By on January 21, 2009

Chicken and egg this. If Chrysler doesn’t score an additional $3b worth of bailout bucks, Fiat can/will walk away from their agreement to “buy” 35 percent of the ailing American automaker. The Wall Street Journal quotes “people familiar with the pact” to substantiate the proviso. Equally anonymous sources told the Journal (we hope) that if the loans go through, Fiat will take three seats on Chrysler’s Board of Directors. And then, “If Fiat meets goals for improving Chrysler’s operations within 12 months of the agreement, Fiat would have the option of buying an additional 20% of Chrysler for about $25 million, said people familiar with the matter. Details of the goals weren’t clear.” Twenty-five million? They’re joking right? Or is that the amount Cerberus would pay Fiat for 20 percent of Chrysler?

On this and the general outlines of the deal, the official spokesfolk are staying stum. “A Fiat spokesman declined to comment on the matter. Chrysler spokeswoman Shawn Morgan wouldn’t comment on Fiat’s demand, but said Chrysler believes the $3 billion in loans are necessary for its viability.”

So what’s it all about Alfie? “‘Chrysler’s got to get revenue going now,’ said one supplier-company executive who works closely with the company. The Fiat partnership ‘gives them a better story’ to present while asking for additional government help, but ‘doesn’t change what’s happening on the ground.'” Roger that.

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39 Comments on “Bailout Watch 352: Chrysler – Fiat Deal Depends on ChryCo Bailout Bucks...”

  • avatar

    Sweet ! So Fiat has figured a way into the US Treasury.

  • avatar

    The Godfather Part IV

  • avatar

    I *love* the Fiat 500.

    I suppose the question is, however, if I love it enough to buy one with a Chrysler badge on it.

    …but I’m getting ahead of myself here. I mean, what’s the expected impact of this? Platform sharing? Fiats in Chrysler showrooms (yeah right)? Chryslers in Fiat showrooms? Fiat badged Chryslers? Chrysler badged Fiats?

  • avatar

    If my last name were Fiat (Tex Fiat?) I’d do the same thing. Sad part is that our government will let them get away with it. Given the roughly 10% market share that Chrysler claims, their bankruptcy and the ripple effect on the supplier base would hardly be the calamity that they want us to believe it would be. Let ’em fail!

  • avatar

    While I LOVE the idea of having access to Alfa products, I’m not sure I’d buy it if it’s built by disgruntled UAW workers. (or even gruntled UAW workers).

    Also, if I’m subsidizing the importation of Italian cars, my expectation is that the price will reflect that they’ve already picked my pocket.

  • avatar

    So, let’s make sure we have this right:

    1. US Treasury invests MINIMUM $7 Billion in Chrysler.

    2. Fiat TAKES 35% equity stake in company in exchange for access to tech/products with unproven marketability in US.

    3. I assume, it also goes without saying that Fiat will somehow PROFIT from the sale of their re-branded US products on a unit-by-unit basis too (there will be a revenue stream for Fiat in addition to the equity stake). This could be in the form of Fiat as a supplier of components to build the products its granting Chrysler access to.

    4. Fiat can purchase +20% more for only $25 MILLION, which it will only do if things are looking positive (ie: it can STEAL it). Are you kidding? Million’s are so 1990’s… we talk Billions & Trillions in 2009.

    Does anybody else find it absurd that US taxpayers are subsidizing the transfer of a controlling share of equity to a foreign entity?

    Keep in mind a current ~19.9% Daimler equity stake in the company (I assume this gets squashed way down in the deal), but still. BEST CASE US interests (A private equity firm, gag) ends-up owning 35-40% of this company in the end… but we financed the whole fucking thing. Amazing.

    Taxpayers are hosed unless this all works to perfection and the company can repay the “loan” from cash flow.

    Good Luck with that!

  • avatar

    Hopefully there are enough Alfa fans in Congress to see that Chrysler gets the $3BN it needs!

  • avatar

    At one time Moamar Quadafi (Libyan leader) was a significant shareholder in Fiat…Can anyone confirm if that is still the case?

