Obama’s Chrysler Deal a Gift to Fiat

Fiat figures to benefit more from its marriage with the struggling U.S. automaker.

Dan Neil
The Los Angeles Times
May 1, 2009
After an abusive affair with Germany’s Daimler ending in 2007 and a dysfunctional relationship with former owner Cerberus Capital Management that ended with the company in bankruptcy Thursday, can Chrysler learn to love again?

The alliance between Chrysler and Italy’s Fiat — in which the Turin automaker takes a 20% stake in Chrysler and Chrysler gains access to Fiat’s small-vehicle and fuel-efficient technology — is plainly a terrific deal for Fiat and maintains Chief Executive Sergio Marchionne’s reputation as super-fixer and corporate Midas.

Fiat pays next to nothing and now has instant access to U.S. markets through Chrysler’s dealers. For at least a year, Marchionne had been casting about for a partner to help bring Fiat to America, approaching GM, Ford, BMW and Nissan along the way. A plan to reintroduce Alfa Romeo was abandoned suddenly last year after the economy softened.

Obama-Chrysler-Fiat-GMAC-Canada: If This Works; Pigs Can Fly
In Marchionne’s view, Fiat is too small to survive on its own in an era of rapid consolidation. It needs annual global sales of 5.5 million or more to remain viable (last year’s total: about 2.1 million vehicles). That kind of volume is possible only if Fiat sells cars in the U.S.

The immediate benefit of the alliance with Chrysler is, obviously, the $8 billion in government loans that would help it weather the painful reorganization to come.

In the longer term, the theory runs, Chrysler will be able to re-badge successful Fiat products — imagine a Chrysler-badged version of the Fiat’s Bravo sedan — and build other vehicles based on Fiat global platforms.

But in this new Italian romance, the relationship is distinctly one-sided.

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