Fiat / Chrysler: What's the Latest?

One of my favorite soap operas these days happens to be the proposed marriage between Chrysler/Fiat. I'm not sure how many miles Fiat Chief Executive Sergio Marchionne has racked up over the past few months shuttling between Italy and the U.S. but it has to be considerable.

Given the short time frame (the end of April) the Obama administration has given Fiat and Chrysler, things must be moving at an amazing pace. There certainly have been publicity stunts. For example, Chrysler Exec Jim Press (who must be rethinking his decision to leave Toyota) driving onstage in a Fiat 500 when he introduced the next generation Jeep Grand Cherokee. Nice one.

Cerberus has basically said that it will give away its stake in Chrysler simply to be rid of it. Daimler, which still holds a small piece of Chrysler, is throwing a fit and saying that Cerberus is making unreasonable demands in its quest to acquire that final piece of Chrysler from the Germans. Nobody outside of those two organizations is quite sure what the unreasonable piece might be. Maybe an exec's head on platter stuffed with stock certificates?

While the deal would give Marchionne's company and instant presence in the U.S., one has to wonder if the management headaches would be worth it. Sure he'd get a ready made North American car company, but he'd also get a ton of ready made problems: bloated labor contracts and pension deficits, some less than desirable dealerships, irked suppliers, etc. In this climate, Fiat certainly does have options. For example, if they back out of the deal, Chrysler would almost certainly slip quickly from Chapter 11 to 7, where Fiat could pick off whatever delectable morsels it finds while leaving the unpalatable behind. Or, Fiat could pass on Chrysler and buy GM's Saturn brand. There are so many options that it makes your head spin.

One also wonders have Marchionne would keep Chrysler afloat until reinforcements can arrive. It's a joke how little Chrysler currently has in the way of future product. In good or bad times, you always need three things in the auto industry: product, product and product. How can Chrysler continue to function with such a hobbled lineup? My best guess would be massive incentives and some rushed Italian built vehicles to bolster the ranks until North American production can crank up. You know that the first people through the door to buy a Fiat 500 or going to pay whatever you ask. Sure, you'll only sell a minuscule amount, but it will be good PR. Perhaps while these folks are at the dealership looking for a 500 you can slip them a roofie and get them to sign paperwork on a Caliber?

In the end, I think the deal will go through because the alternative is simply too politically distasteful. Either way, we won't have to wait long to find out!