Fiat Gets A Deal On Chrysler: Majority For $1.27 Billion

by Bertel Schmitt

Published: April 21st, 2011

fiat gets a deal on chrysler majority for 1 27 billion

In a few months, Fiat will own 46 percent of Chrysler, Fiat announced today in Turin. With another 5 percent milestone reached by the end of the year, Fiat will have the 51 percent majority in Chrysler. According to Germany’s Automobilwoche [sub], the 46 percent level will be reached after Chrysler has paid back the government loans. Payment of the loans is expected for the second quarter of 2011.

According to Automotive News [sub], Fiat has agreed to pay $1.27 billion for the 16 percent stake in Chrysler. The deal turned out to be a little cheaper than the $1.5 billion expected last week.

#BertelSchmitt #Chrysler #Fiat #Italy #Loans #Majority

Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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Robbie on Apr 21, 2011

Can anyone explain to me how a car company that was bleeding money and had no new designs can now possibly be viable..?

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- Windswords on Apr 21, 2011
  
  They had new designs - the Hornet B class, the 200 D class, the Jeep Trailhawk (fore-bearer of the new JGC) as well as new minivans and Ram production (2007-09 years), but 1st Daimler and then Cerberus would not spend the money needed to fill the product pipeline. A million bucks for a concept car but not a billion bucks for a production ready vehicle.
  
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- Doctor olds on Apr 22, 2011
  
  @high desert cat- The 51,000 US Chrysler employes in the U.S. , particularly 10,000 of them at their HQ in Auburn Hills MI working to design, develop and market Chrysler products might disagree on whether they are an American company or not. btw- Chrysler's HQ is full! They need more space for the engineers they are hiring. It never ceases to amaze how little folks here know about what it actually takes to run a car business. The most strategically important parts of the business, product development and administration, seem to be ignored in all the discussions about the value of saving these companies.
  
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Buickman on Apr 21, 2011

easy. quick rinse thru BK combined with a union leadership prostituting itself by crawling into bed for millions in VEBA admin fees. add in a gov't passing out more money in the name of plant modernizations and there you have it. trouble is the turniquets and bandaids haven't repaired the source of the bleeding...incompetent marketing management.

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FleetofWheel on Apr 21, 2011

'Imported from Detroit' but owned and controlled from Italy. Chrysler can laugh off the incongruity of their domestic chest thumping with a TV spot featuring Lido Iacocca making some Italian-American quip.

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Tparkit on Apr 21, 2011

"The deal turned out to be a little cheaper than the $1.5 billion expected last week." Wow - whocoodanode? I am shocked! ... almost as shocked as I will be to learn that not one dime of that $1.27 billion - or any of the remaining cash to gobble up Chrysler will actually come out of Fiat's pocket. Like GM, when corporate welfare puppy Fiat says "We give you your money back" they really mean it.

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- PenguinBoy on Apr 22, 2011
  
  I'm actually OK with this deal. I wouldn't be surprised if a liquidation would have cost the taxpayers even more than the bailout. There's no sense comparing the situation to some ideal, you have to compare it to the next best alternative that was available. Sergio seems to be doing a good job driving a turnaround. They seem to have acknowledged their problems, and appear to be heading in the right direction. It's a good deal for Fiat - they get instant access to the second largest market in the world. It's a good deal for Chrysler workers - they get to keep their jobs. It's a good deal for taxpayers - a liquidation would have cost more.
  
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- Tparkit on Apr 22, 2011
  
  @PenguinBoy "There’s no sense comparing the situation to some ideal..." How about comparing it to a legitimate bankruptcy proceeding?
  
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- PenguinBoy on Apr 22, 2011
  
  @PenguinBoy Would a "legitimate" bankruptcy have cost the taxpayer less in the end? The stock and bondholders got burned badly - but I don't have a problem with that, that's the risk they took when they decided to back sketchy management.
  
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- Doctor olds on Apr 22, 2011
  
  @tparkit- Exactly what do you mean by "legitimate" bankruptcy proceeding? Who do you think would have financed it? (I suggest the only entity capable of doing so was government. After all, the credit freeze that collapsed car sales also made it virtually impossible for companies to borrow either.) Do you think customers would have continued to buy Chrysler products if they spent several years going through bankruptcy? (I doubt any financing for bankruptcy could have been obtained, but even if it could, I suggest it would have been a quick death spiral in a year or less, and would have cost taxpayers far more in the end with Chrysler being liquidated. Since they share suppliers, it likely would have collapsed the entire automotive sector, foreign transplants included, with a mind boggling cascade of bankruptcies.) Chrysler was pushed into bankruptcy by the global financial crisis, resulting credit freeze and collapse of the U.S. market in mid October '08. U.S. sales averaged 17M a year from 1999 to 2007, then fell to 13.5M in '08. That obscures the fact that most of that drop occurred in just the last 2 1/2 months of the year. Toyota lost money globally for the year and went on to lose even more than GM in the first quarter of '09 due to the weak U.S. market. The market bottomed at 10M in 2009, a nearly 40% drop from the norm. That is why Chrysler was burning through cash then, but still has the potential to be viable today.
  
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