Fiat will get 35% of Chrysler - in exchange for what?

Daimler still owns what- 20% of Chrysler?

Fiat will own 35%?

That means Cerebus will end up owning less than 50%?

I'll tell you why this is happening.

Chrysler is competition to Fiat in Italy. Chrysler sells more cars in
Italy in the past year or so, more than any other country outside of
north america.

But here's whats really going to happen:

Once Fiat has it's 35% of Chrysler, it's going to clamp down and reduce
Chrysler sales in Italy and in Europe generally. It's the typical scam
thats performed by what seems like an enthusiatic business partner who
in reality is your competition.

Daimler did much the same with Chrysler in Europe. In the late 90's,
Chrysler designed the 300m specifically to compete in Europe (5m length
was important design consideration). We all know how well that worked
out for Chrysler.

Read the story below. Fiat will get 35% of Chrysler.

What will Chrysler get?

Hope? Change? Hot air? A lot of talk, but no action?

What does Cerberus get? A more dilluted stake in Chrysler?

--------------------------------------------------------------

Back from brink of collapse, Fiat bids to rescue Chrysler

By Dave Hall, Windsor Star
January 21, 2009

http://www.windsorstar.com/story_print.html?id=1200367&sponsor=

An Italian automaker, which was in dire straits only five years ago, is
now being counted on to help rescue Chrysler -- the smallest of the
struggling Detroit Three.

Led by CEO Sergio Marchionne, who earned an MBA at the University of
Windsor in the mid-1980s, Fiat SpA has reached an agreement to take a 35
per cent equity stake in Chrysler LLC.

The deal will give Fiat access to the North American market and Chrysler
will gain from Fiat's small-car technology and engine innovations, but
one analyst says it was too soon to tell if the alliance will be
successful for both companies.

"It's hard to say at this point because the devil is always in the
details and we simply don't know enough about how this will work to tell
if it will truly help both companies," said David Cole of the Ann Arbor,
Mich.-based Center for Automotive Research.

"But clearly both need help and this deal gives them both some scale
across the globe," said Cole. "Fiat doesn't do a lot of business here
and Chrysler is not all that active outside of North America so this
gives them both access to new markets."

The Canadian Auto Workers' union has always felt that a merger or
partnership with a global company "made far more sense than with a North
American rival such as GM because of the potential access to different
products and markets," said president Ken Lewenza.

"On the surface, I'm satisfied with what I've heard, but I'm also
cautious because not too long ago we were hearing that the partnership
between Daimler and Chrysler would be a win-win situation and we all
know how that turned out," Lewenza said. "But those two companies
continued to operate virtually independently, and I think this needs to
be much more of a partnership to have a chance of being successful."

Chrysler chairman Bob Nardelli said in a statement issued to employees
Tuesday that "under the agreement, Chrysler will have access to all Fiat
group vehicle platforms, with the exception of Ferrari, which would
complement our current product portfolio with fuel-efficient,
environmentally-friendly small cars and powertrain technology."

Fiat and Chrysler, while operating in vastly different markets with
different product lines, are similar in size. Last year, Chrysler sold
two million vehicles across the globe while Fiat sold 2.5 million. Both
depend heavily on sales on their own continent.

Marchionne was unavailable for comment from Fiat's headquarters in
Turin, but earlier Tuesday he issued a statement saying "this initiative
represents a key milestone in the rapidly changing landscape of the
automotive sector and confirms Fiat and Chrysler's commitment and
determination to play a significant role in this global process."

Marchionne, who took over as CEO in 2004, has been largely credited with
pulling the automaker back from the brink of collapse.

At one point Fiat was the largest car producer in Europe, but by 2004 it
had slipped to eighth amid rising debt, leadership woes and labour
unrest.

Losses have steadily fallen under Marchionne's leadership and the
company recorded its first profit in 17 quarters during the first three
months of 2005.

With three successful models -- the Grande Punto, Bravo and the
award-winning 500 -- the company has re-entered markets, such as Mexico
and Australia, it had previously abandoned.

But despite the turnaround, analysts still question Fiat's long-term
viability, especially in the small car market where profit margins are
thin.

The company has been seeking a North American partner for months and
will now have an opportunity to begin assembling its small vehicles on
this continent while, at the same time, relaunching the Alfa Romeo
brand.

It's expected Fiat will initially ship vehicles to North America while
selected North American plants are retooled to accommodate its small
vehicle lineup.

"It's probably not that difficult to retool from an engineering
standpoint, but they will be looking for assembly operations where they
can build these Fiat models on similar vehicle platforms," said Cole.

Lewenza said that would likely not include Chrysler's Windsor Assembly
Plant which assembles the Town and Country, Grand Caravan and Volkswagen
Routan minivans.

