By on October 8, 2012

Fiat says it sits on a 22.7 billion euro cash pile. CONSOB, the Italian equivalent of the SEC, told Fiat to explain “size and purpose” of its cash position, says Il Messagero in Rome. Fiat says it is not aware of an alleged probe, and that any suggestion that its cash pile was lower than reported in its statements was false, and will be dealt with.

“Any suggestion that Fiat may not have the liquidity stated in its financial statements is false and will be treated as such by Fiat,” Fiat told Reuters. However, the way we read it, Fiat is not accused of overstating its cash. Instead, it is blamed for not spending the money.

On September 24, Fiat CEO Sergio Marchionne said in a speech that he is  “exasperated” by CONSOB’s “19 letters” between April 2010 and October 2011 that asked for more information about Fiat’s plans to invest in Italy. According to the Economic Times, “Fiat has 12.1 billion euros in cash and equivalents, and Chrysler, in which Fiat has a 58 percent stake, has 10.6 billion euros, it said on July 30. Fiat cannot access Chrysler’s cash because of agreements with Chrysler’s creditors.”

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23 Comments on “Fiat Bitten By Financial Watchdog...”


  • avatar
    Pastor Glenn

    Wait, let me get this straight.

    A socialist government in the USA essentially violates its own bankruptcy laws and voids the first tier rights of bondholders, then GIVES Chrysler to FIAT, with a portion going to the UNION, because nobody wanted it – and then puts a stipulation that a 40mpg car must be built by a certain timeframe – after which FIAT will be given even more of Chrysler. Right? Right.

    But someone must have at least had two brain cells to rub together in that bunch, because one stipulation was that FIAT could not “raid” the (US taxpayer) replenished monies in the bank for Chrysler to survive on.

    Now ANOTHER bankrupt socialist state (Italy) has bureaucrats “sniffing around” (sorry) more or less demanding that FIAT’s books (which include Chrysler’s monies – since FIAT now owns over 50% of Chrysler) should have spent more money IN ITALY since it’s on the books? Obviously this is to ensure that FIAT survives the future – despite the fact that Italy is following Greece towards total economic and social collapse. Have I got that right so far?

    To make the unlikely story even more interesting, we see that GM (which also had an illegal transfer of ownership to UNIONS and GOVERNMENT with illegal transfer of wealth from BOND HOLDERS) can’t make money because their German arm, Opel, which they were originally going to hive off to Magna. Opel is dragging them down in much the same manner as the “unsinkable Titanic’s” inner holds which were intended to prevent sinking filled with water after several were torn by the iceburg – but which actually sank the ship (because they were cross-connected at the top – duh!)

    So now we have FIAT which wants to buy Opel from GM and Volkswagen which wants to buy Alfa Romeo from FIAT. Oh yes, and we also have Mazda needing a partner with FIAT sniffing around….

    Since logic, intelligence, sanity and fiscal conservatism seem to have all been thrown to the floor and trampled on….. why not have GM, FIAT and Mazda form a paper Global Motors Corporation in Zug, Switzerland (12% tax – lowest in the world), merge the three companies (watering down the US and Canadian ownership), merge GM and Chrysler in the USA (Chevrolet-Chrysler/Ram/Jeep-Buick/GMC-Cadillac), then GIVE Opel away to the German government. Threaten that if the German gov’t don’t take it off Global’s hands, that it’ll be simply declared an excess and unwanted subsidiary and left outside the merger – to die on the vine by being given total “independence” of Global and no monies whatsoever. In other words, left out of the merger and left to die by the side of the road.

    Excess European Fiat capacity could be used to build Mazda and “Chevrolet” (Daewoo) cars for Europe’s sales channels.

    Of course, Chrysler would still have to remain a separate “on paper” subsidiary with funds segregated. But this is not big deal as this is the arrangement that American Motors Corporation used for the Jeep Corporation for many years after the spring 1970 purchase from Kaiser Industries. (Subsidiaries and Divisions are two separate legal entities, and this includes taxation and booking of income purposes).

    • 0 avatar
      Type57SC

      The bankruptcies were legal. the DIP lender and 363 buyers get to call the shots, not creditor priority. creditors could object and basically had to offer a better deal than what’s on the table. They didn’t because there wasn’t that amount of DIP to be had outside of the UST.

      No one seriously thinks FIAT will sell alfa or GM will sell Opel. FIAT is not offering to “buy” Opel as much as be given a doury to take Opel. Which nobody is seriously considering.

      Otherwise, rant on my friend.

      • 0 avatar
        Robert Schwartz

        m

      • 0 avatar
        28-Cars-Later

        I wish he did then he could balance the Federal budget!

      • 0 avatar
        Pastor Glenn

        If the bankruptcies were truly legal, then why this?

        http://dealbook.nytimes.com/2009/05/22/gop-lawmakers-side-with-gm-bondholders/

        If you can’t be bother to go there, here is the money quote:

        “Rather than blaming lenders or exercising favoritism to a political ally, this situation can be resolved in a manner that respects the rule of law and injects confidence and certainty into the markets that will help our economic recovery.”

        Please take note of those three words – RULE OF LAW.

        And if you care, no I’m not a Demoncrat nor a Repugnican. I’m actually a Constitutionalist. If you care.

      • 0 avatar
        el scotto

        The bankruptcies were sweetheart deals from the US Government. Read up on Liquidation Motors. The bailouts to Chrysler and GM reek of manure. To some that means “enhances plant growth”.

      • 0 avatar
        BrianL

        People love to look at bond and debt holders but forget that GM had essentially zero SECURED debt holders. When the gov’t loaned they money, that was SECURED. The gov’t was essentially the only one entitled to anything.

