Fiat: Makin' it up as it goes along
Day 501
A wonky "rescue" at best
"I have absolutely no intention of running Chrysler." -Sergio Marchionne, Fiat CEO, Jan. 22.
"It's possible that I will have to divide my time between running Fiat and running Chrysler." -Marchionne, Apr. 14.
Fiat's flagship Cinquecento (Italian for 500), intended to fill the small-car void that is crippling Chrysler. Europeans apparently like the 500`s Neon bug-eyed face, circa 1997, and its AMC Pacer blobbiness. But will buyers in North America, whom Fiat gave up on 25 years ago after failing to achieve showroom appeal from Boston to Bakersfield?
Fiat started out in January expecting a gratis 35-per-cent stake in Chrysler in return for offering it the same small-car technology it shares in some three dozen global partnerships. Barack Obama said that was too greedy. So Fiat is currently settling for 20 per cent.
Fiat wanted as little to do with Chrysler as possible. The idea was simply to use the No. 3 U.S. automaker`s dealerships and a few of its plants to get a North American foothold for Fiat`s own line-up. Obama last week said, publicly this time, that he expected Fiat to be hands-on in Chrysler's rescue. Hence the 180-degree turn above.
Fiat says it can have its strong-selling Fiat 500s rolling off Chrysler assembly lines as early as next year. Industry experts disagree, pointing to the hundreds of millions of dollars of retrofitting and retraining required of Chrysler in building the Fiat flagship. That`s due to the stiffer U.S. safety and other regulatory requirements the U.S.-built 500 will face. As for Chrysler, it bragged last week of eight new models in the works. Obama's auto-industry task force could identify only four viable Chrysler models ready for showrooms anytime soon.
What we have here is an Obama administration that has pretty much given up Chrysler for dead, in order to focus all its attention on the much bigger GM. And a Fiat boss, raised in Toronto, who's like the dog chasing the car and doesn't know what to do once he`s caught up with it. It's entirely possible that Marchionne (pictured, left) will build the Fiat models he brings over from Turin at Chrysler's under-used Tocula plant in Mexico, which won't save or create UAW jobs in Michigan and Indiana. He might build Alfa Romeos in Ontario, as Dalton McGuinty last year asked him to do, probably at Chrysler's Brampton plant. Then again, perhaps not.
If they really cared, and of course they should given all the jobs and tax dollars at stake, Obama, McGuinty and Stephen Harper would demand from Fiat the same elaborate rescue blueprint they're negotiating with GM, describing exactly which Fiat models are to be built at which North American plants and in what volume. And which of Chrysler's 30 plants would be closed - as Marchionne says he plans to do. Marchionne has also said Chrysler is part of a larger empire-building exercise that might draw in PSA Peugeot-Citroen and perhaps other automakers. The providers of Chrysler bailout funds - as long as all this is to be done on the taxpayer's dime - should be told in detail about that too. Do Ontario taxpayers want to fund the creation of a trilingual, transcontinental automaker when the bilingual DaimlerChrysler was an unmitigated disaster?
Remember, Fiat is a company so undisciplined that its debt mysteriously "ballooned," to use Marchionne's term, to $7.6 billion (U.S.) last year, three times what Fiat estimated. Credit agencies have cut Fiat's debt to junk status. And Fiat is a candidate for bailout funds from Rome. And this is Chrysler's saviour?
Leading indicators
* Recession victim Conquest Vacations closes after 37-year run.
* Modest recovery in Canadian house sales in March.
* No quick end to recession, Wal-Mart CEO warns.
* March marks 42-year low in U.S. factory activity.
Analysis and commentary
* Economist: Surely not all economists are to blame for the economic crisis.
* New York Times: Grim signs U.K. may need IMF bailout.
* Business Week: BlackBerry maker RIM ranks No. 8 among BW`s 25 most innovative global firms.
Oddities
Cities with major league baseball teams have a 28 per cent lower divorce rate than towns that were unsuccessful in attempts to obtain a baseball franchise, claims a report by the Center for Marital and Family Studies at the University of Denver. Says Howard Markham, U of D psychology professor and director of the CMFS: "Going to a baseball game and not talking about relationship issues, but rather having fun and talking as friends is one of the ways to protect and preserve love."
``I don`t want to know what a split-finger fastball is. I want to know why you won`t fix the garage-door opener.``
Legendary Chicago real estate developer Sam Zell says it was a mistake to buy Tribune Co., the giant newspaper chain that filed for Chapter 11 bankruptcy protection in December, only a year after Zell bought it and loaded it up with $13 billion (U.S.) in debt.
“The definition if you bought something and it’s now worth a great deal less, you made a mistake,” Zell said in a Bloomberg Television interview today. “And I’m more than willing to say that I made a mistake...”
“It’s very obvious that the newspaper model in its current form is not working. And the sooner we all acknowledge that the better. Whether it be home delivery, whether it be giving away content for free, I mean these are critical issues.”
Zell gave long odds on unloading his Tribune albatross.
“That’s like asking someone in another business if they want to get vaccinated with a live virus,” Zell said. “There’s not a long list of people who want to buy newspaper companies today.”
Zell, pictured right and a.k.a. ``the grave dancer,`` a self-styled sobriquet for his knack in buying distressed real estate at a steep discount, inexplicably closed out his career buying a newspaper conglomerate at the top of the market. Tribune`s holdings include the Chicago Tribune, Los Angeles Times and other leading U.S. papers suffering a recession-induced advertising slump and readership and revenue losses to the Internet.
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Note: For the purposes of this blog, the inception of the Great Recession in the U.S., the epicentre of the crisis, is taken as the start date for the global slump. The U.S. has been in recession since December 2007.
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