Fiat's Stake in Chrysler Will Rise to 30%
04-06-2011, 03:54 PM
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Fiat's Stake in Chrysler Will Rise to 30% Fiat To Own 30% of Chrysler “Within Weeks”
By Edward Niedermeyer on April 5, 2011
Automotive News [sub] reports that Fiat is “weeks” away from concluding an agreement in which 90 percent of its Latin American dealers will sell Chrysler vehicles, triggering a government clause that will increase Fiat’s stake in Chrysler from 25% to 30%. Known as the “Non-Nafta Distribution Event” in the Chrysler operating agreement, it calls specifically for
execution by the Company of one or more franchise agreements covering in the aggregate at least ninety percent (90%) of the total Fiat Group Automobiles S.p.A. dealers in Latin America pursuant to which such dealers will carry Company products.
And that’s it. Why does it matter that this agreement isn’t any more specific? Because Fiat has no plans to sell any Chrysler Group brands anywhere. Products, yes. Brands, no.
According to AN’s report
CEO Sergio Marchionne plans to sell Chrysler models under the Fiat brand in Brazil to reach the first goal that 90 percent of Fiat’s Latin American dealers offer Chrysler vehicles, the people said, declining to be identified because the plans are private.
The plan would allow Marchionne to sidestep negotiations with dealers on Chrysler contracts and avoid the cost of introducing the brand in Brazil, where Fiat has the largest share of the market, one of the people said.
Does this matter? Well, yes and no. As a practical issue, Chrysler will have more demand for its NAFTA-produced products so the bailout’s goal of preserving jobs at all costs is accomplished by Fiat’s rebadge policy. On the other hand, this development exposes much of the bailout-era rhetoric about preserving Chrysler as an American company in the same way Fiat’s “Irrevocable Ecological Commitment” in the Chrysler operating agreement exposes the supposed green motivations for the bailout.
I’m sure few industry observers actually expected Fiat to rebuild Chrysler as a global alliance partner rather than subsuming it into its own global ambitions. Rebadging Chryslers as Fiats in markets where Fiat has a long history makes good, pragmatic sense. But would Britain have embarked on the British Leyland experiment if they knew it would end with foreign ownership of their auto industry? Likely not. In the same way, many Americans will likely look upon this news as evidence that the billions they spent on Chrysler did nothing to preserve “the American auto industry” beyond a few US-market brands and some jobs (admittedly in an uncertain economic period). This isn’t Fiat’s fault, and there was certainly no one else lining up to take on Chrysler, but the nationalist justification for the bailout (and let’s not pretend like it didn’t exist) has fallen about as flat as the environmental one.
By Edward Niedermeyer on April 5, 2011
Automotive News [sub] reports that Fiat is “weeks” away from concluding an agreement in which 90 percent of its Latin American dealers will sell Chrysler vehicles, triggering a government clause that will increase Fiat’s stake in Chrysler from 25% to 30%. Known as the “Non-Nafta Distribution Event” in the Chrysler operating agreement, it calls specifically for
execution by the Company of one or more franchise agreements covering in the aggregate at least ninety percent (90%) of the total Fiat Group Automobiles S.p.A. dealers in Latin America pursuant to which such dealers will carry Company products.
And that’s it. Why does it matter that this agreement isn’t any more specific? Because Fiat has no plans to sell any Chrysler Group brands anywhere. Products, yes. Brands, no.
According to AN’s report
CEO Sergio Marchionne plans to sell Chrysler models under the Fiat brand in Brazil to reach the first goal that 90 percent of Fiat’s Latin American dealers offer Chrysler vehicles, the people said, declining to be identified because the plans are private.
The plan would allow Marchionne to sidestep negotiations with dealers on Chrysler contracts and avoid the cost of introducing the brand in Brazil, where Fiat has the largest share of the market, one of the people said.
Does this matter? Well, yes and no. As a practical issue, Chrysler will have more demand for its NAFTA-produced products so the bailout’s goal of preserving jobs at all costs is accomplished by Fiat’s rebadge policy. On the other hand, this development exposes much of the bailout-era rhetoric about preserving Chrysler as an American company in the same way Fiat’s “Irrevocable Ecological Commitment” in the Chrysler operating agreement exposes the supposed green motivations for the bailout.
I’m sure few industry observers actually expected Fiat to rebuild Chrysler as a global alliance partner rather than subsuming it into its own global ambitions. Rebadging Chryslers as Fiats in markets where Fiat has a long history makes good, pragmatic sense. But would Britain have embarked on the British Leyland experiment if they knew it would end with foreign ownership of their auto industry? Likely not. In the same way, many Americans will likely look upon this news as evidence that the billions they spent on Chrysler did nothing to preserve “the American auto industry” beyond a few US-market brands and some jobs (admittedly in an uncertain economic period). This isn’t Fiat’s fault, and there was certainly no one else lining up to take on Chrysler, but the nationalist justification for the bailout (and let’s not pretend like it didn’t exist) has fallen about as flat as the environmental one.
