Wednesday, January 21, 2009

Fiat Hearts Chrysler? Yeah, Right.

"Hmm, Dodge Neon, 3 Series or a Lexus? Tough Choice .."

Fiat and Chrysler have apparently signed an agreement committing to form the classic "strategic alliance" deal so beloved of car companies over these long 20 years past. "Oh goody", you cry, "salvation". However, before we crack open the Asti Spumante to celebrate all those bailout tax dollars being put to good work, let's take a reality check because I somehow doubt that this will go quite as well as the PR machines would have you believe.

If consummated, the deal will immediately deliver 35% of Chrysler into the hands of Fiat, with options to increase that holding in the future. In return, Fiat ships large amounts of cash to Cerberus .... whoa, hang on, maybe not. In reality, Fiat's exposure is merely agreeing to share its small car platforms and engine technology. That's it. Oh, and to provide assistance to Chrysler in making a case for further bailout funds, required in order to get this deal done at all, to us, the taxpayers.

For those of us with short memories, it's worth remembering that it was just such an alliance that accelerated Chrysler's descent into the pit of nothingness in the first place. Remember "Daimler Chrysler", anyone? Net result of that particular liaison was endless divisional wrangling between German and US management teams, Chrysler getting access to platforms and technologies only once they were long past their prime and duly discarded by Daimler, and bugger all incremental sales from the much vaunted access to Daimler's European car dealer network. In short, they got nothing from it whatsoever, other than being royally screwed when Daimler finally admitted defeat and decided to file for divorce.

Of course, all that gets forgotten in a wave of happy-clappy statements from Nardelli around how Chrysler will gain access to new dealer networks, be able to compete in the small car segment and generally cure world hunger at a stroke.

Let's be realistic. Cerberus is done with Chrysler. They have declared defeat, and Fiat are only willing to take the remaining assets off their hands so long as we, the American taxpayers, foot the bill. Check this out for the inside track and then do the maths. This deal puts a maximum value on Chrysler Co. of $125 million. For the whole shooting match. Lock, stock and totally-drained barrel.

How much have we already thrown into the bailout pot for these guys again? Oh yeah, $4 billion, and that's against the $7 billion Nardelli said in December would suffice to turn this thing completely around. Be interesting, therefore, to see what they have to say for themselves when Chrysler reports back to Congress on "what we did with your money" in February. "Hand it to the Italians", now appears to be a large part of the answer .... talk about an Italian Job style robbery.

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