Fiat is not exactly in a comfortable position. In fact, few, if any automakers, are. This is why most of them are studying ways to get together with others and join forces. Fiat's golden opportunity has arised with the world financial crisis. The company intended to have a participation in the North American market. And there is not a better way to do so than making an alliance with a North American carmaker. Chrysler, in this case.
These companies have complementary ranges and Fiat has the kind of technology that matters to Chrysler: how to produce light and fuel-saving vehicles. Fiat also has the guy who knows how to produce these cars: Cledorvino Belini, CEO of Fiat's operations in Brazil.
Belini has conducted Fiat to a very successful operation in Brazil, where the Italian company leads overall vehicle sales for seven consecutive years. Quick decisions, fast vehicle development, efficient suppliers management, cars that offer good value for money and lean production are some of the qualities Fiat presents in Brazil. Since Chrysler needs a similar recipe to recover, and Belini has the confidence of Fiat's world CEO, Sergio Marchionne, we may hear his name quite often in the next few months.
As for Fiat and Chrysler, reports state they have created an alliance, but in fact a new company has been created. This new company will run Chrysler, Dodge and Jeep and will be managed by Fiat, once Bob Nardelli and Tom LaSorda have stepped down from their positions in the company. Nardelli will act in Cerberus as an advisor.
Chrysler has not avoided filing for Chapter 11. Some of its creditors did not want to negociate, what, in the end, will be worse for them. Now the company counts with legal protection and will not have to negotiate anything, only say what it can do or not. Creditors, at least for now, will just have to accept.
Even though it seems nice for Chrysler, it is not. Their main stake, buyers' confidence, may drop in a menacing way. This is why Barack Obama himself said Chrysler cars will have the backup of the USA government.
Car production in the USA will be suspended from Monday, May 4, until all details of the new company are revealed. An important part of it has already been divulged: 55% of the company's shares will be in the hands of VEBA (Voluntary Employee Beneficiary Association) 10% with the governments of USA and Canada and 20% with Fiat. The other 15% will also go to Fiat if the company manages to fulfill these requirements:
* 5% if it provides Chrysler with a car that is able to reach 17 km/l to be produced in the USA (this car has already been confirmed to be the 500);
* 5% if it offers a fuel-efficient family of engines to be produced in the USA (FIRE engines, already confirmed by Fiat) and;
* 5% if it opens its dealers doors all over the world for Chrysler to export its vehicles.
This is a step Fiat is already taking care of.
Dodge Dakota units have been seen in Betim by the blog Autos Segredos, where the Italian automaker controls what is about to become the biggest car-producing plant of the world, with a capacity of 800,000 every year. Since Fiat does not produce pick-up trucks, this is the right product to sell in South American markets.
If Fiat manages to lower Chrysler debts with the USA to US$ 3 billion or less, it will be eligible to acquire an additional 16% equity interest from January 1, 2013 to June 30, 2016, what will leave the company in the position of holding 51% of all shares. Anyway, Fiat will be limited to 49% of all shares until all loans granted by the US Treasury have been paid.
Besides that, all financing operations from Chrysler will be performed by GMAC, what will keep cars accessible to those that still have their jobs. Let's just hope Fiat and Chrysler manage not only to keep the ones that already exist, but that they help create new ones.
Source: Chrysler
