EoW March 2009

Writing in the Detroit News, Alisa Priddle reported the first comments on the deal from the Italian side, made during a conference call held 22 nd January by Fiat SpA chief executive Sergio Marchionne with company investors. Both automakers will be the stronger for the alignment, said Mr Marchionne, who saw little product overlap and no danger to Fiat in the relationship with Chrysler. He said. “We carried out a sufficient level of due diligence [on Chrysler] just to get us to sign a relatively detailed letter of intent.” (“Fiat: Chrysler Is A Good Fit,” 23 rd January) Indeed, Fiat has troubles of its own, having reported a 69.8% drop in fourth-quarter 2008 profit largely on falling demand in Western Europe and Brazil. Its CEO told the investors that 2009 could see Fiat’s global sales dip perilously close to its breakeven volume of 1.84 million vehicles. Hence, Ms Priddle noted, Fiat’s need to do something – and Mr Marchionne’s personal commitment of many hours to helping Chrysler, which had already scored $4 billion in emergency funding, to commend itself for billions more in US government loans. As he spoke, a Fiat team was at Chrysler headquarters in Auburn Hills, Michigan, lending a hand with the revitalisation plan Chrysler would bring to Washington by the initial 17 th February deadline. While Fiat will not fund any part of Chrysler’s restructuring, Mr Marchionne said it will provide turnaround expertise and years of development work for new vehicles, free. Chrysler is to be given access to all of Fiat’s vehicle platforms except the Ferrari sports car line. But, as noted by Ms Priddle of the Detroit News, the cost of tooling and building Chrysler-badged Fiats goes on Chrysler’s account. Fiat would benefit from Chrysler’s North American distribution network, but it would provide its own network in Europe and South America – presumably to Chrysler’s advantage. According to Mr Marchionne, the global economic crisis will force consolidation in the automotive industry. “The Chrysler arrangement,” he said, “is a first step in that direction.” On the same day that the Fiat chief expressed these views, Jim Press, president and vice chairman of Chrysler, spoke at an automotive roundtable in New Orleans, hosted by the global marketing information services firm JD Power and Associates. Mr Press said that the Chrysler-Fiat alliance would combine engineering experience and technology in a way almost unknown in the competitive auto industry. It will also, he said, preserve jobs, accelerate delivery of fuel-efficient cars to the market, and help stabilise the US car industry. “That’s not a bad thing,” the Chrysler executive commented, before putting a question to reporters at the forum: “That’s a good thing, right?” ❈

Elsewhere in automotive . . .

❈ In an effort to quickly raise about $257 million in cash, Detroit-based General Motors said it would sell and lease back some of its non-manufacturing operations in Britain. Properties that could be sold by GM’s United Kingdom and Ireland Division include its headquarters in Luton, a parts warehouse there, and

37

EuroWire – March 2009