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Old 10-05-2010, 02:22 PM   #1
XDCX
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Default What will Marchionne's "Investment Freeze" mean to Chrysler's U.S. Dealers?

Automotive News has a report indicating Marchionne will extend an "investment freeze" which will delay the introduction of the new Panda for the European markets. The new Panda has been delayed twice and is now scheduled to be released in 2012.

Marchionne's rationale for the delay is it wouldn't make sense to launch a new vehicle in a recessionary market.

What, if anything, does this mean for the U.S. Chrysler dealers?

On the plus side, perhaps Marchionne can use this delay for Europe to speed-up the introduction of new product for the U.S.? To the extent the U.S. may recover from the global recession before Europe this strategy may make sense.

On the down side, perhaps this is an indication that Marchionne is quick to change his mind and will back away from his recovery projections for Chrysler.

To that point, here's an excerpt from the report in Automotive News:

"Hauser also questioned how long Fiat's European dealer network will tolerate a falling market share and a lack of model launches.

Fiat's new freeze in product investments represents a drastic change of route from what the company announced in January when Marchionne said Fiat was planning to return to normal investment levels this year to benefit from an expected European market recovery in 2011."



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Old 10-05-2010, 06:01 PM   #2
Ralph
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Ouch...seems he may be ore a realist than I thought. If I had a gun to my head....I'd be hard pressed to say the US economy is going to get better before the European one. Trending is to connect the two through financial regulation etc...meaning they'll be even closer tied to each other.

Didn't Daimler slow product development at Chrysler after they claimed they were going to rebuild the company. And then Cerberus, claimed there was a new rising from the ashes and yet did the same thing. And...Marchionne and the POTUS said same........

I was just thinking, after reading the post about the pending IPO plans, I was especially drawn to mention that the offering would be done in such a way to allow the UAW to divest. Ummm, wait a minute here, the UAW selling out of their own company? They see more money in an IPO than in future profits?

So a structured IPO allowing the treasury and the UAW to get out, and Marchionne steps back from expanding the Fiat stable? I thought that the development and introduction of new, exciting and technologically advanced models was critical to all companies. Wasn't this what made Marchionne such a hero at Fiat, he didn't sit on his hands, he went after the market and fixed the place.

I've read it everywhere that Chrysler suffered worse than any other maker in the "Second Place Great Depression" because their ownership history slowed or stopped product development. It's tough for Fiat to face the world's auto market objectively I think from a manufacturer point of view, as these are new a different times. If market share is dropping, there are only 2 options, sell more or spend less. if the economy is giving you a drubbing you may be able to sell more by new product but you'll spend more in the short term. Calculated risk that some make and some don't.

Hard to figure the bigger implications. I think it speaks to the industrialist's view of the near future.
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Old 10-06-2010, 09:12 AM   #3
crowe
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“Automaker says it has enough cash to buy Chrysler”
http://www.indyposted.com/114813/fia...-sell-ferrari/

Italy for September
“Sales by Fiat, which accounts for almost 30 percent of the market, fell 26.3 percent”
http://www.reuters.com/article/idUSTRE6910UY20101002

“Europe: Too many new cars, too few buyers”
http://www.ctv.ca/generic/generated/...le1740326.html
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Old 10-06-2010, 09:17 AM   #4
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“The government invested $12 billion in Chrysler and holds a 10 percent stake”
http://www.detnews.com/article/20101...lout-loss-$17B

So if the government’s 10% share cost $12 billion, is Fiat’s 20% share worth $24 billion & the Union’s 70% share worth $84 billion?
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Old 10-06-2010, 10:26 AM   #5
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Well Crowe is using logic and that does not seem to work anywhere in this whole mess. Anyone who believes that some how the governments losses are going down probably believes in the tooth fairy.
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Old 10-06-2010, 11:44 AM   #6
XDCX
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Quote:
Originally Posted by crowe View Post
“Automaker says it has enough cash to buy Chrysler”
http://www.indyposted.com/114813/fia...-sell-ferrari/

Italy for September
“Sales by Fiat, which accounts for almost 30 percent of the market, fell 26.3 percent”
http://www.reuters.com/article/idUSTRE6910UY20101002

“Europe: Too many new cars, too few buyers”
http://www.ctv.ca/generic/generated/...le1740326.html
Thanks for the links - I had read the first two earlier this week but didn't see the third one until you posted it.

Concerning the first article, while we know Fiat won't sell equity in Ferrari to invest cash in Chrysler, we still don't know if they have any plans to invest cash in Chrysler at all. The headline of the story suggests Fiat wants to invest cash to increase their equity in Chrysler but I haven't seen a quote from Marchionne that supports that contention.

Concerning the second article, I think it highlights why Peter De Lorenzo is such a critic of Marchionne - Fiat's not doing that great in Europe right now. They're losing volume and market share. I also think it's the reason the Chairman for Volkswagen has been making statements that "time is on our side" when it comes to buying the Alfa brand.

Concerning the third article, it will be interesting to see how Fiat and their unions settle their negotiations. I thought the most interesting comments regarded China's plans to be a vehicle exporter by 2015.
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Old 10-06-2010, 11:51 AM   #7
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Quote:
Originally Posted by crowe View Post
“The government invested $12 billion in Chrysler and holds a 10 percent stake”
http://www.detnews.com/article/20101...lout-loss-$17B

So if the government’s 10% share cost $12 billion, is Fiat’s 20% share worth $24 billion & the Union’s 70% share worth $84 billion?
I love the way you think, but like srt pointed out logic rarely applies when the government is spending the taxpayers dollars. The only way the government's investment in Chrysler could be worth $12 Billion is if Chrysler has almost THREE TIMES the value of Ford.

