View Full Version : Thoughts about the Fiat/Chrysler deal
I've done a lot of reading and have tried to figure out what agenda Cerberus has for doing a deal with Fiat.
As I suggested in another post, this deal looks like a "no brainer" for Fiat. They don't have to invest any cash, they get 35% equity and they can just walk away if Chrysler goes bankrupt. By contrast, if the partnership works out Fiat has the ability to purchase a majority stake in Chrysler and assume control.
From a dealership standpoint, my greatest concern was a report that indicated it would take at least 24 months for any new product to hit the showroom floors. That's a long time from now.....
My bet is that Cerberus is doing this deal because they figure it's the only way they'll be able to get the additional $3 Billion Bridge Loan from the Treasury Department. Chrysler needs to submit a plan to the Treasury on February 17th.
Here's the AutoExtremist's opinion on the Chrysler/Fiat deal, Cerberus and the future for Chrysler, Jeep and Dodge dealers: http://www.autoextremist.com/on-the-table1/
I know that he comes across as being negative, but he's also been pretty accurate in forecasting the future.
Based on everything that I've read so far, this article provides the best summation of what the deal is, and why it has been formed: http://uk.reuters.com/article/americasDealsNews/idUKTRE50J7X120090120?pageNumber=1&virtualBrandChannel=0
It affirms my opinion that Cerberus is looking for an exit plan for Chrysler, yet they still want to maintain 80% control of Chrysler Financial.
As a side note, don't forget that Cerberus own Chrysler's Auburn Hills Headquarters - it reminds me of their Mervin's deal where they sold the operating company but kept the real estate.
hinterlander
01-21-2009, 05:10 AM
If you have occasion to look at their product line on their Fiat Group website, there is no overlap between what they sell and what Chrysler has. They have a newer "A" segment called "500" that shares a vehicle platform with Ford's Ka, which will be brought to the US next year. They also have commercial vans that might be able to eventually replace Sprinter, plus a good looking "B" segment in Punto and "D" segment in Bravo. They recently returned to OZ and have had some success there, but their pricing is a bit on the high side compared to other vehicles offered there. Best of all, they have small diesels that feature urea injection and particulate traps that might with some tweaks pass U.S. emissions, like the V.W. The papers this morning were talking about Daimler giving up it's 20% and handing control over to Fiat. Remember, Fiat owns Iveco and Case Tractor, both Ag and Construction. This is a big multinational company, no longer "Fix It Again Tony".
goodone414
01-21-2009, 08:12 AM
24 Months --- Why so long????
24 Months --- Why so long????
I was surprised that it was going to take so long too.
From what I've read, the current plan is to build Fiat cars in the U.S. and reskin them to be sold as Dodges. I guess the process of retooling the Chrysler assembly plants, reskinning the vehicles and passing all the government safety/emissions tests would take two years.
Maybe there's a faster solution, but I've read that time-frame in a couple of different news reports.
I read the article three times just to make sure I read it right - Fiat has 12 months to make a decision on whether they want to purchase an additional 20% of Chrysler. According to the news report, sources indicate that Fiat can purchase the additional 20% for just $25 Million.
That means that Fiat would have a controlling 55% interest in Chrysler for a total cash outlay of just $25 Million. That's hard to believe.
Here's a link to the news report: http://uk.reuters.com/article/marketsNewsUS/idUKLL25565820090121
goodone414
01-21-2009, 12:07 PM
I read the article three times just to make sure I read it right - Fiat has 12 months to make a decision on whether they want to purchase an additional 20% of Chrysler. According to the news report, sources indicate that Fiat can purchase the additional 20% for just $25 Million.
That means that Fiat would have a controlling 55% interest in Chrysler for a total cash outlay of just $25 Million. That's hard to believe.
