Topic: After Chrysler, Fiat plans merger with Opel to create car industry giant

[articsteve]

What does FIAT actually stand for:

FIX IT AGAIN TOMORROW

This Marchionne dude certainly swings a big one. 

First he plays the political situation in the USA perfectly by getting the US and Canadian taxpayer to fund his new partnership with Chrysler, and now he's on the verge of having the Germans fund his acquisition of GM's Opel all without spending a cent and offering nothing more than dreams.

His intention is to combine 2 weak car companies with a dead one and produce a Toyota conqueror. 


The Italian carmaker Fiat is seeking to merge its car division with General Motors Europe and ailing US car firm Chrysler to create an automotive giant second only to Japan's Toyota in terms of production.

Fiat's chief executive, Sergio Marchionne, will meet German government ministers today to discuss a bid for the German car maker Opel, part of GM Europe.

If the talks go to plan, Fiat would list shares in the combined company this summer. Marchionne described the plan as "an incredibly simple solution to a very thorny problem".

He told the Financial Times: "From an engineering and industrial point of view, this is a marriage made in heaven."

The plan comes the week after Fiat signed an agreement with Chrysler to take an initial 20% stake in the US carmaker. Fiat's board met yesterday to review the Chrysler deal and back Marchionne in weighing a potential merger of Fiat's car division, including the Chrysler interest, with GM Europe into a new company.

"As part of this process, the group would evaluate several corporate structures, including the potential spin-off of Fiat Group Automobiles and the subsequent listing of a new company which combines those activities with those of General Motors Europe," the company said in a statement. Fiat said the the combined company would have an annual revenue of €80bn (£71bn).

Fiat's chairman, Luca Cordero di Montezemolo, told the Corriere della Sera that a Fiat takeover of Opel "would be for us an extraordinary opportunity; they would be our ideal partners; a very strong group would be created.".

But the German economy minister Karl-Theodor zu Guttenberg said yesterday that Fiat – or any investor – had to present a solid long-term strategy to keep Opel plants open to obtain German government support.

Marchionne has said Fiat needed a partner to reach an output level of 5.5m to 6m units a year, the scale he believes necessary to survive the car industry crisis.

Opel staff, union leaders and some political leaders have reacted with reservations to Fiat. Klaus Franz, works council head of Opel and a supervisory board member, has said parties other than Fiat and Magna were interested in Opel.

Opel, hit by a slump in demand due to the global downturn, has four plants in Germany and employs about 25,000 workers. Thousands more jobs at suppliers are at stake.

[Mitlov]

Scoff all you want about European car companies with iffy historical reliability buying up nearly-dead brands, but we've seen this before done quite successfully.  Volkswagen Auto Group anyone?  Now one of the largest car companies on the planet.  Under its rule, car companies like Skoda and Lamborghini are now doing quite well.

Fiat group (which already has a solid base in Fiat, Alfa Romeo, Ferrari, and Maserati) could be the next VW-esque success story if it plays its cards right.

[articsteve]

But who pays for it?     US tax payer primarily.

Next crazy merger is about to be announced:

Nissan-Renault to acquire GM as in USA 

[rrocket]

Scoff all you want about European car companies with iffy historical reliability buying up nearly-dead brands, but we've seen this before done quite successfully.  Volkswagen Auto Group anyone?  Now one of the largest car companies on the planet. 

Yea, but at least VW had a very established brand here (and in the USA)..with a loyal following.  Fiat?  Nope.  Opel?  Nope.

It's not going to be easy for them to make inroads here....

[rrocket]

First he plays the political situation in the USA perfectly by getting the US and Canadian taxpayer to fund his new partnership with Chrysler, and now he's on the verge of having the Germans fund his acquisition of GM's Opel all without spending a cent and offering nothing more than dreams.

Steve....did you forget about the best one?  The one where GM told Fiat to GTFO and paid them $2 Billion to do so?  Same guy?

[toolatecrew]

Scoff all you want about European car companies with iffy historical reliability buying up nearly-dead brands, but we've seen this before done quite successfully.  Volkswagen Auto Group anyone? 

If VW is the benchmark for this being sucessful it must mean Vw knows what they are doing right?

Chrysler approcehed several Chinese companies about mergers..they all said no. They approched GM they said no (which I admit may actually indicate it was a good idea but I digress). Nissan, Tata Motors,  Hyundai Magna and Volkswagen all said NO THANK YOU. Some within one day.

