April 29, 2009

Fiat-Chrysler alliance (according to GB Vico)

“We’re confident a deal will be struck but we have to wait until Thursday and respect any decision which is made. It’s always hard to weigh probability just ahead of a deadline, but in important negotiations a lot is accomplished at the very end,” said yesterday Fiat Deputy Chairman John Elkann. In turn, says Chrysler Chief Executive Bob Nardelli, the US carmaker continues to make progress in its efforts to complete the proposed alliance with Fiat. In fact, after the U.S. Treasury Department has reached an agreement with Chrysler’s four main creditor banks (JP Morgan, Citigroup, Goldman Sachs and Morgan Stanley) to cancel $6.9 billion of debt in exchange for $2 billion in cash (but the deal still needs the approval of all of the secured lenders), the United Auto Workers union approved a tentative new labor agreement and sent the deal to local union members for a ratification vote today.

So, though nothing is official and caution is in order, it seems to be a done deal. And to think that when Fiat CEO Sergio Marchionne predicted six months ago that only half a dozen carmakers would have the scale to weather the credit crisis, analysts questioned whether the Italian company would be among them. Now not only is he close to complete the alliance with Chrysler, he is also negotiating to buy a stake in Opel from General Motors. According to Sanford C. Bernstein analysts, a Fiat-Chrysler-Opel alliance would rank second in passenger cars and light trucks production, behind Toyota. And again, to think that five years ago it was GM calling the tune for Fiat!

Well, since this is not, by any means, a blog for economists, but rather for humanists, I wonder what the Italian philosppher of history Giambattista Vico would have to say about all this. Well, as far as I know he thought that what happened in the past will, in a similar way, also happen in the future, in conformity with the permanent pattern of historic development. Yet, it was also his opinion that the recurrence is not merely repetition of a previous age, but a movement in a particular direction. Now the question is—which direction? I mean, in this specific case, since what Vico had in mind, in general, was a movement in the Providential direction… Which might seem a rather rhetorical way to end this post. And we need to cross our fingers instead …