By on April 23, 2013

Fiat could be close to raising the cash needed to buy the rest of Chrysler, two people familiar with the matter told Reuters. Apparently, the money will not come from a sale of Alfa to italophile Volkswagen, as previously surmised, but from banks. But knowing banks, they probably won’t simply move the $4 billion across the counter. These days, they often just find a willing buyer for a hefty fee …  

The talks with the banks are expected to conclude next month, and should lead to raising the money needed to buy the 41.5 percent of Chrysler which are held by VEBA, the United Auto Workers’ retirees’ healthcare trust.

Marchionne wants to merge Fiat and Chrysler to use Chrysler’s cash to offset Fiat’s losses. This sounds very familiar to the old DaimlerChrysler lore, usually told with a “merger of equals” tossed in to sound witty. Amazingly, this is yet to be brought up. Perhaps this is because this time, the UAW will be the recipient of the cash. Once they have it, the sermon of “they just drained Chrysler’s cash” can commence anew.

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53 Comments on “Fiat May Soon Be Able To Drain Chrysler’s Cash Raise The Cash For Chrysler...”


  • avatar

    a very intelligent man, certainly a leader. dumber than snot about the American car biz. oughta focus on importing olive oil rather than 500s. just sayin’.

    • 0 avatar
      SoCalMikester

      Id feel a lot better about the 500 if it was hecho en estados unidos. And if it had a proven durable Chrysler drivetrain. I like the car. Its cute, has some style, decent price but a bit down on power compared to something like the Mini.

      If Toyota made one with their 1.8 or even 1.5 liter, Id consider it.

    • 0 avatar
      wmba

      “a very intelligent man, certainly a leader. dumber than snot about the American car biz. oughta focus on importing olive oil rather than 500s. just sayin’.”

      Mr. Dollinger, you are certainly a salesman. You managed to co-opt me a decade ago to write a letter for you in your attempt to save Pontiac.

      For that service, I got to read your full 20 secret points on how to save GM. Salesmanship is not marketing and you do not understand the difference, in my opinion. Your 20 points are weak at the corporate level, and disappointed me greatly. I had thought you might have had some really new ideas, but it was all pretty much frontline sales dross, exhibiting no flair whatsoever.

      Your remarks about Marchionne are at the same level, and insulting to boot. Why not have a go at your real enemy, Dan Akerson? He is worthy of your bile. IMO.

  • avatar
    bobman

    If Sergio can complete this transaction, it would be the fulfillment of a goal that he set for the two companies when their paths were joined back in 2009. He is very aware of the workings of the banking system in Europe and has many very knowledgeable connections in that area. I’m sure that this has contributed significantly to getting to this stage so quickly.

    The merger will be good for both parties and will allow them to focus on increasing their market share. VEBA will benefit greatly because of additional value that the Chrysler / Fiat relationship has brought to their shares. Win / Win.

  • avatar
    Chocolatedeath

    I was about to comment on Buickman’s comment however I then read bobman’s comment..I only have one thing to say…are both you guys serious?? Buickman: You are being a bit harsh dont you think.
    bobman: Chrysler will be broke in two years after this happens.

    • 0 avatar
      28-Cars-Later

      Maybe that’s the point… break Chrysler and dismantle it. If I were Sergio I would do just the opposite and dismantle Fiat, Europe will get worse before it gets better.

      • 0 avatar
        juicy sushi

        I would dismantle both. At this point they’re a hydra on a similar scale to old GM, with even fewer viable brands.

        • 0 avatar
          SoCalMikester

          Whats that make VW? Sure, theyre doing well for now…

          • 0 avatar
            juicy sushi

            A disaster waiting to happen, in my view. Yes, they’re selling well now, but without a way to clearly segment and prevent overlap between brands cannibalism will follow. When it does it will be very hard to justify keeping some of those names around.

        • 0 avatar
          Wheeljack

          Nevermind the fact that Chrysler group (all brands combined) sales in the US have gone up month after month for around three years straight, but yeah they’re totally not viable.

