REPORT: Fiat's Marchionne says Chrysler deal odds are 50-50; warns unions to cut costs
by Chris Paukert on Apr 15th 2009 at 10:00AM 
With the clock ticking down on Chrysler's restructuring deadline from the Obama administration, Fiat's CEO, Sergio Marchionne is getting blunt: Cut costs, or else.
According to Reuters, unless the United Auto Workers and Canadian Auto Workers agree to cut labor costs within the two weeks leading up to the April 30 deadline, Fiat will pull out from its planned stake in Chrysler, all but assuring bankruptcy for the Auburn Hills automaker. In fact, in an interview with Canada's Globe and Mail, Marchionne estimated that the chances for a deal are only 50-50, saying "Absolutely we are prepared to walk. There is no doubt in my mind." Thus far, union representatives have been resistant to lowering labor rates to be more in line with that of Asian and European automakers.
In addition to labor cost issues, Chrysler has massive debt to contend with – some $7 billion is owed to lenders. If the company is to have any hope of making a dent in those obligations without seeking bankruptcy protection, it will need the to secure the second $6B tranche in government loans (it has already taken in $4B) that the White House says will only be offered if they come to terms on restructuring.
On the subject of the possibility of simply 'cherry-picking' from the bin of for-sale brands in the States as a way to re-gain entry into North America, Marchionne has reportedly been dismissive – particular of General Motors' Saturn division, about which he remarked: "It's not a brand I have any affinity for."
[Sources: Reuters; Automotive News (subs req.) | Image: AFP/Getty]
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Reader Comments (Page 1 of 4)
Swede 10:09AM (4/15/2009)
Chrysler needs Fiat, Fiat does not need Chrysler.
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Swede 10:12AM (4/15/2009)
I mean, even the UAW should realize this. I'm a union man myself but let's face it, they have two options: work or walk.
geo.stewart 10:35AM (4/15/2009)
UAW is incapable of a long-term view. IF they could look ahead, concessions now will allow for short term viability and long term stability. but you cant get that through the skulls of most of them.
Its an hourly wage perspective. the more hours I work now, the higher my paycheck is this friday. and those higher paychecks never equate to highedr savings for the low weeks.
RG 11:42AM (4/15/2009)
"Work or walk."
It does seem that simple, right?
However, a plant in my hometown was running the risk of going out of business (auto parts supplier). They told the union to please reconsider their wage pricing and contract to allow them to stay in business. The union said "no." The company then presented in excruciating detail the dire straits they were in and that if the union did not budge, all 1,700 employes would be laid off. The union, with more dissenting votes this time, still would not budge.
This plant will be closing this summer and all 1,700 people have lost their jobs due to their unwillingness to see the writing on the wall.
Pip 12:44PM (4/15/2009)
That is pretty sad they didn't budge. The unions primary job is to protect the jobs of their workers, not their wages. The unions should be doing whatever it takes to keep their workers employed. If it means cutting wages in half, so long as no jobs are lost, they can be considered successful.
BigWill 8:03PM (4/15/2009)
No, the primary job of the unions is to protect the jobs of the union leadership.
sk 10:19AM (4/15/2009)
At this point Fiat might as well wait for Chrysler's chapter 11 filing and then buy up the profitable units only.
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mapoftazifosho 10:21AM (4/15/2009)
True story!
MatthewR 10:50AM (4/15/2009)
What does fiat want? Some dealships, a few engines, and maybe Jeep would be nice (who is gonna win that in the auction?)
What do I want? A Fiat 500C. I just need to convince my girlfriend that it is safe.
Craig 2:58PM (4/15/2009)
Why Chapter 11? Chapter 11 is restructuring. They're going to wait for Chapter 7 and then buy what they need.
Greg Aryous 10:22AM (4/15/2009)
With only 2-weeks to go, Chrysler is definitely headed to Bankruptcy and most likely Ch-7 liquidation so the banks can get a few more pennies on the dollar. The UAW is simply a lost cause. RIP Chrysler, we won't miss your lack of quality, safety ratings or reliability. Should have focused more on bread-n-butter sedans than gas-guzzler trucks, Jeeps and SUVs. You get what you deserve.
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stealthebeatles 10:25AM (4/15/2009)
Yep, shouldn't have focused on Jeep at all. You know, the strongest brand you own. Nor trucks, like the high-volume large margin Dodge Ram, your strongest selling vehicle for the past several years.
Mid-size sedans only.
Mr Cool 10:25AM (4/15/2009)
Amen
Galley 10:28AM (4/15/2009)
As a lifelong Chrysler fan, I have to agree.
sk 10:31AM (4/15/2009)
Most is to be blame on Daimler's management.
mapoftazifosho 10:31AM (4/15/2009)
Greg has it wrong...focus is the wrong way to put it...
They should not have ignored the mid-size sedan and small car segments. The Neon should NOT have been killed and replaced by the Caliber...
My list could go on...but Jeep was and still is a strong brand. It has avoided the environmental backlash that Hummer experiences and still evokes a great deal of positive consumer emotion...def not a brand to discredit...
Greg Aryous 10:53AM (4/15/2009)
If Chrysler "high-margin" trucks and Jeeps made the money you claim then they would not be near bankruptcy - check your facts!
- The '09 Ram is "finally"' a worthy competitor, but a day late and dollar short...
- Jeeps last 3-offerings (Commander, Patriot and Compass) are nothing but a giant disappointment in sales (and profits) that has only "tarnished" the brand!
- Minivans once a segment leader have fallen because of poor quality vs. Honda and Toyota
- SRT performance vehicles have been nothing but a drain on resources and lack of focus. Note: You don't see Toyota or Honda with a "niche" performance line...
In Ch-7 liquidation, Jeep and Dodge trucks are the only worthy assets, everything else is junk!
BigWill 8:32PM (4/15/2009)
"Most is to be blame on Daimler's management."
I'd disagree. Most to blame is Bob Eaton. No Bob Eaton = no Daimler acquisition.
the_MVP_X 10:22AM (4/15/2009)
Cost cuts hurt, most of the time.
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J C 11:01AM (4/15/2009)
The Obama administration needs to put some pressure on the unions.
So far they've only pressured and intimidated AIG bankers and Auto CEO's.
Fire a few union thugs and maybe there will be some progress.
But they probably won't because unions are their power base and mode of intimidation.
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