Fiat Denies ChryCo Debt Assumption

The flushing of Chrysler, Nardelli lies again

Fiat Denies ChryCo Debt Assumption
http://www.reuters.com/article/ousiv/idUSTRE52J25320090320

Fri Mar 20, 2009 9:53am EDT

By Gilles Castonguay

MILAN (Reuters) - Italy's Fiat SpA (FIA.MI: Quote, Profile, Research,
Stock Buzz) on Friday said it would not assume any debt from would-be
partner and troubled carmaker Chrysler LLC CBS.UL, less than two weeks
before Chrysler is to meet U.S. demands for a crucial loan.

Fiat denied a statement by Chrysler that it would assume 35 percent of
that company's debt to the U.S. government.

"Fiat Group intends to make it absolutely clear that the proposed
alliance will not entail the assumption of any current or future
indebtedness of Chrysler," Fiat said in a statement.

At about 1330 GMT (9:30 a.m. EDT), shares in Fiat, which is looking to
form a partnership with Chrysler, were down 2.68 percent at 4.58 euros,
while the DJ Stoxx auto index was down 1.06 percent. Fiat shares were
earlier down more than 4 percent.

A video message on Chrysler's media website on Thursday said Fiat would
take on 35 percent of Chrysler's debt to the U.S. government, but would
not receive any money from that pool.

The percentage figure is the same as Fiat's planned equity stake in the
No. 3 U.S. car maker.

The partnership comes as the car industry is struck by the worst crisis
in decades. It helps Fiat gain the scale it needs to stay profitable and
Chrysler to stay in business.

VIABLE CONCERN

Chrysler has received a $4 billion emergency loan from the U.S.
government and has requested another $5 billion.

It has until March 31 to prove to the government that it can remain a
viable concern and deserves the extra loan. Its partnership with Fiat
depends on it getting that money.

In a non-binding agreement, Fiat is to take a 35 percent stake in
Chrysler in exchange for technology to make small cars as well as access
to foreign markets.

Fiat will not pay cash for the stake in Chrysler, which is 80.1 percent
owned by Cerberus Capital Management, a private equity firm.

Analysts expect Fiat to end up investing something in the partnership in
the coming years.

"Nothing is free in this world," said Arndt Ellinghorst at Credit Suisse.

Commerzbank's Gregor Claussen said: "It will have to invest because
Chrysler plants are not made for Fiat cars."

Chrysler has said the partnership was worth up to $10 billion for
Chrysler and could preserve 5,000 manufacturing jobs in North America.

It has also said the combined purchasing budget of the two companies
would be $80 billion.

 

Did Fiat think they were getting 35% of Chrysler for free?

"in exchange for technology to make small cars"

What - does Fiat have the patent on how to make small cars?

Has Chrysler never made small cars?

"as well as access to foreign markets"

If Daimler couldn't help Chrysler access foreign markets, then what
magic can a third-rung maker like Fiat do?

The irony is that Chrysler's best foreign car sales ->IS<- in Italy.
Doesn't seem like Chrysler needs help from Fiat to accomplish that.

Cerebus will not give away 1/3 of Chrysler for nothing unless they can
saddle Fiat with 1/3 of it's debts.

If Fiat wants to sell their cars in north america, then why the ****
don't they put their cars on cargo ships and dump them here like
everyone else does? What's with all this pussy-footing around with
Chrysler all about?

Does their cash-flow support $80 billion in purchasing? It better,
because they're not going to get any bank line-of-credit for that amount
these days.

 

Mopar Man,

It looks like you have identified Chrysler's problem!

2007 Chrysler LLC revenues were $49B. 2009 revenues must be down 30+% (I am
being conservative). Fiat's revenues were $8.1B for 4Q08. Using the best
possible assumptions for both companies, the combined revenues can't be more
than $66B. To get the purchased content, you'd need to remove the
non-operating revenues, profit, and the labor and load.content of their
vehicles.

More seriously, perhaps the $80B purchased materials content figure that was
quoted was a multi-year estimate?

Bob