REPORT: Chrysler pursuing clause to award Fiat $35 million if deal falls apart
Think Fiat's getting a pretty sweet deal with Chrysler? The Italian automaker is, after all, gaining a 20% stake in the troubled American automaker, plus local manufacturing capacity and access to its dealer networks, all without paying a thin dime. Not a bad deal, but Chrysler's hard at work trying to make it sweeter. Emerging reports suggest that if the deal between Fiat and Chrysler were to fall apart, Chrysler would be obligated to pay Fiat $35 million in severance fees.
Chrysler is currently pursuing the clause in the courts administering its bankruptcy protection. The reasoning is that Fiat has put in the time and money into pursuing the partnership that would allow Chrysler to continue operating, and if the courts – or anyone else, for that matter – were to terminate the arrangement, Fiat would deserve compensation. A similar clause worked out well for Fiat after its partnership with General Motors was terminated. The tables now turned, Fiat has certainly come a long way since then.
[Source: The Detroit News | Image: Chris McGrath/Getty]
Reader Comments (Page 1 of 2)
hypermiler 3:38PM (5/05/2009)
Chrysler is done, no need to fork it to see it is done.
Time to pull the plug on Chrysler and kick Italians outa here.
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ronEbear 3:41PM (5/05/2009)
Exaclty, wtf is up in America. Given that there might be "Buy American" clause in the cash for clunkers program, how is it not hypocritical for an Italian auto manufacturer to be the "saviour" of an American brand?
oZ 4:26PM (5/05/2009)
You're an idiot.
ronEbear 3:39PM (5/05/2009)
Money for nothing and stakes (as in stakes in the company) for free!
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MKIV 7:17PM (5/05/2009)
Anyone remember the deal Fiat got from GM? This is not half as bad as the GM deal...
Alex 3:44PM (5/05/2009)
Personally, i'm not too terribly concerned with what happens to Chrysler, their product never appealed to me. I want this deal to go through to speed the arrival of Alfa Romeo.
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skicat 3:48PM (5/05/2009)
WTF is going on at Chrysler? Why are THEY pursuing a termination clause? Why should they give a s#*t if FIAT gets paid if the deal falls thru? If the story is as reported, I smell kickbacks for Chrysler execs as they exit the flaming ruins.
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Chris 3:51PM (5/05/2009)
Perhaps Chrysler is pursuing this clause as a big FU to the remaining creditors looking for liquidation...just a thought.
brn 4:00PM (5/05/2009)
Because this is how Fiat works. Chrysler was given an ultimatum. They were told that the Fiat deal must go through or they're doomed. Fiat is going to milk this for all they can. They couldn't give a rip if Chrysler dies, as long as they don't loose.
Fritz 3:59PM (5/05/2009)
Something along the lines of stay out our business, because we think FIAT can run the company better than the jackass yokels behind every move this company has made in the past, including the US government, and we'd like to get rich(er).
Bloke 4:28PM (5/05/2009)
"Because this is how Fiat works. Chrysler was given an ultimatum. They were told that the Fiat deal must go through or they're doomed. Fiat is going to milk this for all they can. They couldn't give a rip if Chrysler dies, as long as they don't loose" - brn
You do realise that Fiat is a business and not a charity, don't you? Seriously the stupidity on display here is incredible.
brn 6:29PM (5/05/2009)
Bloke, I do realize that. My issue is that they are being praised in the popular media as a savior. They're not a savior. They're another car company that has tough financial times and questionable reliability. They'll likely take what they can from Chrysler and dump the carcass on the floor. Not the kind of savior that Chrysler should be forced into working with.
Bloke 7:08PM (5/05/2009)
brn - my guess is that you're somewhere in North America (by the spelling of "savious") and you're not too familiar with Fiat, except perhaps for the period prior to the early 1980's ... assuming you're that old to remember. I'm guessing that these days, you're not aware that Fiat makes exceptionally good cars, and in terms of reliability, they're no better no worse than pretty much any other mainstream European manufacturer. I've owned a number of Fiats over the past twenty years and driven many more, so I'll stand by my comments.
For those who understand the realities of business, Chrysler is an opportunity for Fiat to expand its possibilities - and to that end, should be applauded. The fact that it's taking on Chrysler, a company with a terribly poor reputation in Europe is another matter. There isn't any business decision that guarantees success, but compensation clauses are commonplace in business and Fiat's is no exception.
The question will always remain that had Fiat not stepped in, whether Chrysler would have survived. A number of potential suitors, from GM to Hyundai, all ultimately said they weren't interested. What surprised me was the fact that a major Chinese manufacturer missed the boat on this one. Given the cost to the US economy of Chrysler going belly-up and the wasted taxpayers' money which would have ensured, the mere chance of survival under the collaboration with Fiat more than justifies "saviour" status.
Bloke 7:09PM (5/05/2009)
"Saviour", that is.
Bloke 7:16PM (5/05/2009)
"Not the kind of savior that Chrysler should be forced into working with."
Chrysler hasn't been forced into working with anyone. It's a bankrupt company, and it has just two choices: to work with any interested party in the company, or disappear completely.
That's the nature of business - deal with it.
Judy Zik 12:35AM (5/06/2009)
Fiat to Chrysler..."I love you Baby but if this marriage doesn't work out I want 35 million okay?"
Personally I think there is a good chance the judge may say no to this clause with good reason. It is ridiculous to think this idea originated in Auburn Hills. This is an order straight from Fiatsco. It is not suprising but a bit insensitive to say the least. I think Fiat needs to be forced to assume some of the risk here. The idea that they get a windfall if they can't make the deal work is a bit over the top in this climate.
brn 10:27AM (5/06/2009)
"I'm guessing that these days, you're not aware that Fiat makes exceptionally good cars, "
Fiat doesn't do well in this survey:
http://www.whatcar.com/NonCar/7588125111.jpg
I'm the first to criticize JD Powers, but this does put Fiat's reliability into question, hence my statement.
bc 3:54PM (5/05/2009)
Fees when acquisitions fall apart or fail to be approved are standard. Given the size of the deal, $35 million is on the low side.
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Yikes 3:55PM (5/05/2009)
Seems GM was burned by Fiat is a similar deal just a couple of years ago. GM paid billions to get out of a deal with Fiat.
Thanks Obama for funneling our tax dollars to Italy.
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mad.ludwig2nd 3:58PM (5/05/2009)
What does Obama have to do with the 35 million payout?