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Fiat Plots Its Chrysler Plan
May 01, 2009
What made Fiat CEO Sergio Marchionne say, “that would be putting the donkey ass-backwards”?
Well, it starts with a news headline that hasn’t happened since 1933. Chrysler has become the first major American automaker to seek bankruptcy protection since Studebaker.
As of Thursday, Chrysler entered into an alliance with Fiat as Cerberus Capital Management gave up its ownership. In the new arrangement, the U.A.W. will be the majority owner of Chrysler, but Fiat is being looked at to step in with a new management plan of the troubled automaker. (The complete alliance is described here)
Fiat is the parent company of CNH, owning 90% of Case IH and New Holland’s ag and construction business. This isn’t Fiat’s first dance with U.S. automakers. In 1991, it merged with Ford to create New Holland. And then in 1999 it took over Case Corporation.
And this brings us almost up to speed with the context in which Marchionne made his donkey comment. In Fiat’s 1st quarter investor call a week ago, Marchionne updated the audience on the Chrysler deal and entertained a variety of questions about Fiat’s plans with becoming involved in Chrysler and its bankruptcy filing.
Currently, Marchionne values Fiat’s CNH business segment. And when asked if Fiat would want to sell off an asset from their business portfolio to invest financially in Chrysler, Marchionne said selling CNH to provide capital for such an arrangement “would be putting the donkey ass-backwards.” He continued that “We have an obligation to not do stupid things.” His view is that the car business is the problematic sector, and he think through proper management it can improve–not extraordinary investment.
Throughout that conference call Marchionne made statements of dedication to see this Chrysler arrangement come to fruition. Now that it has, he says Fiat will provide management support, technology sharing and distribution growth.
And we’ll see how Fiat writes its next chapter in its involvement in the U.S. car industry.