Here's a link to the news report: http://uk.reuters.com/article/marketsNewsUS/idUKLL25565820090121
I read the same article and about fell outta my chair. Absolutely NO risk for Fiat and if things go good buying a company for $25 Million that sold for $7 Billion only several months earlier. UNBELIEVABLE
goodone414
01-21-2009, 01:31 PM
Okay, if your Cerberus your willing to sell 20% of Chrysler for $25 million right? So does that mean that 100% of Chrysler is worth $125 million? If so how do you justify asking the Federal Government for a $7 billion loan to a company that as the owner you only value at $125 million??? I'm confused :confused:
Okay, if your Cerberus your willing to sell 20% of Chrysler for $25 million right? So does that mean that 100% of Chrysler is worth $125 million? If so how do you justify asking the Federal Government for a $7 billion loan to a company that as the owner you only value at $125 million??? I'm confused :confused:
I'm confused too. :)
The only thing that makes sense to me is that this is part of Cerberus' exit plan and Chrysler feels the partnership will help them secure the extra $3 Billion in TARP funds they've requested.
I think we all agree that Cerberus wants out - all they want is CFC. We know that Daimler values their 19% of Chrysler as being worth $0 and it seems that Cerberus is using the same valuation model.
The fact that Cerberus is willing to give up so much equity without any cash injection is going to be an issue with certain Congress Members. The fact that 54% of Chrysler would be owned by foreign companies will also be an issue.
As before, it will be interesting to see what happens...
The more I read about the Chrysler/Fiat deal, the more I keep thinking about what Cerberus did with Mervins when they bought the company from Target.
Cerberus split Mervins into two pieces - an operating company (the stores) and a property company (the real estate). This strategy is fairly common with Private Equity firms and is often referred to a "opco-propco."
Once Mervins was split into two pieces, Cerberus sold the operating company but kept the property company. It's alleged that Cerberus increased the rents for the Mervins stores forcing the company into bankruptcy.
Flash forward to Chrysler.... Imagine the control that Cerberus would have if they can get Fiat to buy the automotive operations while they retain Chrysler Financial and the real estate at the Auburn Hills Headquarters?
I don't claim to know what their plan is, but I can't get past the fact that Cerberus offered to give away 54% of Chrysler to Fiat for a total cash outlay of $25 Million. It just doesn't add up.
dodgequality
01-22-2009, 06:00 AM
We neophytes will never understand the murky financial doings of these greedy money men who have gotten us in the mess we're in now.
What ethical person would ever think of packaging up worthless mortgages and selling them as bonds?
We're at the mercy of do NO gooders!
CL Pgh
01-22-2009, 06:32 AM
No doubt we don't know all the hidden $$$ agenda's here... but come on, are we really surprised at these goofy numbers??? Didn't the story break early Dec. where Cerberus tried to practically give us to the UAW & suppliers for concessions... and the offer was turned down.
About half the articles I read on this Fiat deal are positive... after the last few months... THAT alone I'll take!
About half the articles I read on this Fiat deal are positive... after the last few months... THAT alone I'll take!
You're 100% right. :)
Even with all of the unanswered questions, I still see this as better news for the Chrysler Dealer Network. A GM merger would have been bad and bankruptcy would have been even worse. At least this deal has the potential to turn out to be a "win-win" deal for both Chrysler and Fiat.
dafuzz1956
01-22-2009, 10:37 AM
We now have some hope and a reason to look up from the snow and slush tha alot of us are walking through. Maybe we are getting off the thin ice and on to some solid ground. :)
I've been thinking about this deal and still can't get past the fact that Fiat has the ability to take a 54% interest in Chrysler for a total cash outlay of $25 Million.
I was wondering last night, why didn't Nissan's Carlos Ghosn take this deal?
Nissan and Chrysler already have agreements on the forthcoming Dodge Hornet and Nissan Titan and Ghosn's indicated that he wanted a larger footprint in North America. I've read that Ghosn is great negotiator, but $25 Million for a controlling interest, how much cheaper is it going to get?
I just get the feeling like there's more to come - it's not a done deal yet.
goodone414
01-23-2009, 10:47 AM
I've been thinking about this deal and still can't get past the fact that Fiat has the ability to take a 54% interest in Chrysler for a total cash outlay of $25 Million.
