By on May 4, 2009

“Insane like a fox,” you’re thinking. And yes, the Fiat CEO is set to receive “good Chrysler” with a taxpayer-funded bow on top. He also has his eyes on Opel, which the German government is desperate to find a good home for. But lightning still hasn’t actually struck once yet, and may we remind you once again that Fiat is in not-great shape financially. And yet Marchionne, mad with power, turns his eyes towards China. And South America. And Russia. In fact, according to the industry analysts Bloomberg talks to, Fiat is like communism in the 50s: everywhere, especially right behind you. You see, Marchionne “craves” 5 million annual global sales even though Fiat sold only 2.15 million cars last year. Reportedly the Chrysler deal will bring the Fiat empire to 4m sales (lets wait for those chickens to hatch, shall we?) and adding any one of GM’s global divisions (Opel, Latin America, Asia/Pacific) would take it over the 5 million mark. For Marchionne the only challenge is figuring out which ones he can pick up for free.

Where did Marchionne pull the 5 million annual sales number from? “I was at Fiat’s Christmas dinner when Marchionne told managers his plan to create a group that produces 5 to 6 million vehicles every year,” says Guiseppe Berta, who studies Fiat as a professor at Bocconi University. Marchionne, it is said, believes that 5 million is the number he needs to reach for “long-term viability.”

The problem (as our Bertel Schmitt has pointed out), is that Fiat may actually face competition for Opel. With no cash to spend, Marchionne’s offensive may run out of steam in true Napoleonic fashion at the hands of a Russian force of nature (a plutocrat in this case). Opel may be Marchionne’s “perfect partner,” but he may have to settle for a less glamorous imperial marriage.

Even GM China should be a tough acquisition for a firm with Fiat’s purchasing power (or lack thereof), as GM will fight hard to hold onto the one remaining market that wants Buicks. Also, China’s government-owned automakers could easily outbid Fiat (with a little help from the Party) for domestic capacity and brands. Which leaves . . . Holden? Or GM’s Latin American division. Where, as with an Opel deal, Fiat runs the risk of competing with itself.

On the other hand, it’s hard to write off Mad Marchionne. He may have played a few too many games of Risk, but the man clearly believes in an aggressive strategy. And, so far, it’s paying off. Of Chrysler’s $4.6 billion debtor-in-posession financing, $4.1billion is paid by the US Treasury, $400 million comes from existing secured bondholders, and $100 million is coming from “the sale of Mopar inventory parts.” And not a euro from Fiat. So far, so good.

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28 Comments on “Sergio Marchionne Is Insane...”


  • avatar
    paris-dakar

    As conspiritorial as this sounds, I wonder if Sergio isn’t working with the Russians behind the scenes. There’s still alot of prejudice against doing big deals with the Russians, so Fiat buys up these companies and then the Russians come in at the end for a share.

    Think Fiat/Chrysler/Opel XX% owned by Russian equity.

  • avatar
    ajla

    Which leaves… Holden?

    Hmmmm… A HEMI-powered Commodore with Alfa-Romeo styling.

    I could go for that.

  • avatar
    Rod Panhard

    I think the guy is smart as can be. Put on some rose-colored glasses for a second. Let’s suppose the Chrysler deal had a snow ball’s chance in hell. Let’s suppose for a second that the Obamians keep shoveling cash into the gaping maw of New Chrysler with the intent of doing a Robert Reich’ian maneuver of “saving jobs.”

    Fiat could end up in the cat bird seat. Or, Fiat may have the first access to some cheap manufacturing capacity.

    Honestly, they’ve got nothing to lose on this deal. And if they can add more to the portfolio, if for no other reason than they’re the only one there, then so be it.

    One thing I’ve learned in life is that a lot of the time, the only thing you need to do to succeed is show up. Marchionne is doing that.

  • avatar
    bluecon

    Fiat has nothing that will sell in the US and it would take some time to bring the product here. The game is to grab as much other peoples money as President Hopeychangey will give them.

    The whole auto industry including Toyota is crushed and Fiat is the saviour? How delusional.

    He ain’t insane he is just looking for the US taxpayers to fund him. And it is working.

    With no recovery in auto sales and nothing showing that there will be one, some of these companies need to go bankrupt. Supporting the weak just weakens the others. This is going to kill Ford.

  • avatar
    paris-dakar

    With no recovery in auto sales and nothing showing that there will be one, some of these companies need to go bankrupt. Supporting the weak just weakens the others. This is going to kill Ford.

    I don’t think it will kill Ford, just push them to let the Feds take over.

    I’m now of the opinion that we will never see another Toyota/Honda/Nissan Plant built in the US again though.