        For Chrysler, it was a different, but they got 97% of the bond holders to agree to the deal. The 3% went to court and lost.

        Read up on how it was legal because the people who said it wasn’t are spewing the same wrong facts.

    • 0 avatar
      Pch101

      “Wait, let me get this straight.”

      You didn’t even come close to getting it straight. What a pile of drivel.

      • 0 avatar
        Pastor Glenn

        I stand somewhat corrected re: the treatment of GM bond holders.

        They were treated better than Chryslers.

        http://www.nationalaffairs.com/publications/detail/the-auto-bailout-and-the-rule-of-law

      • 0 avatar
        Pch101

        Your rant was pretty much deficient of facts and a waste of innocent kilobytes that didn’t deserve that sort of treatment.

        It’s understandable that you are so poorly informed, since you only get your “facts” from the echo chamber of your choosing. Try harder.

    • 0 avatar
      28-Cars-Later

      “Opel is dragging them down in much the same manner as the “unsinkable Titanic’s” inner holds which were intended to prevent sinking filled with water after several were torn by the iceburg [sic] – but which actually sank the ship (because they were cross-connected at the top – duh!)”

      IIRC on the Titanic the bulkheads were “cross connected” as it were but only to deck five. The ship was designed to float with two filled compartments, but four (or possibly five) were breached when the ship struck the iceberg. The fact the ship hit more than two concurrent compartments was not contemplated, or at least not properly vetted… thus the additional weight taken on by four compartments caused water to fill above the deck five bulkhead and spill over into dry compartments, dooming the ship.

  • avatar
    th009

    My personal view is that Marchionne has turned off all the development and investment taps because he wants to hoard cash in case he can buy Opel, PSA or someone else for a song.

    Of course Fiat (including Alfa Romeo and Lancia) is sinking underneath him as I write this, but that doesn’t seem to bother him.

    • 0 avatar
      28-Cars-Later

      He may want to cull one or more of those brands in favor of a purchased one. Fiat, Alfa, Lancia, from a branding standpoint sound a bit like Chevrolet, Pontiac, and Oldsmobile to me… do you really need all three?

    • 0 avatar
      Pch101

      Fiat needs more market share and economies of scale if it is to survive. The easiest way to get market share fast is to buy it.

      • 0 avatar
        28-Cars-Later

        I cannot disagree on quick market share but by buying out others in the process becoming a bloated conglomeration of other people’s companies/products?

        Maybe its just me, but this strategy reeks of GM.

      • 0 avatar
        th009

        But both his own brands and the ones he might be able to buy are dropping market share fast. In the end, he might end up with a few points of extra market share, but split across a portfolio of a dozen brands, none of which have healthy operations in Europe.

        Economies of scale are just one factor for survival and/or success. You also need to have product, and profitability, and good brands. At the moment Marchionne is missing out on all four of those in Europe, and an acquisition, even if on the cheap, is only likely to fix the first (economies of scale).

      • 0 avatar
        Pch101

        I didn’t opine on the pros and cons of the acquisition strategy. I’m just identifying what I believe to be are Marchionne’s motivations.

        Fiat is a regional brand, and it’s weak. The end of Italian protectionism, combined with its lack of branding strength and global presence, put Fiat into a squeeze, with eroding share, increased competition and a dim future. The company as a whole has to grow (somehow) or die, as it is too small to go the distance.

        Meanwhile, the financial crisis has provided automakers with opportunities, too. The near collapse of the US economy proved to be a godsend to Fiat. It is understandable that he’d try to use the European extended crisis in order to pull another rabbit out of the hat.

  • avatar
    jimboy

    I think there is just way too much suspicion going on here. Anybody looking at Europe these days is aware that it has not hit bottom yet. A prudent business person will hold on to cash rather than spend unnecessarily in an economic downturn.
    Marchionne is simply holding on to cash he may need later. Why invest in a market that has zero growth potential when that money could be better used elsewhere? It’s going to take Europe at least a decade to rebound, so fighting for share is best left to the VW group, who are willing to buy share at a loss.

    • 0 avatar
      th009

      It’s not just the discounting (which Fiat, PSA, Opel and Ford are doing as well) but a question of having competitive products to sell. Marchionne has cancelled or postponed so many of the key product development and launch projects, so the Fiat dealers are at a point where price is the only thing that will sell their products.

      When I was in Italy last month, I saw far more (discontinued) Alfa 147s and 159s than the current MiTo and Giulietta. And those two are the only real products Alfa has today.

      • 0 avatar
        Morea

        “And those two are the only real products Alfa has today.”

        Those ARE the only two products Alfa has. They don’t even sell a V6 anymore even though from 1979 to 2005 they produced one of the most highly acclaimed automotive V6s ever made.

        Sergio sits on cash while his brands slowly die. Doesn’t sound like what a business genius would do.

  • avatar

    The main problem I see with FIAT and also with Chrysler is that the CEO is not really a Car Guy but a accountant by trade, thus this man can’t have it both ways, he can’t see the Forest thru the bush!!

  • avatar
    Pastor Glenn

    If Marchionne were to buy up Mazda and get some fresh car lines to remake into both Chrysler and Fiat product, wouldn’t that be cheaper than trying to re-invent the wheel?

    Just imagine a new 2015 Chrysler 200 based on the all-new highly acclaimed Mazda 6, for starters.

  • avatar
    GTAm

    How can they blame them for not spending the money that belongs to the company?? CONSOB is a regulator not an advisor. Marchionne should just give them the finger.


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