Fiat repeadly refused to take on Chrysler debt. My take is that Fiat may well have some sucess in North America. They won't become a super company. They got an entry point to the North American market for basically nothing due to the desparation of Chrysler. I hardly think that Fiat was selected for this partnership becuase of their great fit. They were the only ones who said yes.

http://www.egmcartech.com/2009/05/02/report-chrysler-partnership-was-turned-down-by-toyota-nissan-hyundai-honda-and-more/

[Thinking Out Loud]

Scoff all you want about European car companies with iffy historical reliability buying up nearly-dead brands, but we've seen this before done quite successfully.  Volkswagen Auto Group anyone? 

If VW is the benchmark for this being sucessful it must mean Vw knows what they are doing right?

Chrysler approcehed several Chinese companies about mergers..they all said no. They approched GM they said no (which I admit may actually indicate it was a good idea but I digress). Nissan, Tata Motors,  Hyundai Magna and Volkswagen all said NO THANK YOU. Some within one day.

Fiat repeadly refused to take on Chrysler debt. My take is that Fiat may well have some sucess in North America. They won't become a super company. They got an entry point to the North American market for basically nothing due to the desparation of Chrysler. I hardly think that Fiat was selected for this partnership becuase of their great fit. They were the only ones who said yes.

http://www.egmcartech.com/2009/05/02/report-chrysler-partnership-was-turned-down-by-toyota-nissan-hyundai-honda-and-more/

Just wondering - were the other manufacturers offered the same deal FIAT got (or FIAT brokered)?  They could have likely said no more out of the union issues that would follow more than the company itself, even, or figured that getting Chrysler on the other end of a receivership scenario made more sense. 

If that had played out, instead of VW canning their minivan (which they have), they picked up the plant and wiped out Caravan production and only produced Tourans....VW would have 'reclaimed' the rights as the single largest purveyors on minivans.  Talk about fate after Lee Iacocca branded the Kcar based Caravan as the original 'minivan', forgetting conveniently enough about the Microbus et al.  Without paying a premium for the privilege at that - which is a better business case than what Fiat is doing.

I don't get the Opel thing, though.  Sure, FIAT has an entrypoint for the its products for a song in N/A - what's to be gained beyond creating overlap in a FIAT/Opel marriage.

[Juke1]

Scoff all you want about European car companies with iffy historical reliability buying up nearly-dead brands, but we've seen this before done quite successfully.  Volkswagen Auto Group anyone? 

If VW is the benchmark for this being sucessful it must mean Vw knows what they are doing right?

Chrysler approcehed several Chinese companies about mergers..they all said no. They approched GM they said no (which I admit may actually indicate it was a good idea but I digress). Nissan, Tata Motors,  Hyundai Magna and Volkswagen all said NO THANK YOU. Some within one day.

Fiat repeadly refused to take on Chrysler debt. My take is that Fiat may well have some sucess in North America. They won't become a super company. They got an entry point to the North American market for basically nothing due to the desparation of Chrysler. I hardly think that Fiat was selected for this partnership becuase of their great fit. They were the only ones who said yes.

http://www.egmcartech.com/2009/05/02/report-chrysler-partnership-was-turned-down-by-toyota-nissan-hyundai-honda-and-more/

Just wondering - were the other manufacturers offered the same deal FIAT got (or FIAT brokered)?  They could have likely said no more out of the union issues that would follow more than the company itself, even, or figured that getting Chrysler on the other end of a receivership scenario made more sense. 

If that had played out, instead of VW canning their minivan (which they have), they picked up the plant and wiped out Caravan production and only produced Tourans....VW would have 'reclaimed' the rights as the single largest purveyors on minivans.  Talk about fate after Lee Iacocca branded the Kcar based Caravan as the original 'minivan', forgetting conveniently enough about the Microbus et al.  Without paying a premium for the privilege at that - which is a better business case than what Fiat is doing.

I don't get the Opel thing, though.  Sure, FIAT has an entrypoint for the its products for a song in N/A - what's to be gained beyond creating overlap in a FIAT/Opel marriage.

what's to be gained beyond creating overlap in a FIAT/Opel marriage

Access to the sharp cars from Saturn, since GM was dumping Saturn maybe there is more than what meets the eye here.  It will be interesting to watch.

[Thinking Out Loud]

 

Recent snippet from the G&M:

In a short statement issued after a Fiat board meeting yesterday, the auto maker said the deal, if it happens, would create a car giant with about €80-billion ($126-billion) in annual revenue. The group could be spun off as a separately traded company, the board said.