      • 0 avatar

        Why would he have any smidgeon of reason to break up Chrysler? Outside of Brazil and some other choice spots Fiat is bleeding red all over. Chrysler is paying the bills for now as Europe recovers. Europe may never be like it once was but it won’t stay down forever. Chrysler and Fiat together are a world force with one clear weak spot (Asia). Joining the two companies together, and being that Chrysler is strong in America, Fiat has a presence in lots of important emergent markets and is down but not out in Europe, they could be one of the big companies that will survive the next 20 years.

        So far Marchionne has proven to be a genius. Both him and M. Ghosn can be credited with keeping their respective companies alive in very difficult times.

    • 0 avatar
      bobman

      @Chocolatedeath
      Critics seem to have been predicting the failure of Fiat / Chrysler since they got together. It hasn’t happened, in fact, most reports comment on Chrysler’s success under Sergio’s leadership. I don’t understand why you would say they will be broke in two years. They have a lot of projects, in various states of execution, in many markets around the world. No reason to believe that they’re after anything other that their mutual success.

      I can’t see either one surviving without the other.

  • avatar
    Zackman

    Bye, Chrysler… I knew ye well.

    Next…

  • avatar
    Astigmatism

    I haven’t paid meaningful attention to Chrysler products since the LH platform years, but isn’t the general impression that their vehicles have actually improved under Fiat’s ownership? The refreshed Charger is, by all lights, worlds better than the pre-merger car, ditto the Grand Cherokee, and even the Dart and 200, while not exactly successes, are relatively solid players at least in comparison to the Caliber and Sebring.

    It’s entirely possible that Marchinne has done this whole thing as an elaborate pump-and-dump, but at the very least, Chrysler seems to be a much healthier place under Fiat than it was under Cerberus (or DCX).

    • 0 avatar

      “The refreshed Charger is, by all lights, worlds better than the pre-merger car, ditto the Grand Cherokee, and even the Dart and 200, while not exactly successes, are relatively solid players at least in comparison to the Caliber and Sebring.”

      With or without Sergio, Chrysler would have produced those exact products, Dodge Dart aside. Much like GM, those products were already in the pipeline before and during the bleak times

      You give the man too much credit. Frankly, I find it hard to see what he’s brought to the company aside from the Dart platform. A Chrysler / Mazda alliance would have been the way to go.

      • 0 avatar
        bobman

        @AutoTribute
        Without Sergio there would be no Chrysler and that’s a fact.

        • 0 avatar

          I realize that; however, with regards to the Chrysler Group’s latest products, he had little to do with them directly — once again, Dart aside. Mazda has everything Chrysler needs (not Fiat) and vice vera. Only if Mazda’s executives were a bit bolder . . .

          • 0 avatar
            bobman

            @AutoTribute
            Sergio was directly involved with the initial refresh of the current products. The problem at the time was the very poor quality of materials and workmanship going into building those cars. It was Sergio & Co that brought in the changes to turn it around. Additionally, the advertising campaign introduced by Olivier François made a huge difference.

            This is what Steven Ratner had to say about Sergio and what he has done for Chrysler.

            “I thought Sergio was a great guy. We bet on him… but never in a million years imagined it could go as well as it has gone,” Mr. Rattner said Wednesday after a speech to a Canadian Automobile Dealers Association conference in Toronto. “He’s one of the most extraordinary managers I’ve met in my entire career.”

            Mazda? They weren’t even in the picture. Probably had no interest either.

          • 0 avatar

            bobman,

            Sergio is apparently also very charismatic. Maybe Ratner was just infatuated. Do you have anything indicating that he’s the main reason why the Jeep Grand Cherokee and 300/Charger turned out as good as they did?

        • 0 avatar
          bobman

          @AutoTribute
          I have already mentioned to you that the difference between Chrysler’s failure and success has been due to the quality of materials and workmanship, and marketing. If you do a web search using those keywords, the results will contain many references that will show you that the dividing line between success and failure at Chrysler coincided with Sergio’s arrival. He deserves the credit that industry insiders are giving him.

          • 0 avatar

            “I have already mentioned to you that the difference between Chrysler’s failure and success has been due to the quality of materials and workmanship, and marketing.”

            I understood. The point I was trying to make is that if Chrysler’s top brass needed Sergio to point out that difference, then that company deserved to go under. Frankly, I don`t think they were that stupid.

