By on December 12, 2012

With the exception of France, European governments offer very little help to their ailing car industries. Fiat hoped that Italy would follow the French example. Today, it received a cold shower instead. Italy’s prime minister Mario Monti “offers car makers sympathy, but no aid,” says Reuters.

Italy has not intervened with financial support for Fiat because its European losses are more than covered by revenue from its Chrysler unit in the United States, the report says.

In September, Monti held out the possibility of export aid for Fiat, but, says Reuters, Monti’s weekend announcement that he intends to resign from office before Christmas would suggest that any remaining hopes of export-boosting measures are slim.”

New car sales in Italy are set to fall about 20 percent this year to less than 1.4 million. Before the start of the 2008 crisis, Italians bought about 2 million cars a year.

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33 Comments on “Mario Monti: Let Chrysler Bail Out Fiat, No Money From Italy...”

  • avatar
    el scotto

    The French loaned/gave money to the bank Peugeot owns, didn’t directly give money to PSA. It’s against EU rules to give direct to a nations car company. “In September, Monti help out the possibility of export aid for Fiat”. Held out? Helped out? Little if no moral outrage that the Chrysler part of the company is keeping Fiat afloat. What are export boosting measures?

    • 0 avatar

      Of course there is no outrage, there is G or M in the spelling of Chrysler.

      Cerberus has enough cash in its couch cushions to bail out Chrysler on its own back in the day, but instead federal tax dollars went to rescue a private held enterprise owned by corporate raiders. The lack of outrage over that travesty is not lost on me. That’s right – it’s OK, we got, ehem, “paid back,” and now our tax dollars are keeping Fiat afloat.


      • 0 avatar

        You know wounds don’t heal if you keep picking the scabs off… While American tax payer money was involved some years ago this situation somewhat reversed.
        The lack of outrage might have something to do with the fact that Chrysler was “rescued” by Fiat and now Chrysler might need to return the favor. Seems fair to me IMO.

  • avatar

    There is a silver lining here. These increasingly deep contractions in European auto sales mean that a few years down the road as a recovery finally starts there will be a lot of pent up demand for the survivors to fulfill. That’s what has happened here in the US, and our contraction was nowhere like what southern Europe is going through.

    • 0 avatar

      That’s assuming that this isn’t a structural change and the new reality.

      • 0 avatar

        A legitimate theory, considering the longer life of the average car and the reduced median income of the avg Western worlder.

        I still think Fiat would do right to bring over the Panda. I know its so cliche, but I would love a turbodiesel Panda for a daily driver. To be fair I actually drove a gasoline one in Italy and absolutely loved it. It’s a great car and would do well in places like NYC and SF. Good for people who want a city car w/o the cheesiness of the 500

  • avatar

    Can Chrysler purchase large percentages of itself back from FIAT to help them out?

    • 0 avatar

      That would reduce Fiat’s ownership percentage, which is the exact opposite of what Marchionnne wants to do.

      • 0 avatar

        People do strange things when they’re in dire need of cash.

        Are the Chrysler/FIAT businesses not setup in a way which will disallow FIAT from raiding Chrysler’s cash?

        Where will FIAT come up with the cash to increase it’s ownership to a point that will allow them access to the money Chrysler currently holds?

      • 0 avatar

        Right, his strategy has been to grab 100% of Chrysler as quickly and as cheaply as possible. Once it’s a wholly owned subsidiary, Fiat can consolidate Chrysler into it’s balance sheet. Chrysler’s assets become Fiat’s assets, Chrysler’s revenue becomes Fiat’s revenue, whereas a wall of separation exists between them currently.

      • 0 avatar

        Marchionne has one option for coming up with cash: selling assets. VW would be willing to buy Alfa Romeo, and there has been speculation about a Ferrari IPO for years.

        I suspect he will not do either one of those, though, unless he is forced into a corner.

  • avatar

    In a separate but timely interview I watched on a local PBS with the CEO of Magna Internatal, Frank Stronak stated that all Three USA Companies would soon to be need a Government Handout, makes one think doesn’t it?

  • avatar

    What has kept the lights on the lights at Fiat is Fiat Brazil. They’ll use the money from Chrysler to develop new cars. This is exactly what happened to GM when Fiat suckered them out of 4 bn dollars in order not to effect the put option.

    Hopefully, Chrysler will be able to ante up enough money for Fiat to make the next generation Fiats competitive again. With the exception of Panda, 500, Punto (maybe) their current line in not attractive enough.

    Again, Brazil has kept and will keep Fiat going for the foreseeable future. In Brazil, Fiat more than makes up for the money losing Euro operation.