At what point will people start bragging about corporate PROFITABILITY or consistant PROFITS?  Having a BAZILLION EUROYENLBSDLRS in revenues means nothing if you are still losing money.   

I'll be impressed when people start throwing around their EBITDAs as the benchmarch.

[toolatecrew]

Scoff all you want about European car companies with iffy historical reliability buying up nearly-dead brands, but we've seen this before done quite successfully.  Volkswagen Auto Group anyone? 

If VW is the benchmark for this being sucessful it must mean Vw knows what they are doing right?

Chrysler approcehed several Chinese companies about mergers..they all said no. They approched GM they said no (which I admit may actually indicate it was a good idea but I digress). Nissan, Tata Motors,  Hyundai Magna and Volkswagen all said NO THANK YOU. Some within one day.

Fiat repeadly refused to take on Chrysler debt. My take is that Fiat may well have some sucess in North America. They won't become a super company. They got an entry point to the North American market for basically nothing due to the desparation of Chrysler. I hardly think that Fiat was selected for this partnership becuase of their great fit. They were the only ones who said yes.

http://www.egmcartech.com/2009/05/02/report-chrysler-partnership-was-turned-down-by-toyota-nissan-hyundai-honda-and-more/

Just wondering - were the other manufacturers offered the same deal FIAT got (or FIAT brokered)?  They could have likely said no more out of the union issues that would follow more than the company itself, even, or figured that getting Chrysler on the other end of a receivership scenario made more sense. 

If that had played out, instead of VW canning their minivan (which they have), they picked up the plant and wiped out Caravan production and only produced Tourans....VW would have 'reclaimed' the rights as the single largest purveyors on minivans.  Talk about fate after Lee Iacocca branded the Kcar based Caravan as the original 'minivan', forgetting conveniently enough about the Microbus et al.  Without paying a premium for the privilege at that - which is a better business case than what Fiat is doing.

I don't get the Opel thing, though.  Sure, FIAT has an entrypoint for the its products for a song in N/A - what's to be gained beyond creating overlap in a FIAT/Opel marriage.

This is pure guess but I would say NO.

These offers appeared to take place in advance of these final last ditch attempts. The offer to Toyta was rejected withon one day while Chrysler made several announcments regarding a Fiat deal over a period of months (rember the whoe "Fita will assume Chrysler debt..OH NO WE WON'T" thing?)

It wasn't even that a deal was offered to all these companies ,they negotiated and failed to reach a deal. Chrysler went shopping for a partner and many of these companies just said "Nope not interested don't waste your time talking details".

Fiat was able to take adavantage of timing. They had some interest in at least discussing months ago. How much I don't know. But they had the discussions. The impression I get was that other companies discussion went more like this "We are looking for a partner want to look at it...NO THNAKs bye"

Fiat basically took advantage of an opportnity of a desparate company and desparate government. They were not already in the NA market so nothing to lose . VW etc is already in the US market. Much less to gain more to lose.

[Mitlov]

Scoff all you want about European car companies with iffy historical reliability buying up nearly-dead brands, but we've seen this before done quite successfully.  Volkswagen Auto Group anyone? 

If VW is the benchmark for this being sucessful it must mean Vw knows what they are doing right?

Chrysler approcehed several Chinese companies about mergers..they all said no. They approched GM they said no (which I admit may actually indicate it was a good idea but I digress). Nissan, Tata Motors,  Hyundai Magna and Volkswagen all said NO THANK YOU. Some within one day.

First of all, I didn't say VW was the benchmark of being successful.  Honda is successful with two brand names in a half-dozen industries.  VW is successful with a dozen brands in one industry.  Either model can work if done properly.

Acquiring Chrysler wouldn't have been a good mood for VWAG, but it makes sense for Fiat AG.  Fiat needs manufacturing in North America, a dealer network in North America, and a recognizable brand name with some loyal customers in North America (of course almost no one is loyal to Dodge compacts, but there a lot of pleased Ram, Grand Caravan, and Charger/300 owners who might now be looking for a smaller, more fuel-efficient car from the same company, and that's where Fiat steps in).

When VWAG acquired Skoda, they did so in part to get a good foothold in post-Communist Eastern Europe.  Chrysler could be to Fiat in North America was Skoda was to VW in Eastern Europe.  VW turned Chrysler down, not because the company would be useless to anybody, but because it would be useless to Volkswagen.

