Chrysler, the littlest of the Big Three automakers, is by all accounts a dead man walking. Facing debts totalling $7bn and declining sales, the company has been ordered by the Treasury to prepare for Chapter 11 bankruptcy. Only an Italian suitor and government largesse stave off complete asset liquidation. Four billion dollars in federal loans keep the company afloat, with the government pledging an additional $6bn if it restructures and merges with Italian automaker Fiat.
As Chrysler's knight in shining armour, Fiat comes riding to the rescue looking rather shabby. Financial disclosures show the company lost $533m in the first quarter of 2009. Sales for the entire Fiat Group declined by $14.7bn over the last year. Just six years ago, Fiat was on the verge of collapse itself, saddled with $33bn in debt and a dysfunctional management. Italy's largest employer barely survived then with a cash infusion from none other than General Motors. If Chrysler may wonder what a troubled Italian automaker would want with an even more troubled American one, it is in no position to ask.
On Sunday, Chrysler got yet another reprieve: reaching a tentative agreement with the United Auto Workers union over new terms for contracts covering nearly 27,000 employees in the US. This follows an agreement reached Friday with the Canadian Auto Workers, who represent an additional 8,000 workers in Ontario. Both were crucial for the company to meet the government's requirements for future loans. Both also mean heavy losses for autoworkers.
What will Chrysler's workers get? According to the summary agreement, wage freezes, curbs on overtime and ... majority ownership in the company. If this sounds like a trade-off, it's not. As retiree benefits are the industry's main cost driver, Chrysler seeks to cut the real monetary contributions backing its retiree healthcare trust and replace them with company stock of dubious value. Chrysler's creditors are getting a similar deal, accepting pennies on the dollar for the company's debts.
http://www.guardian.co.uk/commentisfree/cifamerica/2009/apr/27/chrysler-fiat-uaw-bankruptcyMarchionne's gamble
TURIN and TORONTO — For a man who is about to make the biggest bet of his career, Sergio Marchionne looks remarkably relaxed.
He smokes languidly. His Muratti cigarettes fill the ashtray on his big, cluttered desk in Fiat's headquarters next to the famous Lingotti building, the auto maker's half-kilometre-long former factory with the famous rooftop test track. His trademark uniform is a dark jersey; he almost never wears a jacket and tie. This is a man who could be on a golf course.
There are several models of the new Fiat Cinquecento (Italian for 500) on his desk. The Cinquecento, launched in 2007, sealed Fiat's remarkable turnaround story, making Mr. Marchionne something of a hero in the automotive world. Indeed, Fiat was a lost cause when he joined it in 2004. Today, it is one of the industry's most profitable players.
The Italian-Canadian executive is gambling he can work the same magic on Chrysler. “It took me a long time to get comfortable with this notion
,” Mr. Marchionne said. “To us it's a huge step. Fiat Group's reputation is on the line. I can only tell you we are going to treat this with the same level of intensity that we treated Fiat.”
http://www.theglobeandmail.com/servlet/story/RTGAM.20090415.wrfiatcentre15/BNStory/Business
Again. How on earth did Fiat get into this?
Or is it a means to have someone to blame?
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