    Read on Brazilian web that Fiat Viaggio is off to a good start in China (sold more than Dart in America). If this goes on, added to growth in America, the future will be finr for Fiat-Chrysler.

    This is what globalization is for. Like Renault-Nissan, and unlike PSA, Fiat is not wholly dependent on Europe to remain alive. That’s the bright side of global economy and companies.

    • 0 avatar
      Athos Nobile

      IIRC Fiat took $2B from GM.

      “to make the next generation Fiats competitive again.”

      Lets hope.

      • 0 avatar

        Hola Athos? Cómo le va?

        2 or 4 billion, IIRC it was 2 bn euros so about 4 bn dollars. Could be completely off my rockers. Anyway what’s important that at that time the money was put to good use (punto, Idea et al). Let’s hope they can do so again. I think time is running out.

        In Brazil, for example, while they sell everything they make, literally everything, and the import quotas from Mexico have been all used up, I get the nagging sensation they’re dragging their feet.

        Just today I talked to a Fiat suit who told me the new factory in Pernambuco is delayed. The cars that would’ve been coming out of said plant were scheduled for mid 2014. Well the exec told me he expects 2015, late 2015.

        Another thing that bothers me is that Fiat has always been very agile in responding to market conditions. Well I can tell you the market now demands power steering and windows, AC even from the lowliest cars. People want more comfort, better finishing. The Brazilian consumer is (finally) getting more choosy. While Fiat still rules the bottom of the market, they have to start being more competitive in the higher brackets. The viaggio, 500L should be coming now rather than later. People are moving on to the Asian brands (and many are not coming back) while GM is putting on a strong showing. Ford too seems to be beefing up their line.

        In short, Marchionne has to spend some money here now, or risk losing 1st place. The aforementioned Fiat exec thinks next year VW might even take 1st place from Fiat (depends on Up sucess and it not cannibalizing Gol) and even GM might give Fiat a run for second place.

        I know the Italians think they can shove anything our way and Brazilians ill gratefully take it. Anybody who thinks like that will slowly but surely lose market in Brazil.

        If that happens to Fiat, who will pay their bills? Just Chrysler? Not enough I fear.

    • 0 avatar

      @Marcelo, regarding “with the exception of Panda, 500, Punto (maybe) their current line in not attractive enough,” Marchionne has said that the future of the Fiat brand consists basically of the Panda and a series of 500 derivatives.

      The Panda is new, but the 500 is already 5 years old, and will be 8 when Marchionne’s current plan (which doesn’t include a 500 update) ends. And the Punto dates back to 2005 — no update planned for it, either.

      • 0 avatar

        Hey th009!

        I don’t buy that. In Brazil and other growing markets, Fiat has a better brand than at home (Western Europe). People in such places are willing to give bigger and more expensive Fiats a try. In Brazil, people are willingly paying over 45000 USD for a Freemont (basically a Journey with a Fiat engine).

        Now, being that they currently sell over 750 000 cars a year in Brazil, and that 1 000 000 cars is within sight, they’d be foolish to let those consumers who would rather buy a Fiat (but can’t ’cause they don’t exist) go to the competition. Bet you that a Viaggio would sell more than Fluence, 408 and Jetta if it were offered here!

        Fiat is better known and encompasses better attributes than Chrysler in much of the developing world. Again, I bet it’d be that much harder and more expensive trying to sell Chryslers than Fiats. Marchionne surely knows this. So, Fiat just has to do it.

  • avatar

    Besides the money that has been paid back by Chrysler, the US and Canadian taxpayers have gotten their money’s worth out of the bailout through the economic activity generated by Chrysler over the last three years. Employees and suppliers were paid, taxes were paid by the employees and the suppliers. People didn’t have to go on welfare, pension funds were bolstered etc.

    The collective disturbance in the force that you feel are the the flutters of apprehension in the hearts of Chrysler workers who have been through this before with Daimler. Chrysler gets on the right track more or less only to have the profits siphoned off to go overseas rather than being invested back into the Chrysler businesses in North America.

    • 0 avatar

      Chrysler was a boom-and-bust type of company long before the “merger” with Daimler.

      The history of Chrysler has been one long, roller-coaster ride since the 1954 downturn, when its market share plunged from 20 percent to 13 percent in a single year!

      After 1954, Chrysler hit the skids in 1958-62, in 1970, in 1974-75, in 1979-81 (when it needed federal loan guarantees to avoid bankruptcy), in 1989-92, and finally the latest crisis that ultimately resulted in another federal bailout.

      By this point, one would think that grizzled veterans of the company would be ready for anything.

