By on April 17, 2009

CEO Bob Nardelli is punting. Boot ‘Em Bob has told the troops that Chrysler would cede control of its board and senior management to Fiat if the two automakers “merge.” “The U.S. government and Fiat would appoint a board of directors for Chrysler, with a majority of them independent directors who are not employees of either automaker,” Nardelli said in an internal memo intercepted by Reuters. “The board will have the responsibility to appoint a chairman. The board also will select a CEO with Fiat’s concurrence.” Seeing as Nardelli walked away from Home Depot with over $240 million in severance pay, one wonders how much it would cost management (that’s Uncle Sam now) to get rid of him this time ’round. Cerberus exits stage right. American Leyland enters stage left. Anyway, here’s the weird part: Reuters is a bit more specific about the government’s participation in this newly formed Chrysler Board than Automotive News, even though Reuters credits Automotive News for the info.

The two automakers are discussing a new seven-member board for Chrysler that would include representatives from Fiat and possibly President Barack Obama’s automotive task force overseeing the restructuring of the auto industry, Automotive News reported, citing sources close to the negotiations.

Also among the options under discussion is a direct role in Chrysler’s operations for Fiat CEO Sergio Marchionne, possibly even the chief executive’s job, according to the report.

Only Automotive News [sub] puts it slightly differently (at least in the latest version):

The U.S. government and Fiat would appoint a board of directors for Chrysler, with a majority of them independent directors who are not employees of either automaker, Nardelli said in an internal memo to workers obtained by Reuters.


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21 Comments on “Bailout Watch 500: Chrysler to Fiat, Feds: It’s All Yours!...”

  • avatar
    montgomery burns

    Hmmm. Indeed. I don’t think that this is the end game that Sergio had in mind. I still think that the game plan was to get Fiats nose into the tent and see if it could get some fed bailout money. In return Fiat would offer its small car technology to Chrysler (tee hee). Now that it looks like the money might be turned off I think Sergio wants out for now and return during the C7 to see if there is anything worth salvaging.

  • avatar

    How noble. Nardelli is really saying: “This isn’t worth my time. I hate not being the center of success-based ego-worship. I am a failure. I really am not anything special. I am not worth the money these idiots have paid me (over the years). I want out and am trying to look good doing it.”

  • avatar

    Why would Fiat want to buy Chrysler?

    Wht not buy the pieces later and avoid the whole UAW/CAW retiree thing.

    Chrysler is actually worth negative billions.

    This union bailout is going to cost the government lots of other peoples money.

  • avatar

    This whole Fiat thing’s become more trouble than it’s probably worth. Fiat doesn’t really want anything to do with Chrysler as they are, they want a way into the U.S. market. Basically they want a place to build cars and a turnkey dealer network. The UAW, Chrysler’s corporate structure, and all of the bullshit they’re going to have to endure regarding our money probably just doesn’t make sense to the powers that be at Fiat, now that it’s completely apparent that Chrysler goes bust without a “merger” (violent takeover, whatever). Look for Fiat to swoop in when the fire sale starts at Chrysler and take what they want for pennies on the dollar.

  • avatar

    Ha ha.

    Reuters and Automotive News are playing the telephone game with each other.

    “She’s got a gun! Let’s get out while we can! Pass it on!”
    “He said, let’s have some fun and take out the dam. Basset hound.”

  • avatar

    To see what happened to MG/Rover in England a couple of years ago is to preview what I think will happen to Chrysler/Dodge/Jeep in 2009.

    MG/Rover had been in talks to be ‘rescued’ by a ‘white knight’ from China, the appropriately named Shanghai Auto Industry Corporation (SAIC), which is also GM’s JV partner in China as well as VW’s JV partner in China, too.

    SAIC licensed the ROVER cars for manufacture, along with licensing engineering drawings and rights to manufacture ROVER cars. (Let’s ignore the fact that MG and Rover cars were essentially the same, with different grills, trim and badges, except for the 2-seat MG).

    SAIC was very very smart and kept delaying the signing of the bail-out (intentionally, I believe). They must have figured “why pay retail or even wholesale when we can get it after bankruptcy for pennies on the pound?”.

    They were too smart by half, though; when MG/Rover DID go bankrupt, the (equivalent of the bankruptcy judges) saw through the situation very plainly and ended up selling MG, the factory, manufacturing machinery and all rights to MG vehicles to Nanking, a small Chinese manufacturer.

    Nanking got MG for pennies on the pound. Not SAIC.

    So Nanking came in, and stripped the British factory of MANUFACTURING machinery and shipped it to China where MG’s were eventually put into production.

    I think FIAT are going to dink around not necessarily to better their deal (they’d be given 35% of a car conglomerate in a market with virtually NO OVERLAP with their own current markets for FREE, PLUS probably free money from the US government for awhile).

    But I think FIAT might dink around because they think that post-bankrupt might work better for them going forward once they ARE given a massive chunk of Chrysler.

    I just don’t think it’ll ever happen.

    Some Chinese company will come along and actually pay a small stipend after bankruptcy (probably Chapter 7) and will utilize the dealerships to market US/Canadian/Mexican built vehicles for awhile, then will phase-in Chinese manufactured, US/Canadian/Mexican ASSEMBLED cars after awhile.

    That’d be my guess. I’ll also guess which companies are most likely:




  • avatar

    If Fiat just wants a way in with dealers and plants why not buy Saturn?

    They are looking for big government other peoples money.