"It's expensive and time consuming to undergo major retooling so it
makes sense eventually to assemble Fiat models in plants where Chrysler
currently assembles its own small vehicles," he said.

FIAT FACTS

- Founded in 1899.

- The Fiat Group is the largest industrial enterprise in Italy.

- The company name is an acronym for Fabbrica Italiana Automobil Torino.

- It designs, manufactures and sells automobiles, trucks, tractors,
agricultural and construction machinery, engines and automotive
components and production systems.

- It owns Maserati, Ferrari and Case New Holland.

- It has 185,000 employees worldwide.

-- Source: Fiat Group website

 

Actually around 10%, I've read, and Chrysler's debt is also being
converted to equity.

Huh? Chrysler isn't even competition to anyone here at home.

Twice nothing is still nothing.

Again, reducing what's pretty much zero makes no difference.

"Only 8% of Chrysler cars are sold outside North America. Currently,
Western Europe accounts for about half of Chrysler's sales abroad."

So ALL of western Europe = 4% of Chrysler sales.

Yeah, it was still way too big and way too thirsty, had no diesel
option, was overpriced for a nonprestigious nameplate, etc.

Access to Fiat's small car platforms. Vital, considering Chrysler has
no competitive small cars right now.

 

MoPar Man cannot contain his xenophobia, as expressed in another thread...
His beloved American Chrysler has failed and he likes to blame those darned
foreigners...

The product ranges do not compete. Why would Fiat want to throttle Chrysler
sales in Italy? If they were a shareholder they would be interested in
geting sales up.

The 300M, like the PT Cruiser, is an acquired taste and was hardly likely to
appeal to a mass market. And, yes, a 5 m length is FAR too big for mass
appeal, especially in places like Britain and Italy, which have many towns
with old centres with very narrow streets. It's not for nothing that Italy
is the home of small cars and motor scooters. The tiny Mercedes Smart does
very well there, especially in Rome.

BTW, the 300M did get a diesel engine in Europe (though I don't know how
good it was), as did the Jeep etc.

MoPar has provided no evidence for his allegation that Mercedes/Daimler
deliberately limited Chrysler sales. With the large collection of
dealerships and big investment in Chrysler that would be foolish. Where
there were comparable models there was no direct competition.

Take the Sebring convertible v CLK Cabriolet as an example. I have driven
the former (rental in the USA) and have the latter.

The Sebring was priced below the CLK Cab even in Germany and that was right.
The CLK is clearly a superior car but the Sebring convertible offered
similar space and wind-in-the-hair feeling at a lower price. At American
prices the Sebring probably offers/offered better value for money than the
CLK Cabriolet, but it was not available in Europe at American prices. (No
American-made car is.)

In London the main Chryslers one sees are the PT Cruiser, Grand Voyager and
Jeep (and some Neons in their day). I don't think Sebrings were sold here
in any numbers.

In the present climate ALL car manufacturers are suffering. In the UK sales
have fallen off a cliff, and elsewhere they are not much better. There was
talk of Jaguar's owner going to the government for money but, as it is a
very large industrial group there may be a game of chicken to see who blinks
first, i.e. will the government believe that the owner will truly shut the
plant without subsidy. Maybe Tata haven't formally asked yet.

However, the plant is on a two-week shut-down, after an extra-long Christmas
break, and the government may shortly announce US-style aid for the car
makers, as is happening elsewhere.

In France and Germany the government offered a 'scrapping reward' to
encourage new sales. I don't know what happened in France but in Germany
the rules permitted the purchase of cars up to one year old. The sum is EUR
2500 and the slightly-used market was emptied...
We might get a similar scrapping reward in the UK.

Good selection of gloomy reports:

http://article.wn.com/view/2008/10/02/Jaguar_calls_for_USstyle_green_subsidy_for_cars/

DAS
--
To send an e-mail directly replace "spam" with "schmetterling"
---

Actually around 10%, I've read, and Chrysler's debt is also being
converted to equity.

Huh? Chrysler isn't even competition to anyone here at home.

Twice nothing is still nothing.

Again, reducing what's pretty much zero makes no difference.

"Only 8% of Chrysler cars are sold outside North America. Currently,
Western Europe accounts for about half of Chrysler's sales abroad."

So ALL of western Europe = 4% of Chrysler sales.

Yeah, it was still way too big and way too thirsty, had no diesel
option, was overpriced for a nonprestigious nameplate, etc.

Access to Fiat's small car platforms. Vital, considering Chrysler has
no competitive small cars right now.

 

You mean "blame those damned germans". And I'm not the only one who
thinks the Damiler take-over of Chrysler set the stage for Chrysler's
downfall as Chrysler's cash was stolen and Chrysler's vehicles were
stuffed full of Mercedes components in an effort to keep Chrysler a
slave of Daimler components for years to come.