  • avatar
    dwford

    I am not worried about Fiat, at least in the short term. Even if they get some Fiats rebadged and sent over in the next 18 months, they won’t be optimized for the US. See Saturn Astra as an example. Then they will be mixed in with the crap Chrysler is still selling. It will take a whole product cycle or 2 to get everything synchronized – figure 5-10 years.

  • avatar

    Brilliant! The more brands Fiat can take on, the better. I believe GM really showed the world just how effective a company can be with numerous, fragmented and overlapping brands.

    Nah, another company might be able to pull it off better, I don’t know about Fiat’s institutional incompetence, but it can’t be any worse than some of the US automakers. I’ve read analysis that it’ll take something like 3 years before we ever see a Fiat or Fiat-built vehicle into US dealerships. I’m not gonna get too hot and bothered about these early-day moves and maybes.

  • avatar
    SpeedRacerrrrr

    @ paris-dakar

    I’m now of the opinion that we will never see another Toyota/Honda/Nissan Plant built in the US again though.

    Why would you say that? With falling D3 production, they’ll need more capacity (well maybe not Nissan) as the economy improves, which will happen eventually.

  • avatar
    Stein X Leikanger

    I’ve been asking the question for a while – where’s the money coming from?

    Fiat is talking to GM, and wants Saab, Vauxhall and Opel. They want Chrysler, and they feel very confident about their ability to keep this going, once launched.
    I don’t think they intend to maintain all of these brands – being able to see what’s obvious: it’s the same car, with a different name. But they want the footprint and the plants.

    Hmmm – will be interesting to watch this unfold.

  • avatar
    Martin Schwoerer

    Marchionne is very clever and his strategy is simple.

    He wants to be head of a car company that is too big to fail. A combined Fiat-Opel-Chrysler-whatnot will have the financial support of at least three governments.

    Fiat by itself has only Italy at its side, and Italy is itself close to being bankrupt.

    It’s the lesson of modern capitalism: your existence is secured when your business is perceived to be of systemic importance. Privatize the profits and socialize the risks — that’s the name of the game.

  • avatar
    RedStapler

    Paris Dakar

    I’m now of the opinion that we will never see another Toyota/Honda/Nissan Plant built in the US again though.

    If they continue to gain market share they will continue to build here. Otherwise your are overexposed to currency gyrations.

    AFAIK Canada has no right to work provinces so they could still get a visit from the CAW. Mexico is currently in the midst of a smoldering civil war with the drug cartels. A few prominent kidnappings or murders in the national media and the border could close. Using Columbia in the 80s as the template it will continue to fester for quite some time.

  • avatar
    Buckshot

    bluecon :
    May 4th, 2009 at 6:30 pm

    “Fiat has nothing that will sell in the US.”

    You don´t think so?
    This is selling like hotcakes in Europe.
    http://www.fiat500.com/eng/

  • avatar
    paris-dakar

    I’m now of the opinion that we will never see another Toyota/Honda/Nissan Plant built in the US again though.

    If they continue to gain market share they will continue to build here. Otherwise your are overexposed to currency gyrations.

    Why would you say that? With falling D3 production, they’ll need more capacity (well maybe not Nissan) as the economy improves, which will happen eventually.

    The thing that makes me pessimistic about Toyota or Honda growing their business is the Bail Out. Chrysler and GM are not going to be allowed to downsize to match their true market share, so the overcapacity will have to come from somewhere else. The Japanese are very sensitive to the politics of doing business in America and don’t want to be seen as ‘putting Americans out of work’ – as fundamentally false as that premise may be.

  • avatar
    OldandSlow

    Chrysler, Dodge and Jeep will continue to burn through scads of cash – while it gets smaller. This is likely to continue through 2011.

    Chrysler is dead brand. Dodge and Jeep may linger on a bit longer – but will not grow by leaps and bounds.

    Face it. Sales are not going to pick up. Most of ChryCo’s offerings are already at or past their sell by date and by 2012 will be even more so.

    Many of ChryCO’s engineering staff are no longer around. There’s simply not enough folks left in the shop to retool.

    As for FIAT – they’ll sell about as well as VW or Subaru – which ain’t going be anywhere near what Chrysler, Dodge and Jeep were once selling at.

  • avatar
    menno

    I strongly suspect Toyota won’t put another plant in the United States for the simple reason that there is no point in putting plants where, by ‘executive decision’, the rules can be changed and by extension, plants simply taken away. Once a nation loses it’s rule of law, intelligent people will not invest here in the United States, and that is clearly happening now.

    Look at it another way; it’s little known yet (because the talking heads on TV weren’t handed it to talk about), but China has pretty well ceased lending the United States money.

    Our ‘national’ credit card’s been cut up by the lenders.

    Our glorious leaders think they’re so damn smart; they plan to monetize the debt. You know, the greater fool theory.

