Molto Grazie!Treasury Hands Fiat Another 5 Percent Of Chrysler

Bertel Schmitt
by Bertel Schmitt
em molto grazie em treasury hands fiat another 5 percent of chrysler

Usually, when you bring a car from Europe to be made in the U.S., you need to bring something else: Money. You know, for buying real estate for a plant, machinery, that kind of thing. Except when you are Fiat. In that case, a thankful U.S. government hands you yet another 5 percent of Chrysler, as a token of its appreciation, for what amounts to be a token act.

As announced last December, Fiat made good on its promise to build its Alfa-based Dodge Dart in the U.S. According to Reuters,

“Chrysler and Fiat formally committed on Wednesday to the U.S. Treasury Department to produce the 2013 Dodge Dart sedan at a U.S. Chrysler plant.”

With that simple commitment, Fiat has increased its stake in Chrysler to 58.5 percent. By announcing its intentions to build “a highly fuel-efficient car” at a U.S. plant, Fiat reached the final milestone with the Treasury. The government is out of the automaking business, at least as far as Chrysler is concerned. Fiat shares ownership of Chrysler with the UAW. The UAW’s retiree health care trust holds the 41.5 percent. left over after Fiat’s 58.5 percent.

Actually, it is not the new Dodge Dart that got Fiat the last chunk of Chrysler, it is a special anemic edition of said Dart. Equipped with a 1.4-liter turbocharged FIRE engine that also powers versions of the subcompact Fiat 500, THAT Dart is expected to get the required unadjusted combined fuel economy rating of at least 40 mpg. Never mind that the EPA-issued windows sticker probably will say something like 30 mpg. Who are you going to sue, the government?

The 2013 Dart will be built at Chrysler’s plant in Belvidere, Ill.

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  • Herm Herm on Jan 05, 2012

    "it is a special anemic edition of said Dart. Equipped with a 1.4-liter turbocharged FIRE engine that also powers versions of the subcompact Fiat 500" It wont be too bad, supposedly 160hp if its the same engine as used in the 500 Abart, maybe more.

  • Tparkit Tparkit on Jan 05, 2012

    No need for anyone to be surprised at the transfer to Fiat. The deal always was: the Obama administration gets a political exit from bailing out its buddies at the UAW. In exchange for providing an exit that puts a free-market figleaf on a transfer to crony wards-of-the-state, Fiat gets valuable assets for free. Big #1 free asset was the Jeep brand. However, let's never forget that there has been long-term damage to the US as a nation. Washington's act of stealing Chrysler from its owners, coupled with the Administration's naked assaults against Toyota, communicate to investors both here and abroad that there is no rule of law in the US. For all of us, this good day for crony Fiat is a very bad day for freedom from maurading government.

    • See 1 previous
    • PenguinBoy PenguinBoy on Jan 05, 2012

      @hriehl1 "Who cares about those pesky bondholders, stockholders" Cerberus and the bondholders that were still around that late in the game weren't exactly widows and orphans - they were buying some seriously troubled assets at a fire sale price in hopes of big rewards. I don't feel sorry for them in the least, because they were willing to take a big risk on the off chance of a big payback. Suppliers and non-union pensioners are another matter - I feel for them. But I still think the bailout sucked less than liquidation...

  • Fred schumacher Fred schumacher on Jan 05, 2012

    Gee, Bertel, that was a whiney report. Are you upset that an Italian manager turned around a company that German managers nearly destroyed? (Disclaimer: I'm German, my native language is German, my first name is really Friedrich, and my Balkan grandfather escaped from an Italian POW camp in the early days of WW II.) If GM and Chrysler had been allowed to collapse, the whole auto industry supply chain would have gone down with them (stopping production at foreign owned American assembly plants also), and the resulting cost to the federal government and the economy would have been much higher. As it is, the cost to the feds was minimal for their part of the restructuring, since most of the loans were (in the case of Chrysler) or will be (in the case of GM) recovered.

    • See 1 previous
    • Conslaw Conslaw on Jan 06, 2012

      @hriehl1 Bondholders always "get screwed" in bankruptcies. Whenever secured lenders get less than 100%, bondholders should expect to get 0%. By the time of the Chrysler bankruptcy, long-term bondholders who were paying attention had long since sold their stakes to vultures and speculators. The people I feel sorry for were the dealers who took on extra inventory in the closing days at the urging of Jim Press who insisted the company wasn't filing bankruptcy, then many of these same dealers got their franchise terminated in the bankruptcy leaving them with a huge financial mess on their hands. I think both Chrysler and GM culled far more dealers than they should have. Making it harder for people to buy your products is rarely a ticket to success. Suppliers incurred some hardship from the bankruptcies, but nothing like the problems that would have occurred had GM and Chrysler shut down completely. (In a perfect world, parts of Chrysler should have been combined with General Motors to reduce overcapacity in the industry, but GM did not have the management structure or capitalization in place to deal with all the issues involved, so it is probably better that things went the way they did.)

  • Conslaw Conslaw on Jan 06, 2012

    People can correct me if I'm wrong, but while it is true that some non-secured creditors ended up with assets, actual ownership of the company, it is because they brought new money to the table- money that nobody else was going to bring to the table otherwise. That's what happens in every reorganization. The US and Canadian governments brought money to the table justifying their new ownership stakes. They were therefore in position to dictate the terms of the reorganization plan. There was no group of creditors that came out worse than they would have had there been a liquidation. There is no question that the UAW and its pension funds came out better than they would have had there been a liquidation; but the union and its pension and healthcare funds took a haircut like everybody else.