When you are given the shares for free, for no cost, then they mean
nothing to you. If your competitor gives you 1/3 of it's shares (in
exchange for a lot of hot air - in this case in exchange for something
called "access"), then the most effective thing you can do is to
dismantle your competitor, carve it up and sell it off. Bye bye
competitor. Hello $$$.

American managers of Chrysler gave Chrysler to Daimler while calling it
a merger. Cerberus is giving Fiat a controlling share of Chrysler as
part of their exit strategy. In Fiat's hands, Chrysler will be
dismantled. Fiat might keep Jeep brand, or sell it. Same with Dodge
Ram truck line. Minivan production they might keep going.

And oh yea, that huge monster vehicle - the Caliber, which of course is
so large that it can't be considered a small car, certainly not for the
tiny little people in their tiny little villages in Europe, so the
caliber has no use and it must go too.

You're comparing the look and styling of the 300m to the PT? Are you
kidding?

On what planet was the 300m an "acquired taste" ?

How ironic that Italy currently buys more of Chrysler's supposedly
monster-sized vehicles than any other european country.

I believe it was the 2.7L gas engine, not a diesel. I remember several
taxi rides about 5 years ago in the Netherlands in a 300m taxi cab. It
did not have a diesel.

By not expanding Chrysler sales in Europe, when Daimler effectively
owned Chrysler, that's my evidence that they limited Chrysler sales in
europe.

 

All of Western Europe buys 4% of Chrysler's offerings, and I suspect
much of that is minivans. Face it, Chrysler's a niche player there,
much like, say, Aston-Martin or Maserati is here.

 

See below.

DAS

To send an e-mail directly replace "spam" with "schmetterling"
---

FROM DAS: Yes, those "Germans". Quite a few people in this NG have moaned
about Daimler (as it is now called), hardly representative of the
population. The bit about 'slavery' I'd like to see proved. One could
equally argue it was to get the price of components down.

Personally I agree that it was a take-over of Chrysler (as probably do most
Europeans who take an interest) and it was to my surprise to learn it was
'sold' as a merger in the US. I must add, though, that sometimes technical
mergers have tax advantages over take-overs.

I also think it was a big mistake for Daimler to acquire Chrysler, even if
it was just to suddenly up its sales in the (1m p.a. Mercedes cars globally,
2m Chryslers in the US, if IICR). It bought into a troubled company in a
country a lot of European sales managers s don't seem to understand (e.g. we
have seen various British companies such as banks and retailers making big
acquisitions in the US and then exiting with a big loss, which is not to say
there haven't been successful forays into the US). Management attention was
diverted from the core brand.

As I have said here before, I think the main reasons for the deal was top
corporate management's megalomaniac tendencies -- which they have shown
before with disastrous forays into household electrical good and
aerospace -- and the chance to get listed on the NYSE. This meant that the
top executives could pay themselves ridiculously high American salaries,
justifying it by saying "we are an American company now" (and I did not make
the last bit up).

I like (many of) Merc's cars and I think it is a shame they bought
Chrysler. I would have to do some research to confirm this but I think that
the various quality issues that some (key) models suffered arose because of
these strategic issues. I have heard the comment that the quaility problems
arose in foreign plants (not only the US) but there should be no excuse.
Also the question of dealerships, which have been critisised in various
countries including UK, though I personally never knowingly had a real
problem. And it has been addressed in general.

DAS: I suppose Chrysler had no debt, then? Otherwise it would be like the
moans about BMW getting Rover for a pound when, in fact, the company came
with GBP 350 million (USD >500m at the time?) of debt, IIRC.

DAS: Frankly, if some of Chrysler's cars don't sell in the US what's the
point of keeping them going?

DAS: Pure polemics - I was talking about selling them in Europe. Why would
they be dispoded of if they sell well in the US?

DAS: Planet Europe and RoW. I did not compare the two. Each in its own
way is an acquired taste if you don't live in the US (except Saudi Arabia,
which has quite a few US-sourced cars). Let me remind you that for years
the US manufacturers produced cars that were considered pug-ugly in Europe,
and that's besides the issue of tech specs. Things improved (from a
European perspective) in recent years, but that does not mean all American
cars are lovely to behold. As it happens I have an acquaintance here who
thinks the PT Cruiser ir terrific (but still drives his oldish Saab).

DAS: I think you are mixing things up here. I did not suggest that zero
big cars are being sold in Italy or anywhere else. I also said that little
cars are very popular in Italy.

There are lots of Merc S Class and BMW 7s in London, e.g.

DAS: Sorry, 300C had a 3-litre turbodiesel.

http://www.desperateseller.co.uk/fi...s-for-sale.asp?orderID=14520990&vendor=116565

DAS: On what basis do you claim that Daimler deliberately did not try to
promote sales? I have no info and am surprised at this claim, as I said
before.