By now we should know whether Chrysler won the rest of the government loans it needed to pay its clamoring creditors. And if all went according to plan, Fiat should be riding in on a white Italian stallion to save Cerberus from itself.
But right this second, I’m eating crow. It was late, I was tired, and it was live television – CNBC to be precise. Phil LeBeau, one of the most respected television reporters in the automotive realm, asked his panel of analysts and journalists at the Detroit auto show to predict the coming year for Detroit carmakers. My skull began crackling, and I swallowed hard while the big-shot East Coast analysts ahead of me offered Wiffle-ball predictions like “Detroit won’t get its swagger back” and “Ford will come out ahead.” It was my turn. My latent Tourette’s took over, forcing me to blurt out, “Chrysler is going down!”
For some reason, I am unable to cleverly avoid saying exactly what’s on my mind. This is what is known in the shallow world of TV as “excellent bite.” I’m sure it is known among Chrysler executives as something else. Something like, “She bites.” But then, they knew something I didn’t know: Fiat was in town, and a deal was going down.
What was I supposed to think? By the end of 2008, Chrysler owed its suppliers something like $6 billion and its creditors $1 billion. In the month of December, while waiting to hear back on its request for $7 billion in government loans, Chrysler shut down its entire manufacturing operation for a month and offered a golden handshake to several top executives, including its chief marketing officer and the CEO of Asia operations.
It seemed ludicrous that Cerberus truly believed the government – which, by the way, is not smarter than a fifth grader – would throw a few billion its way as long as it was tossing a fat cash wad to General Motors. Chrysler is a privately held company, after all, which no one seemed to notice until Tennessee Senator Bob Corker brought it up, saying to Chrysler’s squirming CEO, Bob Nardelli, “You want to hang around long enough so you can date somebody and hopefully get married soon before you run out of money.” Well, yeah. Like my dad always said, if you don’t ask, the answer is no.
Wonder of wonders, Chrysler got $4 billion. Unfortunately, it was still short $3 billion. This would not be money to fund a tomorrow; it was money already owed. You could speculate from there (and I did) that nothing was going to happen until Obama’s inauguration, and if no money was forthcoming from the new administration, the next move would be bankruptcy. Because what company would make an offer until Chrysler shed some of its financial and UAW obligations, right? Yes, Chrysler was going down.
Chrysler president Jim Press called me a week later with the Fiat news. “We didn’t plan to announce this on the day of the inauguration,” he said. “But someone close to the negotiations leaked it over the weekend.” Frankly, after my on-air proclamation, I couldn’t believe he was even speaking to me.
Press laid out everything that has been unfolding in the media: It’s a nonbinding agreement to create a single global entity that would allow Fiat to manufacture its cars in Chrysler’s unused facilities and to sell them through Chrysler’s dealer infrastructure here. Chrysler would have access to a variety of good engines and excellent small-car platforms (the Fiat 500 and the Alfa Romeo MiTo and 147 replacement among them), as well as global outlets to sell its trucks and Jeeps. The deal covers everything Fiat makes except Ferrari – that is, Lancia, Alfa Romeo, and Maserati. Joint purchasing would be part of the arrangement as well.
“The deal is 35 percent in kind, no cash, and begins when we emerge from our restructuring,” Press told me. In simple terms, if Chrysler qualifies for the last $3 billion, it meets the terms of the Fiat deal. The Fiat share can grow substantially, although none of it is coming from the 19.9 percent still held by Daimler. A restructuring plan is due in Washington by February 17, and Chrysler has some heavy negotiating ahead – with the UAW, suppliers, Daimler, and banks.
“The great thing is, Fiat wants to help with those negotiations. We’re really excited about that, because they’ve done similar restructuring recently, and we can benefit from that experience,” says Press.
The bad thing is, Fiat needs money, too. But every car company is in crisis today, either asking for or receiving government assistance. Any buddy in this crisis is better than no buddy at all. (And bringing up that old Fix It Again Tony sobriquet is as outdated as Washington’s misconceptions about Detroit.) From an enthusiast’s standpoint, this is a solid marriage, one last chance to get that Chrysler’s TC by Maserati right.