  • avatar

    Well from my view point, in which Fiat is the leading car maker and thus has a huge investment, this just gets looking better and better. I mean, I don’t want this deal to damage Fiat in any way.

    I’ve talked to some people inside Fiat Brazil today and details are very iffy. Your story Mr. Farago seems about right. They’re approaching this very, very carefully and will not go in without being sure they’ll get some working money on Chrysler’s part in order to work out their magic.

    BTW, I whispered to them my armchair-quarterback product plan. If it goes any way along the following lines, I claim credit!!

    Import rather quickly via Mexico-Brazil trade agreement some recently approved Eurocrash standard cars (Punto, Linea, Bravo, in hatch, sedan, and station wagon forms – some do not exist – and maybe even their microvan, the Idea), slap a ressurected Plymouth brand on them and voilà, credible Euro product sold through revived Plymouth Dodge dealers, without having to worry to much (and spending money) about introducing a new brand (fiat) into America.

    Slash and burn through some dealers, reorganize them, and keep the brands totally separated:

    PLymouth-Dodge: Plymouth gets economical, yet fun and reliable re-branded Fiat cars, imported to start with. Dodge keeps making Rams, Dakotas, Durangos and crossovers (no minivans, no cars and specially no jeeps).

    Jeep-Chrysler-Alfa Romeo: top-of-the-line dealers, with Jeep only doing 4×4 trucks and SUVs. Chrysler doing traditional American style monster sedans (the Challenger could fit here if it has a more upscale interior) and station wagons, and the best minivans, with big V6s and V8s, and very upscale almost luxury interior. And have an Italian corner at the dealership offering the best in Alfa Romeos (sedans, hot hatches, station wagons, eventually gasp! even SUV-y crossovers with a luxurious and sporty ride).

    It’s crazy enough that it just might work!

  • avatar


    According to

    ” By the mid-1980s, Qaddafi had become a liability for his European investment partners. Chief among them was Fiat SpA in Italy. Qaddafi had spent $415 million in 1976 for almost 10 percent of the struggling carmaker, after Chairman Giovanni Agnelli visited Libya to propose the investment, Huwej says.

    In 1986, Reagan blocked Fiat, which by then had two Libyans on its board, representing a stake that had grown to 14 percent, from bidding on U.S. government contracts. The same year, Libya agreed to leave, for a price. Fiat’s parent and investors had paid $3.1 billion for the stake.”

  • avatar

    If the US government is going to be in the business of paying 100% of the cost of retooling old auto plants, the government should deliberate carefully on what is the best product to be producing (and subsidizing) at those plants. When you look at it that way, producing European Fiats probably wouldn’t be the highest and best use of the funds.

    Three billion is just the start. Rehabbing each plant would cost at least a billion, probably two, per plant, plus you can expect Chrysler to generate negative cash flow to the tune of about half a billion per month over the next two years. Let’s call it $12 billion for operating cash flow, an additional $10 billion for capital improvements, and you’re looking at a $22 billion additional investment.

    It would be far better to use the money and the facilities to build solar cells, wind turbines, and hybrid buses for schools and public transportation. That way we are producing goods that contribute to our energy security without adding to overcapacity in the auto industry. We can get by without the 25,000/yr. Puntos and 500s that would actually sell in the USA. The larger Fiats would run headlong into entrenched (and generally excellent) competition and may not even sell that well.

  • avatar

    Wait, if 20% of Chrysler only costs $25M, by that rationale shouldn’t we taxpayers already OWN the damn company THIRTY TIMES OVER as of December?

    Not only that, but in order for Chrysler to re-engineer FIAT platforms to meet US regs, they’ll have to invest 5 times that $25M. Chrysler can’t even keep their own stable alive – on what basis do they think they can clear THIS hurdle?

    This is messed up beyond belief, and only focused on getting Cerberus some semblance of return on their poorly guided investment. Cerberus “not in it for the money” is the biggest load of BS that Congress has ever swallowed – hook, line, and sinker.

    In my humble opinion, this equates to a viability of exactly ZERO. The treasury needs to pull the $4B back from Chrysler and use it to backstop their suppliers as they force ChryCo into C11 C7.