            If GM was able to make that distinction, then pre-Sergio Chrysler was also able to do so. A new lease on life generally calls for drastic changes in the ways things are done, especially when the whole of America has their eyes on you.

          • 0 avatar
            bobman

            @AutoTribute
            Well they did go under; therefore, they were that stupid. That’s a historical fact.

            From what I’ve read, (even here at TTAC) the problem wasn’t necessarily with Chrysler management; it was more related to their owners. Apparently, neither Daimler nor the ‘scavs’ (Cerbius) that Daimler ‘sold’ the company to, had any use for what the managers at Chrysler had to say. Sergio did exactly what he did with Fiat when he took over. He sought out the best managers and empowered them to turn things around. He gave them a global mandate. They have been doing an excellent job, Sergio was right.

            Take some time to read Ratner’s writing on this. He architected the revival of the auto industry in NA. He wanted Sergio to take control of Chrysler. Good decision.

            Can you imagine the Jeep Grand Cherokee being released under Daimler or Cerbius control?

      • 0 avatar

        Why? Mazda weak in Europe; weak in the ROW; small in the US and Japan. Fiat has a much larger footprint in Europe and much of the developing world.

        • 0 avatar

          Granted Fiat has a larger global reach, and I acknowledge that this is very important to any automaker’s long-term success, I was thinking more along the lines of products. What the Chrysler Group needs is a very good subcompact, compact and mid-size platform for both sedans and crossovers. Mazda has those in spades, more so than Fiat.

          Plus, Mazda — more or less in the same financial position as Fiat, if not better off — is very small compared to the Italian, thus requiring less (if any) of Chrysler’s finances to shore up its financial position. Additionally, with the value of the yen declining, the company is set to be in the black very soon.

          Unlike with Fiat, virtually every single platform used by Mazda is compatible with Chrysler’s products. The Zoom Zoom essence of those platforms also jives well with its value proposition, especially Dodge’s.

          • 0 avatar

            Oh, now I understand you. Mazda would be a fine acquisition for Fiat-Chrysler. Would help Fiat get a foothold in Asia. Suzuki could also fit the bill nicely, perhaps more so as Suzuki could over more economical cars and PUs and off roaders. Not to mention that huge stake in India. Therein lies the problem with Mazda. They make very god cars but that just don’t sell. Beats me as to why. Maybe fuel economy, marketing and lack of a comprehensive design language. Anyone who gets Mazda would get fine products that need work. Suzuki, for its global reach, is probably a more prized object of desire though.

  • avatar
    SixDucks

    The question is will Chrysler be able to keep Fiat afloat until the European situation improves?

  • avatar
    danio3834

    The reason few are comparing the Fiat merger to the Daimler debacle is that they are very different situations.

    With Daimler, it was literally a takeover with Chrysler becoming a subsidiary. Both companies remained extremely segregated with very clear divides. Daimler simply installed slave-driver management to carry out their master’s wishes remotely in Detroit.

    Daimler forced Chrysler’s vehicles downmarket and pinched every possible penny out of the business, and it showed. Chrysler engineers of the time were handcuffed by cost constraints to the point where the holes for the door lock pins in the Caliber weren’t even finished, just drilled holes with burrs and all.

    With Fiat, the two companies are already completely intertwined. They merged immediately to the point where Fiats are sold at Chrysler dealerships and Chryslers are sold under Fiat brands in Europe with future vehicles being significantly cross-developpped. Quality has significantly improved, and both companies are taking the best practices from the other, then both using the same systems.

    Put it this way, you never saw a camo’d C Class at the Chrysler Tech Center, while now there are plenty of 4Cs running around Auburn Hills.

    Marchionne has a lot invested in Chrysler, it’s unlikely that he would cut and run.

  • avatar
    Lampredi

    “But knowing banks, they probably won’t simply move the $4 billion across the counter. These days, they often just find a willing buyer for a hefty fee …”

    What do you mean? A willing buyer of what?

    • 0 avatar
      Lorenzo

      The loans. They’ll securitize them, like they bundled mortgages as mortgage-backed securities (MBS) and sold them on the securities market to investors. If something goes wrong and money is to be lost, it’s the investors’ money, not the banks’. That’s why banks rarely hold onto loans today, there’s too much chance of having to write them off, and the banks’ owners having to contribute cash equity to stay solvent.

