He is a piece of work that Marchionne. He knows that Chrysler has got to go back to Congress on 31 March and tell the custodians of the public purse what they are going to do to turn the company around.
Go deeper with GlobalData
He also knows that Chrysler has nothing that it can say. It is operating in the US car market which has just lost 6m units in a single year. And it does not have the cars that Americans now want to buy.
Chrysler was going to have to stand there naked, and fail to put up an argument for more Government funding. In all probability, it would also fail to put up an argument for keeping the US$4bn it has already received. That loan has been conditional on coming up with proof that the taxpayers were transfusing with cash a company that had a future.
Marchionne will have rung them and said: “I’ll give you a story for the Senate hearing. You give me 35% of Chrysler”. Amazingly, they went for it. The prospect of standing there naked evaporated, and instead, the Chrysler boys could see themselves in mohair and a slinky silk tie. According to Sergio Marchionne’s briefing delivered to analysts yesterday, due diligence is progressing and the relationship with Chrysler is growing strongly.
“We are offering Chrysler access to platforms that are at the heart of the AB and C segments. We will get access to pick-ups for South America. They will have access to our distribution in Europe and we to theirs in the US. We both can share components.”
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataFiat gets 35% of the equity in Chrysler – the weakest of the Big Three – and pays nothing for it other than handing over the engine technology. Being a clever guy, Sergio Marchionne will also have realised that his automation subsidiary Comau, is likely to get the job of equipping the new engine factories for Chrysler in the US.
Marchionne minimises the task ahead for Chrysler: “From our experience with Fiat, if you apply the levers in the right place you can quickly turn these businesses around.”
It’s that simple in concept but Chrysler will be able to take that skeleton and flesh it out with plausible cost-savings and present with a smile to the senate committee on 31 March.
It is incredible that Europe’s weakest big brand wants to go anywhere near the world’s weakest car maker. For one thing, even Marchionne knows that there is too much capacity in the world’s car plants and someone has to go.
But for another thing, Fiat had GM as a shareholder and hated it. It was the big issue for Marchionne when he arrived at the wheel at Fiat. He made sure that the marriage fell apart.
Marchionne grumbles about the comparison. The GM relationship was dreadful and this one is great; it’s all about the chemistry. “I feel more at ease with Chrysler.”
But why help save Chrysler? Why take on partial responsibility for 60,000 people and the legacy costs when he could just sit back and wait and then take on the Chrysler dealers and lease the Chrysler factories after the crash?
Marchionne grumbles about that one too: “I have never backed the death of a US company. The solution is not a case of taking out a competitor. It is taking out capacity.” He then referred to Rover: “One of the most tragic acts I have seen in a long time. I do not think that it works.”
We need to spend a bit longer on this one. How does it work exactly? The old players stay in place; new players come in and all the existing players take out capacity to accommodate them? Need a couple of pints of the amber nectar while the mind processes that.
The other thing that is puzzling is whatever happened to the European solution?
Not so long ago there was the planted information that Peugeot Citroen and Fiat would tie up to create a larger and more effective global group. It has come and gone. PSA has said according to Sergio, that it will manage its own course through the recession. Nevertheless, speculation has resurfaced that he is again eyeing PSA as another cog in a Carlos Ghosn-style alliance machine.
But a more teasing puzzle is the sudden departure of Luca De Meo, that extraordinary young man who ran Lancia and was then given Fiat, Abarth and Alfa whilst being Fiat group chief marketing officer. Could it possibly be that Marchionne asked him to lend his suits to the Chrysler panellists?
Selling Chryslers in Europe is tough enough. But lending your suits to strangers…
Rob Golding
Related Company Profiles
Chrysler Corporation
PSA Corporation Limited
Comau S.p.A.
Fiat Incorporated
Alfa Corporation