  • avatar

    How has there not been a Marlon Brando pic with “I’m going to make you an offer you can’t refuse” caption yet? C’mon, RF, that one should have been a gimme!

  • avatar
    Ken Strumpf

    One of the arguments for preferring domestic brands over transplants was that even though the domestics manufacture abroad and the transplants manufacture here the domestics’ profits come to the US. So why are American tax dollars being used to help foreigners buy Chrysler, thereby allowing profits (if any) to go to Italy instead of here? This just explodes the entire “profits come here” argument as far as I’m concerned.

  • avatar


    I agree totally with you. There are MAJOR financial, emotional, marketing, perception hurdles to be faced. But…

    If it works, you get another viable brand in the US, greater competition, lower prices etc. Plus you keep jobs, technical development. Look at Alabama, the furrin’ makers invest there about 5.6 billion dollars a year just in salaries (Newsweek, I think). Imagine that state without that chunk of change?

    And Chrysler buys time to get back at doing what they do best. Big mofo cars and trucks.

    The beauty of this deal is that between Fiat and Chrysler thre is vrtually no overlap. Less overlap even then between Renault and Nissan.

    It’s crazy, yes. But where there’s a will there’s a way. Let’s give this some time.

  • avatar

    And let me also add this. It gives Chrysler time to come up with something to face the “entreched competition” as you have said Conslaw. Or esle, in future, this “entrencehed competition” will win and we’ll all be driving around in Camcord or Civrollas. And I don’t like this future. I want more brands not less. More competition. Different cars. Not the same old same old. To be able to pick and choose between the American way, the Euro way, the Jap way, heck even the Korean and one day who knows? China way.

    That’s why I’d like to see this succeed.

  • avatar

    I have been saying locally the same thing as FromBrazil. His plan might actually work and I am sure it is better than anything GM has given the gov’t for their turnaround plan.

    $25m seems pretty low ball since Chryco is GIVING AWAY the first 35%. I suppose it is worth it if it turns the company around though(and we the taxpayers are repaid).

  • avatar

    So if FIAT’s plan is to provide platforms to Chrysler which will sell at a profit for both companies, why should they care if Chrysler gets more taxpayer money? Also, if Chrysler is cutting back significantly on R&D costs through this deal, shouldn’t they need less money?

    This may well be a smoke and mirrors campaign to get more money but if so, it’s a pretty shitty one. The only logical reason for FIAT to clamor for money on Chrysler’s behalf is that they want some. Meanwhile the previous $4B has been spent in a month, in which the entire company was shut down, with no explanation of where it went. I know our government is full of people who have as much understanding of the business world as they do about governing but this would have to raise some flags even for them.

  • avatar
    John Horner

    Remember when an investor group got the keys to MG Rover for £10 in 2000? Sometimes the most costly investment starts out a bargain.

  • avatar

    To FromBrazil”

    If Fiat thought (or Fiat and the fiancial community thought) that Fiat cars could be sold (or built and sold) profitably in the US, they’d already be here. Fiat is an opportunist looking for some of Chrysler’s government handout money.

    I don’t doubt that that Fiat has some small car basic technology that might be useful in the long term, and maybe one or two models might even gain some market traction in the US. Chrysler doesn’t have time to engineer new cars with Fiat technology, and even if a couple of existing Fiat cars are successful, that’s not enough to pull Chrysler out of its hole.

    RF regularly comments on how GM announces its bad news on Fridays. Chrysler went GM one better by announcing its Fiat deal the morning of the Obama inauguration. What followed was a round of “press release journalism”. There was no real scrutiny of the deal.

    The truth is, this deal doesn’t even work from Fiat’s perspective. Any money and management attention that Fiat diverts to Chrysler is money that Fiat really doesn’t have. That’s why Fiat stock has tanked since the deal was announced.

  • avatar

    Thanks Kurt!