[toolatecrew]

Scoff all you want about European car companies with iffy historical reliability buying up nearly-dead brands, but we've seen this before done quite successfully.  Volkswagen Auto Group anyone? 

If VW is the benchmark for this being sucessful it must mean Vw knows what they are doing right?

Chrysler approcehed several Chinese companies about mergers..they all said no. They approched GM they said no (which I admit may actually indicate it was a good idea but I digress). Nissan, Tata Motors,  Hyundai Magna and Volkswagen all said NO THANK YOU. Some within one day.

First of all, I didn't say VW was the benchmark of being successful.  Honda is successful with two brand names in a half-dozen industries.  VW is successful with a dozen brands in one industry.  Either model can work if done properly.

Acquiring Chrysler wouldn't have been a good mood for VWAG, but it makes sense for Fiat AG.  Fiat needs manufacturing in North America, a dealer network in North America, and a recognizable brand name with some loyal customers in North America (of course almost no one is loyal to Dodge compacts, but there a lot of pleased Ram, Grand Caravan, and Charger/300 owners who might now be looking for a smaller, more fuel-efficient car from the same company, and that's where Fiat steps in).

When VWAG acquired Skoda, they did so in part to get a good foothold in post-Communist Eastern Europe.  Chrysler could be to Fiat in North America was Skoda was to VW in Eastern Europe.  VW turned Chrysler down, not because the company would be useless to anybody, but because it would be useless to Volkswagen.

Also useless to Nissan, Tata Motors,  Hyundai Magna and GM

I'm not saying that it was a bad deal for Fiat ..far from it. But just becuase it was a good deal and gets Fiat into the market for basically nothing doesn't mean that Chrysler as an overall company is going to be sucessful. Its a great deal for FIat to get a foothold in NA. The government is giving out BILLIONS in handouts that they don't expect will be rapaid.

[Mitlov]

Also useless to Nissan, Tata Motors,  Hyundai Magna and GM

I'm not saying that it was a bad deal for Fiat ..far from it.  But just becuase it was a good deal and gets Fiat into the market for basically nothing doesn't mean that Chrysler as an overall company is going to be sucessful. Its a great deal for FIat to get a foothold in NA. The government is giving out BILLIONS in handouts that they don't expect will be rapaid.

If the goal was free government money, instead of a mutually-beneficial long-term relationship with Chrysler (a la VW and Skoda), everyone would have been scrambling to get Chrysler.  But it's NOT free government money.  The US bailout is low-interest loans, not free money. 

The other companies on the list weren't in a situation to make a good business working with Chrysler.  GM and Nissan and Hyundai already have solid footholds in North America, so they're in the same boat as VW.  They wouldn't get what Fiat gets out of the deal. 

As for Magna, maybe they just wanted to stay in the parts business and not sell cars.  Maybe, like many parts makers right now, they're having cash flow problems and didn't think it was time to expand the business.  Can't read too much into that.

Tata is in a similar boat to Fiat in that they don't have a foothold in the mainstream North American car market yet.  But remember they just bought Jaguar and Land Rover, arguably more troubled than Chrysler, and are probably pumping all the spare capital they have into turning around those brands before trying to acquire any more.

Edit:  As a side note regarding your signature, it's Aldous, not Aldos.

[toolatecrew]

Free Money

Canadian and U.S. governments aren't likely to recover much, if any, of several billion dollars in bankruptcy loans to Chrysler LLC, an adviser to the embattled auto maker conceded Monday.

Robert Manzo, an executive director with Capstone Advisory Group, told a Manhattan courtroom that there is a “low likelihood” the so-called debtor-in-possession financing would be repaid, since it is subordinate to almost $7-billion (U.S.) in Chrysler debt held by banks, hedge funds and other lenders. The loans are designed to help the company continue operating while it is locked in bankruptcy proceedings.

Judge Arthur Gonzalez, who is overseeing the case, ruled last night that Chrysler can begin accessing $4.5-billion in government loans while it attempts to restructure and work out a sale of its assets. The governments of Canada and Ontario have committed $1.45-billion toward this emergency funding.

“They're offering financing with a low likelihood of being repaid,” Mr. Manzo said of the government aid during cross-examination.

http://www.theglobeandmail.com/servlet/story/RTGAM.20090504.wrautoschrysler0505/BNStory/Business/home

Loans that are unlikley to be repaid aren't really loans are they?