Chrysler L.L.C. today faded into history, as it closed its much ballyhooed partnership with Italian automaker Fiat SpA.

The merger clears the way for the third-largest automaker to emerge from Chapter 11 bankruptcy protection, after rejecting objections raised by a group of Indiana pension funds which some feared could delay or potentially scuttle the deal.

"The combined Fiat-Chrysler will get another $4 billion in government loans when the sale closes," according to the Detroit Free Press. "A group of about 45 banks, hedge funds and the Indiana pension funds also will receive $2 billion in cash to settle $6.9 billion in secured debt they hold."
But what exactly is emerging here? I remember the optimism that greeted the Chrysler merger with Daimler Benz. What makes Chrysler think it will fare better with Italian management than German? Unlike the earlier deals, no one is trying to argue this is a merger of equals. That was never true about Daimler and Chrysler. One pundit even joked that the Chrysler part was silent.

The new Chrysler will have about 780 fewer dealers and a slimmed-down product line that will focus on small, fuel-efficient cars. It employs about 38,000 employees. Though Fiat CEO Sergio Marchionne no doubt is eager to expand its foothold in the U.S., that is not going to be easy.

Both Fiat and Chrysler have lousy reputations with consumers. Fiat has not gained traction with U.S. for decades because people have heard the old joke that the company's name is an acronym for Fix It Again Tony (FIAT). Chrysler's vehicles have consistently earned poor reviews from Consumer Reports and other sources. Whether these perceptions are fair is another story.

Fiat owns 20 percent in the new company, which it didn't put any money into.

The Italian company either made a brilliant business move or a staggeringly stupid one. Only history will be able judge that for sure.

Increase your money and finance knowledge from home

Income Investing

Grow your nest-egg.

View Course »

Behavioral Finance

Why do investors make the decisions that they do?

View Course »

Add a Comment

*0 / 3000 Character Maximum