April 17, 2009

The 'superhero' in whose hands are the partnership negotiations between Fiat and Chrysler

Fiat CEO Sergio Marchionne is the car industry outsider and the “superhero” who, against all expectations, pulled the Italian automotive group back from the brink collapse since taking over in 2004, and now it is also him in whose hands—according to the chairman of Fiat, Luca Cordero di Montezemolo—are the partnership negotiations between the Turin automaker and Chrysler.

The two carmakers are both racing against the clock to strike a deal by May 1, the deadline President Barack Obama set to receive federal bail-out funds which are essential for Chrysler to avoid bankruptcy. “The only thing I have to say […] is that we should leave it up to Sergio Marchionne and his staff to see whether a solution can be found by the end of the month,” Montezemolo said.

Montezemolo also said that Fiat isn’t looking at Opel, the German unit of General Motors, and this in response to an earlier press report saying Fiat may be looking at the German carmaker.

President Barack Obama, as it is well-known, is keen on the Fiat solution for Chrysler: after all, “the technological transfer Fiat is proposing would enable Chrysler to develop the small eco-friendly cars the American president is pushing for.” But the deal seems to make sense for both companies. In fact, not only would it give Fiat an initial 20% stake in Chrysler in exchange for its cutting-edge green and small-car technology, the Turin automaker would also have access to Chrysler’s plants and dealerships in order to allow it to return to the American market, initially with Alfa Romeo and the trendy Fiat 500 city car.

But there are still obstacles to overcome:

The deal in part hinges on unions and lenders accepting stock in Chrysler in exchange for the debt owed to them.

An accord draft leaked to the press on Thursday indicated that unions would take a 20% stake in Chrysler, the same as Fiat's initial stake, as payment for half their pension fund.

Marchionne is also asking that unions except wage cuts to bring labor costs in line with those in other plants in the US producing foreign cars, in states where the union have less power.

He added that Fiat was ready to ''walk away'' if the concessions were not made, while Montezemolo has said that a 'Plan B' existed should the accord fall through. The leaked draft also indicated that Marchionne would serve as CEO for both Fiat and Chrysler, while the US automaker would have an American chairman of the board.


  1. As much as I love the fiat 500 I will stick to my gas gizzling monsters when driving on my frequent trips to California.

  2. Looks like a win win for Obama. Fiat doesn't come through, then he gives Chrysler government money and he has control. If Fiat comes through but the unions get twenty percent, Obama controls. Obama is very much about the government controlling the private sector. As for him being for smaller fuel efficient cars, that is of course for others, not him. What did he drive as a private citizen? I drive a four cylinder. Did he?