    BTW, from what I’ve heard from my sources in Fiat Brazil, the 25 million dollar option sounds true. You know why? It’s the same kind of “put option” Fiat got from GM last time, that said in n-years, GM would buy Fiat or pay the penalty for not doing so. That’s how Fiat “ripped off” “poor, innocent” GM (can’t this people write or even read a contract?) the 2 billion dollars from GM. Seems like Fiat learned from GM’s mistake! Wow, a car company making smart decisions.

    You know the saying “Don’t touch that with a ten-foot pole”? Well, in a nutshell, Fiat is touching and coming on to this deal, but carefuuly wielding the proverbial ten-foot pole. They’ll only do it if it’s very, very advantageous to them or as risk-free as possible.

  • avatar

    Fiat sucks. If they want to take Chrysler off our hands with no additional bailout money fine.

    But they have nothing to offer the US market. The 500 is a tarted up Ka (we’ll see how happy Ford will be to see it come here), and the rest of their cars are just lower quality alternatives to the Japanese.

    The only thing that is certain is that bailout money to Chrysler needs to end immediately. And their current “loans” need to be called in March.

    If all it wants is distribution then Fiat can join the other bidders in Chrysler’s liquidation.

  • avatar

    Fiat loves finding a way to get free money from the US, just like my Italian buddy always likes scoring free Taco Bell from me. What do I look like, General Motors??

    If you can find a better car – I’ll sell that to ya too! /Lido

    But seriously, you had to see this coming. The US is so enthusiastic to see “Chrysler” survive in any form that it will cost us big money.

  • avatar


    I have to disagree with you. FIAT has long discussed coming back to America/North America. Just 2007, they considered building an Alfa plant. I didn’t pay much attention to it so I don’t know the results but the US market is HIGH on FIAT’s “list of things to do”.

    Getting a couple of models selling would keep Chryco alive while the plants are turned around and new models bought/developed.

    I tend to disagree with RF that Chryco is beyond help, but I agree with him that no one currently in place will do what is necessary.

    In addition (though probably not an important issue), with a US market for FIAT’s, maybe Ferrari, the US being by far the largest annual purchaser of the marque, wouldn’t have to pay the CAFE non-complaince penalty.

  • avatar
    Rod Panhard

    There’s no way in hell this will work. Here’s three simple reasons:
    1. Chrysler will run out of money before anything can happen. They barely got funding last time as an American-owned company. They won’t get funding as a foreign owned-company.

    2. Chrysler-badged Fiats still have to compete with Honda-Badged Hondas and Toyota-Badged Toyotas and the Alfas would have to compete with BMW-badged BMWs, even though Saab & Volvo customers might be available. The only time Chrysler-badged Fiats will sell is when Toyotas and Hondas aren’t available.

    3. So let’s suppose I’m wrong about Reasons #1 and #2 … even if Alfas and Fiats make it to revived Chrysler/Dodge/Plymouth showrooms, the sales force won’t know how to sell them. The dynamics of the sales process in American car dealers hasn’t changed since the early 1990s when you could buy an Alfa-Romeo at your local Chrysler dealer, or the 60s and 70s when you could buy an Opel at your Buick dealer or a Capri or Pantera at your Lincoln-Mercury dealer.

    It’s doomed. Get over it. We’re better off just giving the money directly to the communities where the factories are located where they used to hire the Chrysler workers. Make them use it for something useful, like a making giant pinatas that resemble the soon to be deposed Chrysler managers.

  • avatar


    Again, I agree with you. It’s a very tough deal to pull, but if it does…

    2 or 3 products is of course not enough. But it’s enough to start. And, if you’ve read what I said before, it will gain time for Chrysler to get back on its feet. If you get one or two small Fiat made, possibly Plymouth badged, cars selling, plus the minivans, plus a part of the truck market, plus some forrm of competitive family car (they had this car just some years ago) its enopugh to get what? 10 percent of the American market? I bet that sounds good to Fiat and Chrysler and all other American companies had better get used to it. I don’t think anyone is going to have more than 20% of the American market anytime soon. With these smaller market slices it’s enough to have a participation across market segments and 4 or 5 hits (not necessarily home runs). That’s how Europe’s market looks like. Nobody has more than 10% (off the top of my head VW 10%, Renault 8%, Ford 7%, Fiat 6%, PSA 6%, Toyota 5% very rogh figures mid you, and Europe-wide. Local markets vary greatly).