      • 0 avatar
        Lampredi

        OK, but does that really matter for the lender (Fiat) in this case? If so, in what way?

        • 0 avatar
          Lampredi

          Sorry – that should be “borrower”, not “lender”…

        • 0 avatar
          Lorenzo

          Debt is debt. The borrower still has to pay it off, and the original bank consortium will be collecting the money for the investors. The downside is the debt instruments are traded like stocks and one bit of bad news can lower prices and make the borrower look bad.

          A big drop in price would make the borrower look like a big risk, or even cause solvency rumors to float, and that’s never good for PR. Chrysler/Fiat could be in good shape financially and looking to launch a new model, and solvency rumors can lead to speculation the new model has to be a hit or else.

          A big company always has large accounts payable, and suppliers can get antsy, even to the point of demanding early payment or COD. That kind of thing can cause accounting disruption to the biggest companies.

  • avatar
    olddavid

    My family has been associated with the various iterations of Chrysler since 1966. I cannot help but wish them success. This, for better or worse, will be the model for all worldwide OEM’s that are suffering today because of the market slump in Europe and to a lesser extent, Asia. I will also admit that every time I see a 500, I wonder why I don’t see more of them? Why does VW sell 10 of their small cars for each FIAT? Why isn’t the Dart selling at a 250,000 annual clip? Why the disconnect between perception and public acceptance? It seems to me VW gets a pass while delivering an inferior product. Like the girl you drunkenly take home at 3:30 a.m., only to consider gnawing your arm off rather than waking her as you make your getaway, the VW seems to be a great idea at the time, only to dim as reality sets in. Who today would bet their security on 10 year old VW Passat to get away from the incoming tide at Siletz flats? Or would you rather bet on an equally aged Ford Focus or the lamented Sebring? I am probably too personally invested in this question to really be impartial. I am, however, curious what our cohort believes.

    • 0 avatar
      Summicron

      “…every time I see a 500, I wonder why I don’t see more of them?”

      Vulnerability? Like tossing Hello Kitty onto a 6-lane highway during rush hour?

  • avatar
    mini22

    At this point Fiat needs Chrysler to help it survive in Europe. Sales in Brasil are strong.Sales in the US are certainly on the upswing. However together they are not enough to offset the losses in Europe. The plan appears to be dramaically increasing its exports from Italy and Poland while reducing product sold in Italy and th rest of Europe. Alfa when it becomes optimized would probably sell 70 to 80% of its product abroad. To get Alfa going and produce more product for Fiat they need cash.Chrysler is generating cash but Fiat cannot touch it until it gets control of Chrysler.So one could assume Marchionne has 2 choices. The preferred choice is getting a loan from banks to to buy the shares owned by VEBA. The other option is to sell Alfa and Magnetti Marelli to VAG. One wonders if this option would generate the cash necessary to fund Fiat enough to be able to buy those VEBA shares.It is also wrong to assume that by owning 100% of Chrysler that Fiat would be dumb enough to drain Chrysler of cash. Marchionne is a money man and a shrewd one at that. If you recall he forced GM back in 2004 to pay Fiat 2 billion to getout of having to own it. This enabled Fiat to be saved as a company. Marchionne saw a golden opportunity in Chrysler when the US came calling.True some of the improvements in Chrysler cars were already on the drawing boards. However Fiat had to implement them in record time(18 months). This ultimately helped generate enough sales for greatly improved profitability month to month by Chrysler.From 2014 forward, however there is to be a lot more integration of platforms with Chrysler and Fiat, including RWD platforms. As you all should know the more a company utilizes shared platforms the cheaper it is to produce the products.This is th reason why Fiat needs to own more of Chrysler. Integration, intergration ,integration.

  • avatar
    genuineleather

    The biggest difference between DaimlerChrysler and Fiatsler is that the role of succubus has reversed across the pond.

    Mercedes has been consistently profitable for decades; the same cannot be said for Chrysler and its perpetual boom/bust cycle. It was MB money that covered up huge losses at ChryCo for years, despite conspiracy theorists’ nonsensical claim that Daimler “sucked Chrysler dry”.

