Chrysler CEO Bob Nardelli and I share a birthday, but there the similarity ends. We were both born under the astrological sign of Taurus and the irony is not lost that this distinction may put us closer to Ford than either Chrysler or Opinion. Those of us born under this sign are said to be dedicated, determined and disciplined, reliable, patient and tenacious. Somewhere in there is stubborn, but not to worry, that’s a trademark of the auto industry in general.
Nardelli is a tough guy, but he’s been a top gun (GE) or CEO (Home Depot) at ever weaker companies over his career, always landing on his feet after being let go with one of those cash-rich parachutes. Light bulbs, the two by fours and now cars—is there an end to all this somewhere and is it a happy ending?
Enter potential merger partner Sergio Marchionne, FIAT Group CEO and brand new 35% suitor of Chrysler. Daimler Benz couldn’t make a similar marriage work, but then they had an already large U.S. presence and not much upon which to build cross-markets. Embarrassingly, Daimler paid some $38 billion to buy Chrysler in 1998 and recently had to pay a dowry of $650 million to get a private investor group (Cerberus) to take it off their hands.
Somewhere there is a meeting in the great beyond, where Walter Chrysler and Henry Ford are both getting drunk.
For his part, astrologically, Sergio is a Gemini—adaptable and versatile, communicative and witty—how Italian of him. The dark side of his sign is nervous and tense, superficial and inconsistent, cunning and inquisitive. Can this marriage be saved? I admit to a long and tireless campaign against the stubbornness and superficiality of Detroit as the American automobile industry sank beneath the waves of one failed non-strategy after another. Detroit held fast to muscle-cars long after the muscle had left the industry.
They brought disaster upon themselves the old-fashioned way—they earned it.
All that off my chest, Chrysler has been an engineering giant in the industry and now builds a pretty damn fine (if somewhat upscale) car, supposing they can survive to see the market come back. FIAT, for its side of the bargain, has a 20% market share in Europe and none in America, which is still the world’s largest single buyer of cars. Chrysler hasn't much in the way of small, fuel-efficient cars and could use the FIAT line to bolster their dealer network. Hmmmm . . . might work.
The Washington Post reports,
The alliance of the two companies provides no cash to Chrysler, but the company's chief executive, Robert L. Nardelli, told stakeholders in a letter that he hoped the deal would bolster the automaker's case for an additional $3 billion of federal loans by strengthening its offerings. The nonbinding agreement is subject to approval by the Treasury, and Chrysler said it hoped it would be complete by April.
That was perhaps an unfortunate metaphor. Being puzzled is not something you want to admit when you’re courting. Someone at the Treasury Department might just reasonably begin to ask if there are any other significant pieces missing; like perhaps unsustainable commitments to health and welfare obligations. The Italians are not likely to contribute much to that synergy.
Mercedes out almost $30 billion and now Chrysler, divorced after that short marriage, is
trying to stagger to the altar with FIAT and Alfa Romeo.
FIAT, itself formerly and briefly married to GM, was paid some $2 billion to annul that matrimonial disaster. Automobile companies, like Elizabeth Taylor, seem somehow unfit for marriage, no matter the doggedness of their intentions.
Nardelli and Marchionne—the names sound like a couple of expensive desserts at an Italian restaurant. Yet Marchionne was the author of a remarkable turnaround at FIAT—known alternatively as Fabbrica Italiana Automobili Torino and Fix It Again Tony, the latter with a usually benign chuckle. The man booted FIAT into a 20% market share in Europe, but it’s depressing to think that the American taxpayer is supposed to come up with a $3 billion dowry to get Chrysler to the church on time.
Supposing FIAT actually has hopes for successful entry into an already crowded and declining (read that plummeting) American auto market, they could do worse than avail themselves of Chrysler’s 3,372 authorized dealers across the land. Currently faced with the very expensive and very demoralizing shutdown of huge numbers of dealers, Chrysler might find blood enough in the FIAT econo-box line to keep the patient alive until help arrives. It better arrive quick.
(WaPo again) . . . By mid-February, Chrysler must submit a restructuring plan to achieve long-term viability, international competitiveness and energy efficiency. If it doesn't show progress on that plan, by May 1 the government can call back the $4 billion loan, effectively pushing the company into bankruptcy.
That’s a week from now.
. . . A critical element to the deal is the
acceptance by dealers, who would likely be asked to sell Fiats. "This is phenomenal," said Hayden Elder,
co-chair of Chrysler's national dealer council and the owner of Elder Chrysler
Dodge Jeep in Athens, Tex. "We've got a partner now."
"This is phenomenal," said Hayden Elder, co-chair of Chrysler's national dealer council and the owner of Elder Chrysler Dodge Jeep in Athens, Tex. "We've got a partner now."
It sounds like, given the alternative, dealer acceptance is not going to be a problem. Which would be great news for a stressed industry, were it not for the fact that automobile sales (worldwide) are at the very tip of the economic spear—and that shaft is in an almost vertical downward free-fall. Which might bring a whole new meaning to the term shafted.