Fiat stands by decision to take a stake in Chrysler
Jun 9th 2009 11:30AM
Updated Dec 4th 2009 2:12PM
In yesterday's episode of "As Chrysler Folds," the U.S. Supreme Court decided to hear a challenge by three Indiana pension and construction funds -- which could ultimately destroy the sale of the company to Fiat.
Despite the decision, the Italian automaker announced today that it won't stop its quest to acquire a controlling stake in the American automaker. A spokesperson for Fiat stated, "Fiat won't walk away from Chrysler." Should Fiat walk away from the deal, Chrysler would have few options other than to liquidate.Chrysler claims that the agreement with Fiat is the best deal that it can get for its assets and that the deal is "critical" to the company's chances to emerge from bankruptcy protections. The Italian firm has offered its small car and environmentally friendly engine technology, along with management expertise, in exchange for a 20 percent stake in Chrysler. Fiat's initial investment will then grow to 35 percent in 5 percent increments.
Fiat's CEO Sergio Marchionne will also become Chrysler's chief executive once the deal is sealed. Marchionne turned Fiat around, and is expected to help bring fundamental changes to Chrysler's management structure. It is believed that Marchionne will do away with the failed hierarchy at Chrysler and will install a quicker decision-making process. According to the report, Marchionne and Fiat plan to launch the companies rather popular Fiat 500 and its Alfa Romeo brand in the United States.
While the three Indiana pension and construction funds, understandably, feel that they have been slighted and ignored -- that the company has neglected some of its shareholders -- this deal absolutely has to go through. The only way to save Chrysler will be to let Sergio Marchionne and Fiat work their magic on the American automaker. Of course, I could be buying into the Fiat hype that is permeating the coverage of the Chrysler situation -- but if we are going to save Chrysler, it may have to be done.
If Fiat can step in and bring Chrysler out of bankruptcy protection, it will be a boon for the American auto industry. That should be reason enough to give Fiat a chance. What does Chrysler and the American auto industry really have to lose? The risk versus reward scenario suggests that Fiat is the way to save Chrysler, but we'll see what the Supreme Court and the rest of America believes.