    As to not selling there, getting back to America is Fiat most calented long term dream. Maybe it will turn out to be premature. Fiat wants to go on making cars, and to compete globally they have to get into America. Even if this doesn’t pan out, you can bet Fiat will be looking for ways in, even if they die trying (because they’ll probably die anyway if they don’t). As to the product, don’t worry! They have improved. On all fronts. The last 15 years they have been making true, world-class cars. If you don’t believe me, have some patience. You’ll have an opportunity to soon see for yourself. Either through Chrysler or more in future, alone.

    The Fiat 500 is not a tarted-up Ford Ka. The Ka is in fact a tarted-up 500. Or (tongue-in-cheek) a tarted-down one!


  • avatar
    Geo. Levecque

    Fiat got a huge settlement of money a few years back from General Motors, this money improved there product line as it is today, thats why they can buy 35% of Chrysler-Cerberus and so it goes eh! What goes around comes back to haunt all.

  • avatar

    FromBrazil: I agree regarding the Ka / 500. The Ka is about as entry level as it gets. The 500 is more of a Mini fighter.

    Actually, that brings me to my point: The way I see Fiat gaining a foothold in the US (which *has* been a rumored goal of theirs before this whole bailout thing) would be to make it a small boutique dealer network, nested inside existing dealers… like Minis in BMW dealerships, and Scions in Toyota dealerships.

    If not Chrysler, where’s Fiat going to park itself? Surely, the Japanese manufacturers aren’t going to let them in, and BMW and Benz already have tennants (Mini and Smart, respectively). That pretty much leaves the Koreans and the Americans.

  • avatar

    The only point I see in favor of this deal is putting some people on the Chrysler board who are actually interested in and know how to run a car company. I understand that current management has done wonders with Fiat over the last few years, and Chrysler can sure use someone with that mindset.

  • avatar


    You’re right, too. That’s the plan they had been working on. A small boutique presence. But Fiat is a mass producer. To go it the way you say would be slower. This Chrysler thing might, and I stress might be an opportunity to make a faster entry. Even if they don’t go in with the whole Plymouth idea. Either way I think they’ll treat the 500 as a special product and it will be probablby sold, anyway this goes, at Alfa Romeo shops and not Fiat or Chrysler shops.

  • avatar

    Remember that Fiat already has a large presence in the US in the form of Case-New Holland. This gives them experience with vehicle manufacturing here. They are not as “foreign” as some think. It has been rumored that they may convert an existing factory into passanger car manufacturing. Thus, they are looking to Chrysler for the dealer/distribution network.

    From the CNH Global web site Fiat has many plants in the US:

    Manufacturing locations in the United States include Belleville, PA – hay and forage equipment; Benson, MN – sprayers, floaters, cotton pickers; Burlington, IA – tractor loader backhoes, forklifts; Calhoun, GA – crawler excavators, dozers; Dublin, GA – compact tractors; Fargo, ND – tractors, wheel loaders; Goodfield, IL – soil management (tillage) equipment; Grand Island, NE – combines; New Holland, PA – hay and forage equipment; Racine, WI – tractors, components; Rocky Mount, NC – engines; Wichita, KS – skid steer loaders

  • avatar

    EVERYONE IS MISSING THE MAIN STAPLE OF THE CHRYSLER PACKAGE HERE FOLKS. I’m a Dodge Chrylser and Jeep dealer. The consensus on this blog is 1. Jeep is worth something 2. chrylser goes away no value 3. Dodge truck will go somewhere else.

    First of all ALL OF THE VALUE OF CHRYSLER LIES IN DODGE RAM PICKUP. All the marketshare, all the profitability, all the customer loyalty=DODGE TRUCK. Drive down the freeway and look at the number of Ram’s vs chrysler’s other brands DUH. In our SW Zone ram sales=80% of the entire companies RDR punches. Jeep is just hype, Jeeps don’t sell in volumes, RAMS DO.

