Fiat Money

As a tough sort of bird, it would be hard to imagine exactly what Casimir (Kazimierz, originally) would make of the state of Chrysler today.  Dodge Main was torn down long ago to make room for GM’s Poletown plant.  Chrysler is no longer holding out in Hamtramck’s neighboring enclave, Highland Park.  After several brushes with death, custody of Chrysler, like an invalid in a nursing home, is now being transferred to Fiat, as the Italian company has a provisional deal with dominant partner Cerberus for 35% of Walter P. Chrysler’s legacy.

The one bright spot of this development is the potential use of Fiat products, platforms, powertrains and components to help Chrysler develop a competitive car line.  While Fiat vehicles are a bit small for American mass-market tastes, a size upgrade gets one to the Alfa Romeo line up, which includes C/D sized 159 sport sedans and wagons and access to more American-sized engines in the 1.8, 2.2 and 3.2 liter sizes, the latter being a V6.  But the star of the Fiat line up is the new 500, the smallest of the line up and another retro icon, like the MINI.  Unlike the MINI, though, the diminutive Fiat has a usable rear seat and a pleasing interior to go along with its pleasant styling and personality.

Best of all, if the car is ever sold here, is that Grandpa might be tempted by the fact that the car is built in Tychy, Poland.  A car built in the actual homeland might trump the adopted industrial hometown of Hamtramck.

Regardless of provenance, the Fiat-Chrysler alliance does have a few issues.  First off, Fiat is about to acquire 35% of Chrysler with an outlay even I could afford, that is, absolutely nothing.  Cerberus essentially tossed the keys of Chrysler to Fiat with number of good wishes and a “see what you can make of it”.  While Chrysler now has access to the Fiat parts bin, they had access to it prior to the arrangement.  Secondly, there’s the small matter of Chrysler’s previous dalliances with Daimler and Nissan-Renault.

I’m sure most felt that Fiat’s 35% stake included a buyout of Daimler’s remaining 19.1% stake.  But that’s not the case, and right now Cerberus has a 54.9% stake in Chrysler, meaning that if Fiat and Daimler were to work out an accommodation, they would jointly run the firm.  For its part, Daimler has said that anything that helps Chrysler helps their stake in the firm, having acknowledged that Chrysler’s fate is not core to theirs, at least for the moment.  The joker in the deck is the extensive tie-ins Chrysler has inked with Nissan.

One wonders what Carlos Ghosn in his mountain redoubt thinks about Sergio Marchionne’s piece of ledger-demain with Chrysler.  (No, I don’t KNOW if Carlos has a mountain redoubt, but he should.)  Was the Nissan-Renault alliance offered a similar deal as Fiat, that is, nothing down and no payments forever, or if Sergio simply forced himself to the front of the queue, no matter how short that queue might have been for equity in Chrysler these days.  Was there an anguished cry of “Curses! Foiled again!” or whatever powerful automotive magnates say in such a situation, no matter their polarity?  Did he say, “Clever, Sergio, but we’ll see who gets the last laugh”?  Or was it simply a matter of passing on what he thought was an unfavorable deal?

After all, 35% of what is in all probability a negative net worth situation would be a deal that could have been put together by nearly anyone.  (Tongue-in-cheek, Edward Lapham’s Automotive News January 30 column offers Daimler $1 for their 19.1% stake, for example).  Surely, as a courtesy Nissan-Renault would have been offered similar terms that Fiat took advantage of, ne c’est pas?  In such an environment, Nissan-Renault still makes more sense than Fiat, as the core Chrysler truck products have a lot to offer Nissan, but have little relevance to Fiat, and Nissan-Renault have a wider product portfolio more easily adapted to North America.  Or is it possible that Daimler’s acquiescence needed to be secured for any deal to go forward without drama, and that Fiat was preferable to the formidable Nissan-Renault alliance, with its strong worldwide presence?  Might the redoubtable Carlos Ghosn be railing against Dieter Zetsche more than Sergio Marchionne and Stephen Feinberg?

As my grandfather found out when the vendors making their deliveries to his store and those of his friends had their legs and noses broken by desperate people trying to secure a business advantage, politics and economics sometimes make for strange bedfellows.  Daimler may well have vetted the potential suitors for Chrysler’s still magnificent assets like a Sicilian godfather or eminence grise behind the scenes, ruling out some and preferring others until settling on an acceptable candidate.

Daimler’s in a bit of box itself, in that it would like to see someone take Chrysler’s stock off their hands for a great deal more than Mr. Lapham’s offer.  The dubious winner needs to be strong enough to help and eventually generate enough profit to buy out the former owners.  They probably don’t want that suitor to be too successful.  Let’s say more of a Chrysler than a DeSoto.