Fiat's Marchionne Back In the USA; Hurdles In Chrysler Deal Remain
By Michelle Krebs April 9, 2009Fiat CEO Sergio Marchionne reportedly is back in the U.S. to continue hammering out an
alliance with Chrysler.
Marchionne and Alfredo Altavilla, Fiat's head of business development and chief executive of its powertrains division, reportedly are dividing their time between negotiations in Detroit with Chrysler and the UAW and meetings in Washington with U.S. Treasury officials.
President Obama has given Chrysler until the end of this month to
finalize a definitive agreement with Fiat. And that's "ample time," said Chrysler President Jim Press Wednesday at the New York auto show, where he was driven onto the stage in a Fiat 500.
"We prefer having a shorter timeframe to get through this period, get all the questions out of our minds and get back to business as usual," Press told reporters at the show.
The current framework of the deal is for Fiat to take a 20-percent stake in Chrysler in return for access to its small car platforms, like the Fiat 500, and technologies, but no cash.
Daimler Balks At Cerberus Demands
Meantime, the Chrysler-Fiat alliance could be running into problems with Daimler AG in Germany.
At Daimler's annual meeting Wednesday in Berlin, CEO Dieter Zetsche told shareholders demands from Chrysler's majority owner, Cerberus Capital Management, are "making it difficult to reach an agreement" about Daimler's remaining 19.9-percent stake in Chrysler. Private equity firm Cerberus owns 80.1 percent of Chrysler.
Even though Daimler has listed on its books that its Chrysler stake is basically worthless, Cerberus apparently wants Daimler to simply relinquish its shares as part of its overall plan to restructure the company. Daimler also holds $1.5 billion of secured loans to Chrysler; Cerberus has $500 million in secured loans.
"We have analyzed these demands in detail and regard them as unacceptable," said Zetsche, who ran Chrysler when Daimler owned the American company outright, in prepared remarks at the shareholders meeting.
Daimler also disclosed Wednesday that it has transferred back to Chrysler ownership 22 international sales offices through which Chrysler sold vehicles outside North America - in Europe and South America. Those offices could prove valuable to Chrysler and Fiat, providing both with more opportunity for overseas sales.
Finance Fiasco Brewing
And more storm clouds are arising on the financing front. Two advocacy groups are launching a national online boycott of Chrysler's main bank, JPMorgan Chase, if the bank doesn't help the struggling automaker. Banks hold $6.9 billion in secured Chrysler debt, and, to meet the requirements of its government loans, Chrysler must renegotiate its debt.
Progress Michigan and FireDogLake.com are asking people to close their JPMorgan bank accounts and cut up their credit cards in protest of the bank's reluctance to help Chrysler. A Facebook page called "Americans Boycotting JPMorgan Chase" has been set up and there are plans to post a video of someone closing their account on YouTube in the next day or two, organizers told the Detroit News.
Burning Through Cash
Further, analysts are increasingly doubtful that even if a Chrysler and Fiat strike a deal that the $6 billion in loans from the U.S. government will not be enough at the rate that Chrysler -- and other automakers -- are burning through cash. One analyst said that $6 billion would not get Chrysler through this year in the current market downturn.
On the union front, the United Auto Workers union and Chrysler have picked up the pace of negotiations to reach a new agreement on Chrysler's obligations to finance the retiree health care fund known as the Voluntary Employee Beneficiary Association (VEBA) per the 2007 labor contract. An agreement is required by the end of this month to meet the government's loan requirements.
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