COLUMNS: Chrysler and Fiat Merger - Noise, Vibration & Harshness

April 14, 2009
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It seems only yesterday they were the masters of the universe. Yet just yesterday, literally, my friends at Citibank fired an e-mail my way, inviting me to take advantage of exclusive "access to great concerts, dining, sporting events, and more." Translation: the bank won't loan money to me or anyone else, by rights it is bankrupt, yet when it's not busy jacking up credit card interest rates to usurious heights or lobbying for more bailout money, Citi makes time to suggest expensive ticket purchases for selected events that valued idiots - I mean, customers like me - might care to see, such as Kevin Nealon in the round (Citi's suggestion). All so I can pay them an additional charge.
Now there's a recovery plan for you.
It's against this pitifully sad, surreal, and shape-shifting backdrop - pervasive today, as corporate America falls flailing from on high - that one must evaluate the news that Chrysler plans to merge with Fiat.
Take a moment with us to recall how absurd this proposition would have sounded twenty years ago. Back then, the U.S. auto industry and the media covering it went around telling everybody who'd listen that the Europeans' failure to compete in the U.S. market - indeed any car company's unwillingness or inability to field a full line of cars here - was a sign of their lack of manly vigor, their unfitness for the twenty-first century, and, in the case of Fiat, the pudding proof of Italian firms' classic aversion to cost accounting and other forms of basic business discipline. Cue self-satisfied harrumphing about overpaid workers, overhead camshafts, and creeping socialist tendencies, such as national health care.
Except who's laughing now? OK, maybe not laughing, just not blubbering quite so loudly? Yes, it's those frivolous Europeans. They may be running to their own governments for assistance, but at least they're set up to build more efficient cars, which is surely what will be required of any American car company that survives, especially with the major stakes now held by the United States of Barack Obama.
A Fiat-Chrysler hookup would have sounded funny even a few years ago, when General Motors paid $2 billion to not marry Fiat, a sort of reverse dowry. As many observed at the time, it was a bargain . . . for both parties. But Chrysler has different needs than GM. It may call its preferred fate a merger, but it's more accurately described as becoming part of Fiat. Funny thing is, the deal actually makes sense.
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In exchange for 35 percent of Chrysler, Fiat proposes to give Chrysler modern engines and platforms and also help retool its plants. If anything good comes of it, Fiat will acquire a controlling 55 percent interest. Call me an X1/9-loving fatalist (a Fiatalist?), but it sounds like a square deal to me.
Yes, Cerberus will see its influence decline, and Daimler, which retains 20 percent ownership, may wind up with nothing, but don't say that like it's a bad thing. Daimler blew it, and Cerberus knows that its charge has a desperate product deficit that it's in no position to remedy. Now that it's stuck with Chrysler - no money play out there, much less a chance of recovering its $7.4 billion investment - Cerberus might as well see whatever it's going to still own whipped into shape.
In this "merger of equals, part two," Fiat plays the role of Daimler, the dominant partner with the superior technology, because, well, it is. Only unlike Daimler, Fiat actually plans on sharing the family jewels to give the pentastar people a fighting chance. Daimler tried it once but gave up. Thanks to a few Mercedes-Benz parts and some big brotherly, shared engineering, we got Mopar's finest ever (albeit now aging) car line - the 300/Charger/Challenger/Magnum.
Perversely, when it had the chance, Daimler neglected to do the same for the Caliber and the Sebring, models that never came within two counties of Mercedes-Benz's vast storehouse of goodness. Accordingly, they became cautionary examples of what happens when Chrysler designs and engineers cars on the cheap, working alone.
If a divine state of being is achieved by leaving a place like you found it, fairly can it be said that Daimler never achieved such an exalted state during the original so-called "merger of equals." Hopes were high when Daimler-Benz took over Chrysler in 1998. What was off-loaded nine years later was a steaming wreck, set to implode. With a large but largely disappointing lineup of starved-for-investment also-rans and a few mildly interesting gas guzzlers, the business started croaking the minute gas prices surged. Then credit dried up, and it croaked some more. Enter Uncle Sam. And Fiat.
The problem with the Fiat-Chrysler deal, some complain, is that the government's investment will help foreigners. If the idea is to preserve American jobs and industrial capacity, I'm not sure I discern the difference between giving taxpayers' money away to creepy banks and private equity know-nothings like Cerberus versus laying it on dynastic right-wing Italian industrialists and their banks. Choose your poison.
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If there is one thing the car czar, presidential panel, or whoever finally gets charged with making something out of this unhealthy situation called Chrysler must understand, though, it is this: the Caliber and the Sebring are irredeemable. Put aside all the structural problems at Chrysler, forget the unions and factories, the too many dealers and worldwide economic collapse - what Chrysler needs most is new cars. Only it's got no money to build them. Answer? Acquire an all-new line of quality cars, ready now. For free.
And that's why, unlike congressional critics and many in the bloviating trades, I endorse the merger of Chrysler and Fiat. Fiat has the fresh, new, fuel-efficient cars Chrysler needs. I also can't help noting that its quiver contains the retro-adorable and eminently practical new Cinquecento along with bigger sedans and wagons boasting pleasant turns of style and speed.
The key fact is that the competitive, off-the-shelf technology that Fiat brings to the party would cost many billions to replicate - money that taxpayers will otherwise be asked to fork out, while still running the risk that whoever's left at Chrysler might not get it right.
Of course, merger plans may mean that new Chryslers will start resembling Fiats and Alfa Romeos, and, perhaps for some, this will be depressing.
And if only it weren't going to be up to Chrysler dealers to sell us Fiats and Alfas, which is another part of the proposed deal. We've seen this movie before, during Chrysler's Lee Iacocca-inspired Italianate period, when "select" Chrysler dealers sold Alfas in the early '90s, and it wasn't pretty. Citibank has more enthusiasm for Kevin Nealon, I promise you, than most Chrysler dealers showed for Alfa.
But, hey, cheer up everybody, it could be worse. We could be paying our taxes to help build more Calibers. Three cheers for diversifying the gene pool.

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