  • avatar

    If FIAT wanted to pick up Chrysler’s assets for pennies on the dollar they would have ALREADY backed out of this. But that’s not what they want. If Chrysler goes C7 all the people go with it. FIAT can buy the factories, the engineering facilities, the test track, but without the people it’s not worth much to them. If the mission was to simply sell FIATs in America they would’ve bought Saturn by now. But Saturn is just a distribution channel. They want a real automaker so they can expand their product offerings.

  • avatar

    Funny I was talking to some people (supposedly in postions to be in the know)down here just yesterday and they said the rumors running inside the company are:

    – Fiat will only take Chrysler if they name all directors and CEO

    – Fiat puts no money on the table

    – Fiat gets to shut down most factories and slash distribution network by half

    – Fiat gets access to TARP money

    What they give back:

    – Small cars (unclear if w/ Fiat brand or a Chrysler brand)

    – Make Dodge only trucks (and distibute them the world over)

    – Chrysler brand lives on making cars along 300C line and bigger.

    That’s what’s on the grapevine down here in Fiat’s largest ovwerseas operation.

  • avatar

    FromBrazil’s comment makes total sense. The only question is if FIAT gets TARP money. Politically it might be impossible to give them money while cutting all the jobs in the US. If they cut lets say 50 percent and it would save 50 percent of the jobs maybe that might be enough political cover.

  • avatar
    John Horner

    The thing with internal company rumors is … they are most often very close to the truth! My money is on FromBrazil’s G2.

  • avatar

    Putting together bluecon and fromBrazil’s thoughts makes sense to me.

    FIAT want’s Cryco given to them with extras because it is too big of a liability to consider otherwise (worth negative billions, as stated).

    FIAT’s stance seems reasonable considering the property they are looking at.


  • avatar

    FIAT want’s Cryco given to them with extras because it is too big of a liability to consider otherwise (worth negative billions, as stated).

    I’d say that this is a negotiation ploy. Fiat sees upside in the deal, but they are negotiating hard because they lose nothing by playing hardball.

    But still, it’s very obvious that Fiat sees this is a unique opportunity to become a global automaker. They want this deal.

    If the task force is smart, they’ll call Fiat’s bluff and demand a commitment of working capital, with at least some of it being contributed immediately upon closing. There is no good reason for the government to proceed unless Fiat comes up with cash that can be used to fund future operations, otherwise the US government picks up 100% of the cost with no benefit.

    The current market cap or enterprise value of Chrysler are more or less irrelevant. The buyer is paying for the potential to use Chrysler to grow its own company, not for the current cash flows that Chrysler is generating. Fiat would be comparing the expected benefit of getting that growth by buying Chrysler versus trying to get there by starting with a clean slate.

  • avatar

    For More on Nanjing/SAIC – MG/Rover:

    The similarities are startling. Private Equity group/German Automaker fire sale, troubled company’s tarnished reputation. It’s likened to a British Soap Opera

  • avatar

    Wouldn’t let me edit the above for some reason, but,with all due respect, it’s Nanjing Automotive, not Nanking.

  • avatar

    @Sherman Lin, John Horner, Bunter 1, Pch101.

    All of you have a point, and may I stress to you: Fiat is approaching this very warily, they will only go in w/ fresh money (that is not theirs) on the table, and they are very, very aware of the political angle. So much so in fact, that right now, apparently, they are not talking to Chrysler so much, but rather to the US gov guys trying to find a way. Again, apparently, they already know what’s salvageable from Chrysler and again, (sorry!,) apparently Chrysler does have some nice projects in development that gives the brand a way foward even if the Fiat cars are not an immediate hit.

  • avatar

    The problem with this plan is the same as the others and that is they need customers to buy product at a price that turns a profit.

    Government agencies can be mismanaged for years. The top leadership can and does get shuffled in an attempt to make things better. Sometimes it works sometimes it doesn’t but the fact is there usually is no competition so the customer gets a choice of bad service or not so bad service.

    Car companies can’t just proclaim how things are going to be, they have to sell cars too. All the leadership changes and ideas in the world are great but none guarantee sales. Forward looking predictions are worthless.

  • avatar

    they will only go in w/ fresh money (that is not theirs) on the table

    I’m sure that they are saying it, but it looks like a bluff. Realistically, Fiat cannot genuinely expect to get someone else to provide all of their working capital into perpetuity. They surely aren’t stupid, so they can’t seriously be expecting that.

    If I was in Fiat’s position, I would publicly adopt their stance, too, and repeat it enough that I seem serious about it. Fiat has nothing to lose from trying.

    But I would also expect the US government to reject that position. The purpose of the extreme stance is to negotiate a better deal that involves as little of the company’s money as possible. I would ultimately expect their to be some sort of matching loans and grants, along with tax incentives to retool some of the US operations, not a situation in which Fiat contributes absolutely nothing to play here.

  • avatar

    This reminds me of house hunting butterflies that go to open houses, see listings with agents, and generally just eye shop. But never make serious offers. House butterflies like to lowball so that they are let off the hook when it is refused. As long as they are driven around by agents, and get to stroll through stranger’s homes it costs them nothing.

    I doubt Fiat is serious in this. And it looks like a lot is being put on the line.

  • avatar


    You’re probably right, but this no money from them is probably the best stance to get as much TARP money as possible. Don’t you think?

  • avatar

    this no money from them is probably the best stance to get as much TARP money as possible.

    Sure. As I said earlier, I would do the same thing if I were in Fiat’s position. It’s a good negotiation tactic for them to use, and I’m not surprised to see them do it as this stage of the negotiation.

    It’s up to the US government to play hardball here. My guess is that they’ll play softball instead, and Fiat’s required contribution will be lower than it probably should be, but something greater than zero.

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