26 percent for the year” – that’s a pretty impressive turnaround!

    If the upcoming Dart is class competitive with the Focus, Cruze, and Elantra (Civic and Corolla are no longer benchmarks in this class IMHO) then I expect the turnaround may be durable – the lack of competitive C and D class offerings is the biggest gap in Chrysler’s lineup right now.

    While I woud prefer it if the bailouts had not been necessary, I’m convinced that bailing out Chrysler cost me less than letting it fail would have – especially when all the hidden costs are taken account. And while it looks like Fiat got a good deal on Chrysler, nobody else wanted it at the time so it was the best deal the taxpayers could get at the time.

    • 0 avatar
      DC Bruce

      Washington DC accounting: when the numbers don’t add up — or they add up in a frightening way — start talking about “hidden costs” or, if you have a PhD in economics “externalities.” That’ll make it all better.

      The really cool thing is that the folks who really will get stuck paying for this are still in diapers and have not yet learned to talk, much less write for the New York Times.

      • 0 avatar
        bikegoesbaa

        The really cool thing is that the folks who really will get stuck paying for this are still in diapers

        Better them than us.

      • 0 avatar
        PenguinBoy

        @DC Bruce: Fair point.

        Is there any objective analysis, using only direct and easily quantifiable costs, that shows the Chrysler bailout cost the US and Canadian taxpayers *more* than a liquidation would have?

        I suspect the first tranche of the bailout money, which was given out before the bankruptcy while our governments were trying to figure out what to do with the basket case that was Chrysler at the time, would have been a sunk cost regardless of the outcome. I think we’ve gotten most, if not all, of the post bankruptcy money back – and we are not on the hook for any retiree benefits.

        In any case, I’m impressed by the Chrysler turnaround so far. I wish them well, and hope they can stick around long enough to eventually produce some new products as cool as this old Chrysler posted by Murilee just now: http://www.thetruthaboutcars.com/2012/01/junkyard-find-1964-chrysler-new-yorker/#more-424427…

    • 0 avatar
      photog02

      I hope the Dart is class competitive. If it is, or can come close on some other aspect such as price without feeling too much like a junker, it could recreate the success Chrysler saw with the Neon.

      • 0 avatar
        rochskier

        Me too. From what I’ve seen in photos the Dart looks pretty sharp, and the engine options sound decent. The 2.4L also sounds as though it has been designed from the ground up to support forced induction, and that will allow Dodge to offer a factory-tuner version at some point. That should also draw some interest from the tuner crowd.

        The real question is how much will these cost off the lot? If they can keep it in the $15-20k range Dodge will have a hit on its hands. $20-25k will probably be steady but not great sales. North of $25k is going to be a real problem for the under 35 crowd, especially with so many great low mileage, late-model vehicles on the used market.

  • avatar
    Mandalorian

    Is it just me or does anyone else think he is saying “My Precious” and rubbing a ring?

  • avatar
    shelvis

    So Fiat gives Chrysler platforms to replace the old Mitsubishi bones (platforms that would cost BILLIONS to develope independently) and finally gives Chrysler worldwide distribution and that’s a token? Cerberus couldn’t sell Chrysler to the feds for $1 for gods sake. Would folks be happier if chryco stayed with the Germans, got parted out to the Chinese or got merged with GM? What would actually please you guys?
    Have a look at what other cars actually achieve 40 MPG combined on the old cycle and see if you can honestly say the Dart isn’t a game changer.

  • avatar
    Herm

    “it is a special anemic edition of said Dart. Equipped with a 1.4-liter turbocharged FIRE engine that also powers versions of the subcompact Fiat 500″

    It wont be too bad, supposedly 160hp if its the same engine as used in the 500 Abart, maybe more.

  • avatar
    tparkit

    No need for anyone to be surprised at the transfer to Fiat.