    Fiat, Nissan, Hyndai, whoever wants to get into the truck biz, buys chrysler. Toyta has failed, nissan failed, honda never really tried to compete with FMC and GM on TRUCKS. The only, and I mean only, item that makes Chrysler a distant memebr of the big three is the RAM pickemuptruck. And the Cummins diesel contract ceritainly doesnt hurt a damn thing.

    So if you are a CAR company and want to get into the profitable TRUCK business, you buy CHRYSLER.

    that’s their MO, it aint JEEP, it aint the caravan, it’s the TRUCK and that’s why Chrysler will sell, it will not die, bc on it’s death bed there is WAY too much value in the dodge RAM line and brand to throw in the trash can. Think about what the Japs have spent trying to get into the truck biz, then there’s chrysler sitting there with a branded, accepted, award winning and mass appeal pickup.

    C’mon peeps…wake up

  • avatar

    Fiat does build trucks through its Iveco subsidiary, but they are not light trucks like the Dodge Ram. They would have no need for Cummins because they build diesel engines that are direct competitors to Cummins. I suppose we could see Dodge Rams with Iveco diesels in them.

  • avatar

    Most of this doesn’t make any sense. Chrysler is by far the most damaged American brand. Fiat still, 20 years on, has NEGATIVE brand equity in the US. Why would you chain an anchor to a cinder block and expect the combination to float?

    This is a money grab pure and simple. Chrysler has no plan whatsoever to recover. Nothing to show the Feds on Feb 17th. All they could come up with is a half-baked merger that is so absurd on the face of it that I can’t wait for Bob Corker to get hold of it!

    Fiat product cannot be be in the US for 18-24 months at best – more if it has to be re-styled. Chrysler might re-start some truck plants if they can ship them to global Fiat dealers, but that’s a stretch.

    All that being said, Congress will huff and puff and… hand over the cash.

  • avatar

    Congress will hand over the cash.

    But there is another problem. Who will buy vehicles, any vehicles? Everyone I know is either being laid off or is in deep fear of being laid off very soon.

    No matter what they do — there’s no market, for now.

  • avatar

    LLC – You didn’t get the memo on Obama giving us all jobs and showering us with stimulus cash?

  • avatar
    Domestic Hearse

    “Does anybody else find it absurd that US taxpayers are subsidizing the transfer of a controlling share of equity to a foreign entity?”

    mdh, FTW.

    “Wait, if 20% of Chrysler only costs $25M, by that rationale shouldn’t we taxpayers already OWN the damn company THIRTY TIMES OVER as of December?”

    jgh, makes it a TIE!

    The B&B see through this charade. Cerberus is using Fiat to sweeten their story to the US government in order to hoover more billions. Once they’re done, they flip the keys (of the wreck) to Fiat for nothing. The Italians can decide how much to keep, how much to close. More close, less keep.

    Cerberus gets away scot-free (well, better than free…remember, they used OPM to buy Chrysler in the first place…and remember, Benz wrote down their 19% position in Chrysler to 0 a couple months ago), with our (children’s future tax bill) billions in their bank account.

    Wake up, America.

  • avatar

    Fiat, Lotus, Audi, or Gm…It’s a business. If Fiat was conspiring with chryco to heist the obamabucks then they wouldn’t put all these deal killer poison pills in the document.

    Car business is not over, the sky is not falling, we are on the other side of this deal I can assure you. You will see Feb sales up, March auto sales WAY THE HELL UP from previous months, close to 07 comparisons. As a dealer I already see the lenders loosening WAY WAY up, someone is going to buy chrysler for their truck line before it is actually worth something again. Remeber where you heard that, bc you heard it from me.

  • avatar


    Agree with your two posts. That’s why I said keep Jeep simple:Wrangler and a Cherokee thingy. Dodge: just pick-ups and derivatives. Plymouth-Fiat clones. Chryssler: Big aspirational cars and if that doesn’t work you can always phase it out and replace them completely with Alfa Romeos and Maseratis.

    Sometimes, a smaller but stronger line is better, and more profitable. Sometimes less is more. And beautiful and profitable.

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