    Problem is, I suspect China will be wanting real repayments, not the repayments that Weimar Republic handed to the victors after WWI.

    Any history buff knows what happened then. Between 1920 and 1923, what took 1 papier mark (worth nothing more than paper) to purchase, took several TRILLION papier marks to buy 4 years later.

    It’s called hyperinflation and it’s going to start eating at everyone’s savings this year, and will destroy the economy (see Zimbabwe) within 3 years after that, unless President Goodwrench and his henchmen can be stopped from doing this thing.

    But honestly, it’s too late. And “we” voted this bozo in. So I guess we get what we deserve, eh?

  • avatar
    menno

    By the way, didn’t the Italians snuggle up and buddy buddy the LAST bunch of fascists who took over a powerful country between 1933 and 1945? They have this thing about fascists, don’t they?

  • avatar

    menno, great point. It is not an absurd reactionary statement to equate the Obama administration with the Nazis. Excellent roundabout invocation of Godwin’s Law.

    Certainly a McCain administration would have halted all federal assistance to banking and industry and the economy would have righted itself in short order. Also, if the American dollar goes the way of the Zimbabwean dollar, I’ll eat my hat (well, I’ll probably have to at that point). We’re managing the best we can and the economy is showing many signs of stabilizing, and don’t think the decisionmakers are so stupid as to ignore the risk of inflation after taking the actions they have. I think in the long run Chrysler’s just going to wither up and disappear, really, as it probably should given that it’s been kicked around from Daimler to Cerberus and now to FIAT for 10+ years now. I think all these workings to pair it up with someone are a bit odd because it’s a total zombie and everybody knows it.

    However, it’s not the work of fascists. I expect to enjoy reading a reply from you shortly that explains with remarkable clarity just how the Obama administration is, in fact, a bunch of freedom-hating fascists, and I don’t expect to change your mind on the subject, I just thought I’d provide an opposing viewpoint.

  • avatar
    paris-dakar

    Look at it another way; it’s little known yet (because the talking heads on TV weren’t handed it to talk about), but China has pretty well ceased lending the United States money.

    Even more frightening, China has been using their USD$ reserves to buy up commodities like copper, gold, oil, coal, rice while the USD$ still has value.

    We’re looking to get caught in a vise of falling value of the currency v. rising commodity costs.

    But we’re so puffed up over our New President. How proud we are, while the world snickers at us!

    http://english.pravda.ru/opinion/columnists/27-04-2009/107459-american_capitalism-0

  • avatar
    menno

    Jake, you don’t have to believe or agree with my assessment but there are a lot of folks out in reality-land who are having their eyes opened real quick. As for McPain, well, he’s not even a real conservative, he’s a RINO. I’m not even a Republican; why am I bothering to answer that?!

    I’m well past being a conservative person; I’m now a Constitutionalist. Once this nation is entirely wrecked, hopefully a few of us will have the strength and will left to try to salvage parts of it and make a republic of free people again.

    But the United States won’t survive as it is now. I can almost guarantee it. What makes us “special”? The soviet union didn’t survive in it’s former ‘glory’.

    As for fascism; what is fascism? It’s also known as national socialism. Note that second word. It’s generally done through dictatorship, with a ruling clique using public money as they desire, propping up corporate ‘friends’ with same. Socialize the losses, capitalize the gains? One rule for the few, another for the rest of us? Starting to look familiar yet?

    This is the truth about cars, but we can’t escape the truth about life here; in fact, we shouldn’t even try.

    But I don’t expect the scales to fall off your eyes from one commentary. Your reality is what you dream it to be, I suspect. But the real reality is going to slap you on all four cheeks and perhaps at that point, you’ll start to realize that those of us trying to warn everyone (and being mocked for our trouble) have been right all along.

    Fire all of Washington DC and let’s start over.

  • avatar
    menno

    BTW constantly referring to ‘Godwin’s law’ is simply a means of trying to control other people’s thoughts and actions, while claiming they are doing that themselves. Very liberal-minded. To which I must say, those who do not learn from the mistakes of the past, are bound to repeat them. This is why occasionally, we must look at the past (Weimar Republic, National-Socialism/fascism, Communism and other failed ‘isms’ which keep trying to come back from the dead – like zombies!)

  • avatar
    Pch101

    BTW constantly referring to ‘Godwin’s law’ is simply a means of trying to control other people’s thoughts and actions

    Er, no. It’s meant to encourage intellectual discipline and rigor. In other words, to keep people from being intellectually lazy.

    If one can’t make an argument without constantly rehashing the same few polarizing historical figures, then there is something wrong with the veracity of that person’s argument. Surely, one should be able to provide more depth than that.

    The whole bloody world doesn’t boil down to Hitler. A history book that consists of Hitler, Hitler and Hitler just isn’t a very good book, unless it’s a specific discussion of Germany in the 1930’s and 40’s.