Given that Ford's current market cap is $45 Billion it's hard to imagine Chrysler could be worth more than $5 to $10 Billion based on their current size and profitability.
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Old 10-06-2010, 03:08 PM   #8
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Quote:
Originally Posted by Ralph View Post
Ouch...seems he may be ore a realist than I thought. If I had a gun to my head....I'd be hard pressed to say the US economy is going to get better before the European one. Trending is to connect the two through financial regulation etc...meaning they'll be even closer tied to each other.
While I'm not a financial expert, I do believe the U.S. will recover before the rest of the developed nations. I've read many times that as bad as things were with banking and real estate in the U.S. they were actually worse in Europe.

Additionally, I don't fault Marchionne for not wanting to release new product in a recessionary market - I just want to hear if he can speed development up for the CJDR dealers. As I understand it the CJDR dealers won't see any new Fiat based product until 2013 - can that ETA be advanced now that there are resources available since Europe's on an "Investment Freeze"?
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Old 10-06-2010, 04:24 PM   #9
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Nobody can quite figure out what Marchionne is up to in the long term. One thing that will be bad for the long term is the massive quanities of fleet cars that Chrylser is pumping out. Chrysler residual values have always been bad and Cerebus knew that had to stop is Chrysler was to remain in the game for the long haul when they cut fleet sales. Now fleet are back and although the exact numbers are "secret", reports are that fleet sales are over 40% of Chrysler's sales. Even now Chrysler auction cars are flooding the market at low prices, what will that look like in 2-3 years?
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Old 10-07-2010, 07:44 AM   #10
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Quote:
Originally Posted by crowe View Post
“The government invested $12 billion in Chrysler and holds a 10 percent stake”
http://www.detnews.com/article/20101...lout-loss-$17B

So if the government’s 10% share cost $12 billion, is Fiat’s 20% share worth $24 billion & the Union’s 70% share worth $84 billion?
Don't forget the bondholders however...their $27 billion of THEIR OWN money only bought them 7% of NEWCO. Apparently, REAL money from private investors doesn't have the same value as federal tax dollars. Bottom line is Fiat got 22% for nothing...the BEST deal of anyone--no cost--no risk. UAW came in second...no legal claim to their totally unsecured claim for $10 billion in pension funding, but got 60% of the company in exchange for future votes. 3rd place goes to the Taxpayers (via federal gov.) with 11% at a cost of $12 billion and "Dead Ass Last" place goes to the bondholders who paid $27 billion for 7% after being told by the feds that it was a "take it or leave it choice".
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Old 10-07-2010, 07:53 AM   #11
Noah
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Well said, DealerEx.

Another glowing example of our high-minded Federal Gov't at work. Remember, as always: "We're from the government, and we're here to help".
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Old 10-07-2010, 08:24 AM   #12
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Quote:
Originally Posted by DealerEx View Post
Don't forget the bondholders however...their $27 billion of THEIR OWN money only bought them 7% of NEWCO. Apparently, REAL money from private investors doesn't have the same value as federal tax dollars. Bottom line is Fiat got 22% for nothing...the BEST deal of anyone--no cost--no risk. UAW came in second...no legal claim to their totally unsecured claim for $10 billion in pension funding, but got 60% of the company in exchange for future votes. 3rd place goes to the Taxpayers (via federal gov.) with 11% at a cost of $12 billion and "Dead Ass Last" place goes to the bondholders who paid $27 billion for 7% after being told by the feds that it was a "take it or leave it choice".
DealerEx,
Great post with one exception..Dead ass last place should actually go to 789 people that not only put their investment up they also put their soul into the business, and of those, the ones that lost everything not just the franchise lost the most.
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Old 10-08-2010, 07:48 AM   #13
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Quote:
Originally Posted by steve_biegler View Post
DealerEx,
Great post with one exception..Dead ass last place should actually go to 789 people that not only put their investment up they also put their soul into the business, and of those, the ones that lost everything not just the franchise lost the most.
Absolutely correct !!! Since most everyone on this forum either has personal experience with that government facilitated theft or has close friends who were, I guess I took that as a given...sorry for my ommission, because it should NEVER be forgotten, and ALWAYS mentioned any time the subject comes up.
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Old 10-08-2010, 09:34 AM   #14
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Quote:
Originally Posted by DealerEx View Post
Absolutely correct !!! Since most everyone on this forum either has personal experience with that government facilitated theft or has close friends who were, I guess I took that as a given...sorry for my ommission, because it should NEVER be forgotten, and ALWAYS mentioned any time the subject comes up.
DealerEX,
I now stand corrected.....I have said the two words that should not be used are, NEVER and ALWAYS, you used them perfectly.
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Old 10-08-2010, 01:25 PM   #15
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Quote:
Originally Posted by debjay View Post
Nobody can quite figure out what Marchionne is up to in the long term. One thing that will be bad for the long term is the massive quanities of fleet cars that Chrylser is pumping out. Chrysler residual values have always been bad and Cerebus knew that had to stop is Chrysler was to remain in the game for the long haul when they cut fleet sales. Now fleet are back and although the exact numbers are "secret", reports are that fleet sales are over 40% of Chrysler's sales. Even now Chrysler auction cars are flooding the market at low prices, what will that look like in 2-3 years?
I know that we are not a Chrysler/Jeep dealer anymore, but I still have a lot of customers with leases coming back to see me. I had a 2007 Chrysler Sebring with 36K com in and Chrysler wanted $11,300 to buy it. I sent it back. I bought a 2010 from Enterprise with 36K for $9343. This tells you something about how the flood of fleet is depressing the risiduals.
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