    The Germans got zip out of Chrysler, and their shareholders took a $40 billion bath for the privilege. The only people who made out were Chrysler’s shareholders and C-suite executives.

    Was Daimler’s management of Chrysler poor? Absolutely. They have proven time and time again (Maybach, Mitsubishi, Fokker, smart) that they cannot successfully run a company not called Mercedes-Benz.

    Fiat, on the other hand, will finally demonstrate what “sucked dry” really means.

    • 0 avatar
      Wheeljack

      Keep on believing that. There are many ways a parent company can suck a subsidiary dry and Daimler perfected them all.

      The only reason why there were losses at Chrysler is because Daimler slashed budgets and set mandatory goals for pulling huge cost out of the products, resulting in the cheap interiors and slipshod quality. Once you are selling products like that, it’s inevitable to circle the drain and become a loss maker.

      Meanwhile, as we see under Fiat stewardship, put money into the product and sales will take off and money will flow in.

      If nothing else, the Fiat sucess story with Chrysler proves how completely inept Diamler was and definitely calls into question their claims that Chrysler “lost them money”.

      • 0 avatar
        genuineleather

        The fact that Chrysler was a terrible investment is fact, not opinion, unless you consider a $40 billion purchase that was “flipped” for $7 billion a decade later a profitable venture.

        Fiat putting money into Chrysler products? So far we’ve recieved the Dart; gee, thanks. The Grand Cherokee, Durango, Charger, Challenger, and 300 still ride on Mercedes platforms.

        • 0 avatar
          Wheeljack

          Platform or not, the money I am referring to is all the money spent to re-do the dreary interiors that Daimler saddled the LX cars with. Furthermore, do you think the exterior refreshes cost nothing? All the outside body panels were totally new – stamping dies are expensive.

          Also, do some research – the LX platform is not just a “previous generation E-class” as so many internet experts would have you believe.

        • 0 avatar
          danio3834

          Yeah, Chrysler was such a terrible investment that they had investor(s) clamoring to leverage a takeover at their peak. In fact, one of the major reasons Chrysler “partnered” with Daimler was to help protect against leveraged buyouts from other investors.

          Face it, Daimler management sh1t the bed on their “merger” by plundering Chrysler, and that’s why they lost money. Of course a crashing economy and vehicle sales after the merger didn’t make it easy.

    • 0 avatar
      Onus

      If you do some research you would know that Chrysler was swimming in Cash when Daimler Benz acquired them. This was Chrysler post bankruptcy from 2 decades earlier. They had great products and were doing well during the suv boom of the late 90′s early 2000s.

  • avatar
    nickoo

    I’m a huge fan of the “new” Chrysler and when looking at where they’ve come from, it is nothing short of amazing. The biggest challenges they have are not having enough money to get things done fast enough and hence having to keep some legacy platforms, great things are scheduled to keep coming down the pipe. A few things Chrysler must do to keep succeeding:

    Keep jeep “jeep”, bring out a 3 row flagship jeep SUV that’s one step up from the Cherokee.

    Redefine the Chrysler brand with a cohesive quality level spanning across all their vehicle range, a total near luxury competitor with: 100, 200, 300, town and country and a new full sized cross-over

    Continue to expand dodges image as the sporty fun and affordable brand.

    Sell Alpha to VAG while they still want it, there’s no need for Fiat, Lancia, Alpha, Maserati, and Ferrari under one house, consolidate and put that savings towards better products and fuller product lines.

    Kill Lancia.

    • 0 avatar
      danio3834

      Sell them Alpha, but keep Alfa.

    • 0 avatar
      Lampredi

      “Sell Alpha to VAG while they still want it, there’s no need for Fiat, Lancia, Alpha, Maserati, and Ferrari under one house”

      If the argument is that Alfa is redundant (which I cannot see why would be the case), it would be better to close it down than to sell it. But really, it is Lancia that is the redundant Fiat group brand these days, sad as it is.

