Monday,
January 19, 2009
Fiat Considers Stake in Chrysler
The
ANNOTICO Report
Whoa.
Didn
It
is not reassuring that most of Fiat
Maybe
if it takes 3 years to Retool there may be a chance, But can Chrysler last that
long???
Fiat Nears Stake in Chrysler That Could Lead
to Takeover
Wall
Street Journal
By
Stacey Meichry in
January
20, 2009
In an attempt to
revive two of the world
Under terms of a
pact that is being hammered out, Fiat is likely to take a 35% stake in Chrysler
by the middle of this year. It would have the option of increasing that to as
much as 55%, these people said.
Fiat wouldn
The companies
believe working together could generate savings of $3 billion, they said. The
deal is the latest maneuver by Fiat
The partnership
would provide each company with added economies of scale and geographical reach
at a time when both are struggling to compete with larger and more global
rivals like Toyota Motor Corp., Volkswagen AG and the alliance of Renault SA
and Nissan Motor Co.
Chrysler last
year sold two million cars and trucks world-wide, with almost all of its sales
in
While Fiat has a
wider global reach than Chrysler, the two auto makers are smaller players
compared to their global rivals.
Chrysler
spokeswoman Lori McTavish said, "In today
The pact with
Fiat could give Chrysler a stronger case as it seeks more loans from the
Last week, a
vocal critic of Chrysler, Sen. Bob Corker, R-Tenn.,
said the company needs to "merge or go away." A Chrysler official
declined to comment on Sen. Corker
Kimberly
Rodriquez, an automotive consultant at Detroit-based advisory firm Grant
Thornton, said Chrysler has little choice but to find an alliance.
"Without further funding, they don
Working with Fiat
could complicate a separate partnership Chrysler arranged last year with
Nissan. Chrysler is supposed to start making pickup trucks in a few years that
Nissan would sell in the
Chrysler and
Nissan have discussed joining in a broader alliance, and top executives of the
two companies spoke as recently as last week, a person familiar with the matter
said. But Carlos Ghosn, chief executive of both
Nissan and Renault, is wary of any deal that would require Nissan to put money
into Chrysler, a person familiar with Mr. Ghosn
The tentative
terms Fiat and Chrysler have worked out would call for Chrysler
A Daimler
official couldn
News of the
partnership was previously reported by Automotive News, a trade publication.
The potential
alliance will need the blessing of Fiat
Fiat
On the Chrysler
side, Cerberus has been trying to find a partner for the auto company for
months. Cerberus, a massive private-equity fund, acquired Chrysler from Daimler
in 2007, pledging to rebuild its status as an American industrial icon. To come
up with cash to fund its ambitions, Cerberus had Chrysler mortgage almost all
of its plants and other assets to raise $12 billion in loans from a group of
banks led by J.P. Morgan, Goldman Sachs and Citigroup.
Then, in the
spring of 2008, gasoline prices soared to $4 a gallon and Chrysler
Scrambling to
save cash, Chrysler slowed development of new vehicles. At the North American
International Auto Show, which opened last week in
Chrysler
With this deal,
Cerberus would be stepping away from the auto business after an 18-month stint
trying to fix Chrysler. While the private-equity firm and its investors likely
will lose billions on the Chrysler deal, Cerberus could take an even bigger hit
if it is forced to put Chrysler in Chapter 11 bankruptcy protection or continue
running the auto maker amid a slump in the
Fiat is also
facing challenges. Analysts have long doubted whether it has the scale to
survive as an independent manufacturer of small cars. Small vehicles produce
relatively thin profit margins.
Fiat has for
months been exploring ways to gain a foothold in North America, hunting for a
partner that could manufacture its Fiat 500 mini model and re-launch its
high-end Alfa Romeo brand in the U.S.
The financial
crisis has exacerbated Fiat
Most analysts say
Chrysler has little hope of surviving as a standalone company. Amid a rash of
mergers in recent decades, and the rise of well-funded newcomers in
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