  • avatar

    Should “First World” countries like U.S., France, etc. even be producing cars, ( other than “perceived value” cars like Toyota, BMW, Audi, and Mercedes ) when “Second World” countries like South Korea, and soon, “Third World” countries like China and India are, or soon will be producing good reliable cars?
    Seems to contradict good economic theory?

    • 0 avatar
      el scotto

      Uh no, you didn’t define “good”. Reliability is reasonably easy to track. Vehicles are complex pieces of machinery. They can’t be knocked off like a dozen for $10 Polo shirts in Hong Kong. “Good” is a harsh mistress sometimes known as quality. It still needs “1st World” manufacturing processes. BTW, I hate the highly subjective 1st world, 2nd world descriptions. There are parts of Asia and Africa where I could happily live to old age. Following through on your logic; parts for USAF’s newest and most neat-o plane should be made in Tanzania. I don’t think the nice Tanzanian’s need to be pestered by some Air Force officers and a horde of bureaucrats worried about airplane parts.

      • 0 avatar

        Plus, if this were before 1989, those terms would have a different fixed meaning — i.e., the second world was the Soviet-dominated bloc, so a second world car was something like a Trabant. South Korea was never “second world”, although it looks like a recent attempt to graft 1st/2nd/3rd world on top of the old developed/developing/undeveloped.

  • avatar

    I think Fiat could add one or two more products to the US market. Panda and / or Punto would be a good start. Personally I think the brand is doing very well considering they are selling one tiny European car. Done right they could recover some money lost while Europe claws it’s way out of trouble.

  • avatar

    It is my understanding that Fiat does not have access to Chrysler’s cash. They need to own more percentage of the company before they can bring them onto their books. Thats why you hear about fiat wanting to purchase the remaining part it does not own.

  • avatar

    FIAT can’t touch Chryco’s money directly, a consequence of the Diamler/Cereberus fiasco. That’s why they’re in such straits around the world. Cashflow baby. Sergio is dancing as fast as he can to make sure that nothing comes due too soon. I’m surprised that he didn’t get Chryco to redesign the Brazilian cars on the side to leverage his operations.

    If you notice, all the car mfg. that are in trouble, with the exception of Opel, are located in countries that also are in trouble. The countries don’t have anything in the piggy bank to give to *anybody* let alone car co.

  • avatar
    Extra Credit

    So where is Fiat getting the money to pump into Maserati? In yesterday’s Automotive News Europe, Luca Ciferri reported that “Fiat Group is investing more than 1.2 billion euros in its sports car subsidiary to try to increase sales to 50,000 vehicles a year by 2015.”

  • avatar

    I can’t recall reading that FIAT had asked the government for financial assistance or incentives. There was something discussed about improving the tax environment for exporting vehicles. I don’t think that’s off the table because of Monti’s exit, just something for the successor to deal with.
    Sergio has stated that he will focus on increasing volumes for the company’s luxury brands. He’s taking a gamble with this approach. However, their market research indicates that’s the best bet to invest at the moment. I hope he’s successful with these efforts as it will benefit both Chrysler and Fiat. He has stated, from the beginning, that he wanted the companies merged to form one company and be a major player in the industry.

    • 0 avatar

      I would have to agree with the investing in luxery brands would be Fiat’s best hope at the moment, Ferrari and Maserati seem to be doing just fine, but one is in the Ultra grouping and Maserati seems to want to stay in the A8 (S Class, 7 Series) (+) group, so if they could just take some of the styling and give it to Alfa and let them compete in the A6-A8 range it would be best course of action. I think Fiat may be dead (look at thier line up and the names sure as hell have to change if they’re going to bring them over, not to many americans are going to be seen in a car with “Punto” written on it. I also think Marchionni realizes this, perhaps he doesn’t want access to Chrysco’s cash at the moment b/c then he isn’t forced to use it on a dead end, he has a viable end game if it comes to it, transfer Fiats international operations to Chryco, move Chryco, Alfa, Mas. and Ferrari over to Fiat Industrial and leave Fiat Auto (the two were seperated for a reason) to die in Europe (specifically manufacturing in Italy), then vola Fiat International re-enters, producing cars at say Opel plants after a cash infusion or re-purchased and re-purposed Fiat plant or two.

  • avatar

    I have been following Fiat for a few years now, but I can’t recall Marchionne asking for a bail out at anytime. As a group they are profitable unlike PSA for example.
    They will get the export incentives shortly I’m quite positive, the deal is likely done. Marchionne is supposed to announce plans to build Fiat and Jeep SUV’s at Melfi, next week.

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