Fiat To Own 30% of Chrysler "Within Weeks"
Automotive News [sub] reports that Fiat is “weeks” away from concluding an agreement in which 90 percent of its Latin American dealers will sell Chrysler vehicles, triggering a government clause that will increase Fiat’s stake in Chrysler from 25% to 30%. Known as the “Non-Nafta Distribution Event” in the Chrysler operating agreement, it calls specifically for
execution by the Company of one or more franchise agreements covering in the aggregate at least ninety percent (90%) of the total Fiat Group Automobiles S.p.A. dealers in Latin America pursuant to which such dealers will carry Company products.
And that’s it. Why does it matter that this agreement isn’t any more specific? Because Fiat has no plans to sell any Chrysler Group brands anywhere. Products, yes. Brands, no.
According to AN’s report
CEO Sergio Marchionne plans to sell Chrysler models under the Fiat brand in Brazil to reach the first goal that 90 percent of Fiat’s Latin American dealers offer Chrysler vehicles, the people said, declining to be identified because the plans are private.
The plan would allow Marchionne to sidestep negotiations with dealers on Chrysler contracts and avoid the cost of introducing the brand in Brazil, where Fiat has the largest share of the market, one of the people said.
Does this matter? Well, yes and no. As a practical issue, Chrysler will have more demand for its NAFTA-produced products so the bailout’s goal of preserving jobs at all costs is accomplished by Fiat’s rebadge policy. On the other hand, this development exposes much of the bailout-era rhetoric about preserving Chrysler as an American company in the same way Fiat’s “Irrevocable Ecological Commitment” in the Chrysler operating agreement exposes the supposed green motivations for the bailout.
I’m sure few industry observers actually expected Fiat to rebuild Chrysler as a global alliance partner rather than subsuming it into its own global ambitions. Rebadging Chryslers as Fiats in markets where Fiat has a long history makes good, pragmatic sense. But would Britain have embarked on the British Leyland experiment if they knew it would end with foreign ownership of their auto industry? Likely not. In the same way, many Americans will likely look upon this news as evidence that the billions they spent on Chrysler did nothing to preserve “the American auto industry” beyond a few US-market brands and some jobs (admittedly in an uncertain economic period). This isn’t Fiat’s fault, and there was certainly no one else lining up to take on Chrysler, but the nationalist justification for the bailout (and let’s not pretend like it didn’t exist) has fallen about as flat as the environmental one.
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In the end they will say they tried, nothing more. We will end up with Fiats that vaguely resemble Chrysler cars, not the other way around. Once they control the majority of the company it's theirs to do as they please. Anyone working for Chrysler NA operations would be advised to start making plans now. Don't wait until the shoe drops then cry to everyone about the bad situation you find yourself in.
When I read the initial news report on this, it seemed like a win-win scenario. Fiat gets its promised additional 5% and Chrysler gets a huge dealer network in South America. Regarding the use of Fiat badging, I think this is more of an example of Sergio looking to fulfill his wish of 51% control of Chrysler this year. The report that the Dodge replacement for the Caliber will be used to spearhead the Russia/China venture is a clear indication that he will use whatever brand is more suitable to achieve his goal of selling 6 million units per year. I say, go for it Sergio... and wish you the best of luck.