I was wondering last night, why didn't Nissan's Carlos Ghosn take this deal?
Nissan and Chrysler already have agreements on the forthcoming Dodge Hornet and Nissan Titan and Ghosn's indicated that he wanted a larger footprint in North America. I've read that Ghosn is great negotiator, but $25 Million for a controlling interest, how much cheaper is it going to get?
I just get the feeling like there's more to come - it's not a done deal yet.
Hope your right about it not being a done deal yet. I still think that Nissan is a MUCH better fit for Chrysler. That being said my fear is that Chrysler offered Ghosn the deal first, and being the negotiator he is he was trying to make 'em sweat a little. Then out of frustration and with a sense of "Sorry you missed your chance" Chrysler struck the deal with Fiat. It's almost like that customer that you work and work for days until you finally hope someone else buys the car so when Mr. Hardball comes back you can say "Sorry you missed your chance.:D
Hope your right about it not being a done deal yet. I still think that Nissan is a MUCH better fit for Chrysler.
I totally agree.
The news flow has been interesting to watch and the Fiat deal is looking less attractive each day. Yesterday we learned that Fiat has their own problems at home - their debt was downgraded and their stock price tumbled.
Today we learn that the Fiat deal is contingent on Chrysler getting the extra $3 Billion from the Treasury.
I wouldn't be surprised to watch the Fiat deal unwind and then have Ghosn come in with a final offer for Chrysler. Part of me thinks that the Fiat deal is just a ploy to "soften" the stakeholders up to the concept of foreign ownership.
As I've stated before, I have no idea what Cerberus is going to do. What I do know is that they're a lot smarter then I am so there must be a good reason why they're offering Fiat 54% of Chrysler for just $25 Million.
If you have occasion to look at their product line on their Fiat Group website, there is no overlap between what they sell and what Chrysler has. They have a newer "A" segment called "500" that shares a vehicle platform with Ford's Ka, which will be brought to the US next year. They also have commercial vans that might be able to eventually replace Sprinter, plus a good looking "B" segment in Punto and "D" segment in Bravo. They recently returned to OZ and have had some success there, but their pricing is a bit on the high side compared to other vehicles offered there. Best of all, they have small diesels that feature urea injection and particulate traps that might with some tweaks pass U.S. emissions, like the V.W. The papers this morning were talking about Daimler giving up it's 20% and handing control over to Fiat. Remember, Fiat owns Iveco and Case Tractor, both Ag and Construction. This is a big multinational company, no longer "Fix It Again Tony".
Member has been BANNED. Chrysler LLC Corporate employee falsified registration to appear as dealership employee.
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MUAlum92
01-26-2009, 04:23 PM
Wondering if anyone caught the article in Automotive News today about the Chrysler/Fiat deal.....some pretty cool stuff in there about the potential products.
What caught my eye, as well as my dealer principal's, was one little word......"select."
Don't have the article in front of me to quote verbatim, but someone from Chrysler is quoted as saying "select Chrysler Dodge Jeep franchises" will selling the Fiats and the Chrysler branded Fiats....
Found that very interesting.
Wondering if anyone caught the article in Automotive News today about the Chrysler/Fiat deal.....some pretty cool stuff in there about the potential products.
What caught my eye, as well as my dealer principal's, was one little word......"select."
Don't have the article in front of me to quote verbatim, but someone from Chrysler is quoted as saying "select Chrysler Dodge Jeep franchises" will selling the Fiats and the Chrysler branded Fiats....
Found that very interesting.
Thanks for the post - I just read the story in Automotive News and it was very informative.
I also picked up on the "select" notation - it's almost like the current distribution plan for the Dodge Sprinters.
I wonder how many people here have been with Chrysler long enough to remember that you had to have a special "Europa" franchise to sell the Chrysler Maserati TC. Even some Dodge dealers had a separate franchise agreement to sell the limited production Shelby vehicles.
There's no question that this will give Chrysler some power over their dealers - it will be interesting to see how they use it.
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