    The deal always was: the Obama administration gets a political exit from bailing out its buddies at the UAW. In exchange for providing an exit that puts a free-market figleaf on a transfer to crony wards-of-the-state, Fiat gets valuable assets for free.

    Big #1 free asset was the Jeep brand.

    However, let’s never forget that there has been long-term damage to the US as a nation. Washington’s act of stealing Chrysler from its owners, coupled with the Administration’s naked assaults against Toyota, communicate to investors both here and abroad that there is no rule of law in the US. For all of us, this good day for crony Fiat is a very bad day for freedom from maurading government.

    • 0 avatar
      hriehl1

      tparkit…

      What do you mean by “naked assault”? It is just giving Fiat and UAW their “fair share”.

      Who cares about those pesky bondholders, stockholders and suppliers… they’re all rich.

      • 0 avatar
        PenguinBoy

        “Who cares about those pesky bondholders, stockholders”

        Cerberus and the bondholders that were still around that late in the game weren’t exactly widows and orphans – they were buying some seriously troubled assets at a fire sale price in hopes of big rewards.

        I don’t feel sorry for them in the least, because they were willing to take a big risk on the off chance of a big payback.

        Suppliers and non-union pensioners are another matter – I feel for them. But I still think the bailout sucked less than liquidation…

  • avatar
    fred schumacher

    Gee, Bertel, that was a whiney report. Are you upset that an Italian manager turned around a company that German managers nearly destroyed? (Disclaimer: I’m German, my native language is German, my first name is really Friedrich, and my Balkan grandfather escaped from an Italian POW camp in the early days of WW II.)

    If GM and Chrysler had been allowed to collapse, the whole auto industry supply chain would have gone down with them (stopping production at foreign owned American assembly plants also), and the resulting cost to the federal government and the economy would have been much higher. As it is, the cost to the feds was minimal for their part of the restructuring, since most of the loans were (in the case of Chrysler) or will be (in the case of GM) recovered.

    • 0 avatar
      hriehl1

      … all true except the Chrysler and GM bancruptcies did not follow the chain of claimants. Debt holders got screwed while those with no secured claims ended up with assets… it truly was a sad day when law can be ignored in favor of divvying up political spoils.

      It should not have been about jobs, political constituencies, costs or anything else. The law prescribes how a bankrupcy is to be reconciled among claimants… and it was not folowed in the Chrysler and GM cases.

      • 0 avatar
        Conslaw

        Bondholders always “get screwed” in bankruptcies. Whenever secured lenders get less than 100%, bondholders should expect to get 0%. By the time of the Chrysler bankruptcy, long-term bondholders who were paying attention had long since sold their stakes to vultures and speculators.

        The people I feel sorry for were the dealers who took on extra inventory in the closing days at the urging of Jim Press who insisted the company wasn’t filing bankruptcy, then many of these same dealers got their franchise terminated in the bankruptcy leaving them with a huge financial mess on their hands. I think both Chrysler and GM culled far more dealers than they should have. Making it harder for people to buy your products is rarely a ticket to success.

        Suppliers incurred some hardship from the bankruptcies, but nothing like the problems that would have occurred had GM and Chrysler shut down completely. (In a perfect world, parts of Chrysler should have been combined with General Motors to reduce overcapacity in the industry, but GM did not have the management structure or capitalization in place to deal with all the issues involved, so it is probably better that things went the way they did.)

  • avatar
    Conslaw

    People can correct me if I’m wrong, but while it is true that some non-secured creditors ended up with assets, actual ownership of the company, it is because they brought new money to the table- money that nobody else was going to bring to the table otherwise. That’s what happens in every reorganization. The US and Canadian governments brought money to the table justifying their new ownership stakes. They were therefore in position to dictate the terms of the reorganization plan. There was no group of creditors that came out worse than they would have had there been a liquidation. There is no question that the UAW and its pension funds came out better than they would have had there been a liquidation; but the union and its pension and healthcare funds took a haircut like everybody else.


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