Editorial: Fiat Chief Visits Chrysler HQ

Andrew Dederer
by Andrew Dederer

The current recession has done a fair job of turning the world upside down. Instead seeing tragedy repeated as farce, we get a mega-dose of farce with the tragedy hanging over it all. Exhibit A:a letter intercepted by Automotive News reveals that FIAT CEO Sergio Marchionne and a team of Fiat senior executives visited Chrysler HQ on Saturday morning. “This was a very positive meeting,” Chrysler CEO Bob Nardelli wrote. “This potential alliance is very promising, but getting there is totally contingent on meeting the viability plan required of us by the U.S. Treasury.” So the FIAT deal depends on meeting the viability plan, which depends on the Fiat deal? Chrysler has stopped making sense.

Chrysler is struggling– thrashing about some might say– to find a way to justify its continued existence. Not to its customers (real or imagined). To the legislators who are now entirely responsible for its day-to-day survival. To that end, Chrysler has told tales of a hook-up with Nissan( to build a small car and/or rebadging the Ram to replace the Nissan Titan). There’s also been talk of a deal with China’s Chery to import Hornets (or something). Just before the bailout hearings, Chrysler trotted-out a fleet of prototype electric vehicles. Did I forget possible tie-up with BMW? Or PSA? Someone should.

The FIAT hook-up is a charade: the last act of a desperate company. As Justin pointed out yesterday, this is the sort of development that would be laughed out of a producer’s office. Bringing in small cars from FIAT is somehow going to rescue Chrysler? How? Making money off of small cars is not impossible in North America. But it’s close. More importantly, how are 150k cute little Italian job MINI’s going to prop up a company with a 1.5m vehicle market footprint?

How bad an idea is this? Not too many years back GM paid FIAT $2b NOT to take them over (added to the $2b already “invested”). Now granted, this doesn’t exactly make the list of 100 greatest business decisions ever. Not even the top 1000. But while GM’s guys may not know marketing from muesli, they know finance (they’ve been known to squeeze a nickel till it screams). If they decided paying off was better than taking on Fiat’s baggage, there must have been some issues. The success of the new Cinquecento made this look doubly foolish, but don’t pop the bubbly just yet.

FIAT got the 500 and derivatives essentially “for free”. The next big thing will have to be paid out of pocket, and the guys from Torino have some serious debts to work off. Right now FIAT has 5.4b Euros of debt and a bond rating one step above “junk.” They may not be as bad off as Chrysler, but they share a very similar boat. And they’re playing a similar game: telling their backers THIS IS HOW WE DO IT.

FIAT doesn’t have much presence outside Europe (certainly not in the “major” markets). Bad as the American market looks, things across the pond look just as grim, and recovery seems further off. Getting some North American volume sounds like a winner, but expanding into a down market is like cutting production in an expanding one. Again, for both playas, appearance is all.

The biggest obstacle to this alliance is time. Federalizing and/or designing small cars for the U.S. will take [taxpayer] money, and money is time. How long will the American taxpayer be willing to wait for these Italian-derived vehicles? So far, the meter says $4b. Soon, it’ll be another $3b. That’s $7b over four months– without spending a dime on building Fiats. And it doesn’t include the money spent on GMAC or Chrysler Financial or Department of Energy retooling loans.

At some point, the American taxpayer will look at the meter and says “You know what, I think I’ll walk.”

Chrysler is hoping against hope that United States representatives, senators and the newly-elected president are stupido. Meanwhile, absent anything like a genuinely credible “viability” plan, Chrysler CEO Bob Nardelli is doing what the scourge of Home Depot does best: cut…. in the name of FIAT!

Nardelli’s letter told employees that Chrysler’s got to do what a Chrysler’s got to do “to make the alliance work.” He’s seeking price reductions from suppliers [on the brink of bankruptcy]. He wants them to freeze material cost increases for 2009. At the same time, Nardelli’s minions told dealers at the National Automobile Dealers Association convention that the automaker’s reducing dealer margins and reviewing dealer payment terms. No more free gas in the tank of new cars, either.

All this while the FIAT chief swans around Auburn Hills like it was 1996. it isn’t. And it never will be again. The only “alliance” that Chrysler will realize will be a shotgun wedding with General Motors. Chry-Fi? Think American Leyland. Where’s Pagliacci when you need him?

Andrew Dederer
Andrew Dederer

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  • Runfromcheney Runfromcheney on Jan 27, 2009

    "It doesn’t matter much if the latest Dodge subcompact is actually a Fiat under the skin; it’s still going to say “Dodge” on the hood. You average motorist doesn’t know that a Aveo is a Daewoo and a Vibe is a Toyota; why would they know that these things are Fiats? I don’t think reputation will be the problem here." Amen to that. A friend of mine used to have a Chevrolet Prizm, and had no idea that it was just a badge-engineered Toyota Corolla until I pointed it out to her. I thought that she would at least notice that the car parked next to her with "COROLLA" across the trunk looked exactly like her car........

  • Joeaverage Joeaverage on Jan 28, 2009

    The quality of dealer networks seems to be a stitch in alot of people's sides... Don't worry - having visited dealers in Italy to buy parts I can honestly say that those dealers were very, very expensive relative to the auto parts stores just like here. $65 for a Beetle crank shaft circlip that I could get for less than $5 in the after market. $50 for a BMW distributor cap. Same could be had for $15 or so in the after market just like here. What happened to the dealers from the 1960s ads that could fix cars for reasonable prices? Guess that was just a myth too? Maybe dealers need to be factory owned and operated?

  • TCowner We've had a 64.5 Mustang in the family for the past 40 years. It is all original, Rangoon Red coupe with 289 (one of the first instead of the 260), Rally Pac, 4-speed, factory air, every option. Always gets smiles and thumbs ups.
  • ToolGuy This might be a good option for my spouse when it becomes available -- thought about reserving one but the $500 deposit is a little too serious. Oh sorry, that was the Volvo EX30, not the Mustang. Is Volvo part of Ford? Is the Mustang an EV? I'm so confused.
  • Mikey My late wife loved Mustangs ..We alway rented one while travelling . GM blood vetoed me purchasing one . 3 years after retirement bought an 08 rag top, followed by a 15 EB Hard top, In 18 i bought a low low mileage 05 GT rag with a stick.. The car had not been properly stored. That led to rodent issues !! Electrical nightmare. Lots of bucks !! The stick wasn't kind to my aging knees.. The 05 went to a long term dedicated Mustang guy. He loves it .. Today my garage tenant is a sweet 19 Camaro RS rag 6yl Auto. I just might take it out of hibernation this weekend. The Mustang will always hold a place in my heart.. Kudos to Ford for keeping it alive . I refuse to refer to the fake one by that storied name .
  • Ajla On the Mach-E, I still don't like it but my understanding is that it helps allow Ford to continue offering a V8 in the Mustang and F-150. Considering Dodge and Ram jumped off a cliff into 6-cylinder land there's probably some credibility to that story.
  • Ajla If I was Ford I would just troll Stellantis at all times.
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