  • avatar

    Oh menno, I like you. I disagree vehemently with about 60% of what you say, and disagree heartily with another 25%, but you’re always up for it, which is fun. Godwin’s law just points to the fact that comparing a group of people you disagree with to the Nazis is an overused and rather silly debating technique, which is used far too often on Internet forums.

    I don’t think the administration has any real interest in “privatizing the gains” of this Chrysler fiasco – I think what they are trying to do is minimize the impact of the bankruptcy of this large, intertwined manufacturing company on the already struggling economy. You may be right, Obama may be some evil plotting fascist who wants to ruin America forever like some kid’s show supervillain, but I doubt it. Most everybody in government is just trying their best to ensure the people of America are safe, secure and have the opportunity to succeed – we just disagree on how to achieve those ends.

    Also, I’ve said this before, Socialism as a political system is fine. As an economic system it doesn’t work, but you can separate the two. You can have a gov’t that protects the health, safety and interests of the people AND promotes sound competitive business practices. It’s not a terrible evil to provide health care to people who can’t afford it, which some have determined to be the dread beast Socialism.

  • avatar
    menno

    Socialism is nothing but boiled-down weakened communism.

    The only way that communism “works” is when it is in a small group of people who agree to make it work.

    The Amana in 19th century Iowa (a religious sect).

    The Kibbutz in Israel from 1948 (once again, a religious group).

    The Shakers in 19th and 20th century America (once again, a religious sect).

    See any parallels here?

    Where “commune-ism” does NOT work is when it is forced upon people en masse by folks who don’t abide by the same standards (reality check: just another form of dictatorship). You know; like in the Soviet Union where you were lucky to have a Lada (after paying cash and waiting 5-6 years) while the party faithful “leaders” rode around in massive ZIL limousines. They were simply “more equal” than the proles, right?

    Examples are many and obvious.

    This article, written from a perspective which may be unfamiliar to many of you, is non-partisan. It does not blame Jews, socialists, capitalists, Republicans or Democrats; it blames hunger for power, unbridled greed and avarice for our current problems.

    http://www.freebuck.com/articles/lwilson/090504lwilson.htm

  • avatar
    Luther

    Marchionne realizes that the future is global Fascism/Corporatism.

  • avatar
    menno

    BTW Jake? If the gains aren’t to be privatized (by a few – like FIAT) – then just like my auto and homeowner’s insurance, I’d like to see a dividend check when Chrysler starts to make a profit, since it was my (and your) tax monies which made all of this possible.

    I mean, I’m part-owner of Amica Mutual Insurance company, and as such twice a year, they pay me a dividend on profits from the fact that it’s a mutual company. Likewise, I go to a credit union and I’m part owner of that. Not to mention my electric co-op.

    So if gains of Chrysler haven’t been privatized (and losses socialized – i.e. taxpayer funds shoveled down a rat-hole) then when do our dividend checks start coming?

    See what I mean about the REAL reality?

    There aren’t going to be any dividend checks.

    Socialize the losses, privatize the gains. National socialism. Fascism. Same difference.

  • avatar
    Geotpf

    Does every single comment thread on the internet have to turn into somebody claiming Obama or the United States in general is fascist? Geez. Ron Paul is not going to save the planet-deal with it.

  • avatar
    menno

    You made me smile, Geotpf. I’m actually GLAD to have you write that.

    I proves that some of us are awake; some are paying attention; some are a little more than a tiny bit alarmed. To say the least. But in reality, I already knew that there are millions of us who are very alarmed by the very rapid way in which it would appear that this country is going the way of the soviet union.

    If it quacks like a duck, has webbed bird-feet, is wet, it waddles like a duck, and it looks like a duck…. chances are, IT’S A DUCK.

    Please feel free to mock Ron Paul and those who think as he does. However, opening one’s mind often means you learn something new, if you try. If you (or anyone else) would like to see what Ron Paul (and tens of thousands of others)know and understands, it’s right here in a synopsis. (Suggestion: Open the “printer friendly” tab – it’s much easier to read on your screen).

    http://www.learcapital.com/marketcommentary/6855.html#

    Obviously, the flip-side of honest money is – dishonest money. What we’ve got worldwide, right now.

    Dishonest (ironically known as fiat money) leads to EPIC FAILURE. Always has, in several thousand years of human history (what was I saying earlier about knowing history to learn from it/not make the same mistakes?), always will. And is now.

    Iceland. A preview of America, Britain, Europe…

  • avatar
    Buckshot

    What is this, a political forum???
    DON´T talk about fascism,nazism,communism,socialism etc.
    NONE OF THIS BULLSHIT IS RELEVANT TO THE USA.

    There´s no doubt that USA still leans to the right.

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