Bailout Watch 504: But Who Will Rescue The Rescuer?

Edward Niedermeyer
by Edward Niedermeyer

Fiat, the great Italian hope for the American auto industry, has a lot of expectations to live up to right now. Not only are the Torino boyz tackling the miasma of despair that was the Chrysler corporation, but Automotive News [sub] reports that Fiat could “form an alliance with General Motors’ core operations in Europe and Latin America.” Italian-American Leyland, anyone? Fuhgeddaboutit. According to anonymous sources, talks with GM are in the “early phases,” which means that nobody has suggested that an allied Chrysler, Fiat, Opel/Vauxhall and GM Latin America might be too much concentrated fail for one corporation to handle. And Fiat’s got the usual unnamed competition for Opel to contend with. “More than six people have expressed interest, serious people,” says GM CEO Fritz Henderson of his firm’s unwanted Opel/Vauxhall operations. Why so serious? Did previous offers come from folks wearing giant shoes, tiny hats and rubber noses? More importantly, if one of these “more than six serious people” comes from Fiat, might it not be time for a reality check on that firm’s transformative power?

Another Automotive News [sub] report points to the minor hitch in the industry’s Italian rescue plan: Fiat is in a spot of bother itself. Fiat Group’s Q1 financial results show a $90.5 million trading loss, says AN, down significantly from its $990 million profit in the same quarter of last year. The Group’s auto division accounts for nearly $150 million of the loss. Keep in mind that these are “trading losses,” which Fiat describes as operating profit or loss “before extraordinary items.” Analysts say Fiat Group’s net losses could be as high as $300 million. Fiat CEO Sergio Marchionne had predicted a $1 billion “trading profit” for the year and a net profit of $300 million after restructuring costs, despite warning that Q1 2009 could be “the worst of the year.” AN reports that “the analyst consensus is now for a 870-million euro trading profit and a 210-million euro net loss for the full year.”

Edward Niedermeyer
Edward Niedermeyer

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  • OldWingGuy OldWingGuy on Apr 22, 2009

    I think Windswords is absolutely right. FIAT picks this up for no-money down and gets some assets. I wonder if FIAT is a sub-prime automaker? Hey, isn't that what started this mess in the first place ? Sub-prime borrowers buying big houses (factories)with nothing down? Maybe FannieMae or FreddieMac can finance FIAT... You just know that if a deal is done, the Obama administration will have to keep FIAT-ChryCo limping along until after the second term elections. FIAT-ChryCo will have to start making toilet seats and hammers so the Defense Dept can quietly throw them a few billion a year.

  • Kurt. Kurt. on Apr 22, 2009

    The whole Chrysler - FIAT - Opel auto consolidation sort of frightens me. See, if it were just Chrysler heading to C7, no one would care. It would be bad, it would hurt, but it would happen and we would get over it. With GM, who's too big to fail AND Chrysler, SOMEBODY has to step in to save them or drag the country(s) down with them. Are'nt we just creating another "too big to fail"? I have this growing dislike for consolidation and "Corporate Socialism". No one should be too big to fail. I'm no Communist but this is one case where The Gov't should step in and share the wealth. Make several smaller "independent" companies with different owneers and differnt boards.

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