      • 0 avatar
        european

        i will explain why Fiat doesn’t need Alfa anymore:

        by pushing Maserati down-market and expanding the product line with Ghibli (and probably the SUVlet), Fiat will make a strong Audi-contender, that will bring in greater margins/profits which Alfa failed to deliver. Fiat/Dodge will hold the low end while Ferrari will be the top & exotic cars. Jeep makes Jeeps and question mark on Chrysler/Lancia. They will stay probably for some years and then be phased out.

        and VW needs Alfa just to pump some flair & soul into the boring previous-generation Audis, i mean, SEATs.

        end.

        • 0 avatar
          Lampredi

          Oh, come on, Maserati as an *Audi* contender?! With that as a starting point, no wonder your suggestions make no sense. Maserati shouldn’t even be considered a contender of *proper* premium brands like BMW and Mercedes-Benz (even though it’s admittedly *approaching* the territory of those brands with the Ghibli.)

          So *Alfa Romeo* should be the Audi contender (well, ideally Lancia should have been that, whereas Alfa Romeo should have been the BMW contender, but with Lancia practically dead that ain’t gonna happen), and Maserati positioned *above* Alfa Romeo.

          • 0 avatar
            nickoo

            Maseratti *is* being pushed downmarket, as they should be. Fiat can take up the slack from alfa by taking on the lesser alfas while Maseratti takes on the higher end ones. There is no good business case in keeping 3 ultra low volume niche brands in today’s automotive world and Marchionne knows it, that’s why he has a goal to bringing massive sales numbers increases to Maseratti. Maseratti doesn’t need to cut quality or image, they just need to be brought down in price to better compete against the other high end euro cars. I believe that there is a strong business case for this strategy and expect that Maseratti will make a strong worldwide resurgence with this plan, there are a lot of BMW/mercedes owners who are looking for something different and Maseratti can fill that role.

  • avatar
    mini22

    I still do not see why VAG needs Alfa. They have so many model market niches that its almost a joke. In my opinion if VAG were to buy Alfa they would scuttle Seat and replace it with Alfa. So anotherwords FWD products with Ital Design bodywork. The engines will be from the Golf. While there is nothing wrong with VAG’s engineering(the new Golf GTI Mark V11 is a testement to that), my concern is that it will not really be an Italian car anymore. O-The obvious argument is that lamborghini has been able to retain it’s Italian identity with VAG engineering. However let me point out that Lamborghini is an very high end product with lots of expensive engineering and with huge profit margins buiilt in. Alfa would need to be a high volume lower cost sector. Therefore the cost to distinsh it as an Italian car would not necessarily be spent. Look out BMW and Mini. When the new Mini came out in 2002 it was a design in which refected an advance state of development by British Leyland by the time BMW took over the project.
    It clearly was a British car made reliabile by BMW quality control.The next generation clearly reflected BMW’s influence. Unlike the first new genration, the second generation was made more cheaply and contained more BMW parts like turn signal indicator technology, a selectable sport and comfort mode, a shared engine with BMW, Peugeot, and Renault that was turboed instead of supercharged. The 3rd generation Mini is now going to share platforms with the BMW 1 series including engine. Again I have no issue with BMW technology. Theyare a great company. However Mini is no longer a “British Car”. It will have all BMW parts including engine. It will have interior trappings more in line with BMW then what was a Mini trait.I’m not saying that I’m blaming BMW. Costs are costs.I just feel that VAG buying Alfa will ultimately destroy the marquee even if it is a better built car.Therefore it is my hope that Alfa can remain under Fiat’s ownership.The latest news appars to be that Fiat can get the money from banks to own all of Chrysler. Fiat will not drain Chrysler dry. Fiat has invested a lot of money into Chrysler to improve interiors on all models, revise and improve the Chrysler/Mitsubishi designed 4 cylinder engine and to completely share technology between the 2 companies.Fiat has brought Chrysler up by nurishing it so it can be competative in the American market place. You all have to concede that it has accomplished this. Now Fiat needs to invest in product to keep Fiat going. It obviously cannot depend on the european market at this point. However it can greatly expand in North and South America with more products for Fiat and establishing Alfa again with higher end products.Factories in Italy and Poland will be primarily set up for export with a small percentage going to European countries.It will probably also try to continue to improve sales in Great Britain as well.(That market has not cntracted the way the rest of Europe has).I hope this is the course Fiat takes.


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