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Old 6th January 2014, 15:05   #1
Black 6050
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Default Fiat's "Italian Job" Caper

Perhaps all us Chrysler owners will need to learn Italian afterall....

Fiat's 'Italian Job' Won't Have a Clean Getaway

By Edward Niedermeyer

Sergio Marchionne has pulled off the caper of a lifetime. The chief executive officer of Fiat SpA --having already rescued the Italian automaker from the brink and returned it to profitability within two years of taking charge in 2004 -- now appears to have saved it again by wrestling control of Chrysler from the United Auto Workers union VEBA trust. But like Michael Caine at the end of "The Italian Job" -- I'm talking the 1969 original, in which a gold-bar-laden bus teeters on the edge of a canyon wall -- Marchionne may find that his epic score places him in a cliffhanger.

Though Fiatís public-relations department may not like my comparing the Chrysler acquisition to a (fictional) theft, the modern auto industry has few precedents for the screamingly good deal Marchionne negotiated. Fiat will pay just $1.75 billion for the VEBAís 41 percent of Chryslerís equity.The rest of the cash for the deal ($1.9 billion up front and $700 million over three years) comes from Chrysler itself.

But what really makes the buyout a steal is that Chrysler is leaner and more profitable than itís been in decades, thanks to the taxpayer bailout that originally gave Fiat a hefty chunk of the firm for noncash agreements. Because of Marchionneís temerity and the Barack Obama administrationís desire to save union jobs, Fiatís Chrysler acquisition became the exception to the rule that acquiring automotive assets is always cheaper in bankruptcy.
But let's get back to that teetering bus: As markets price Marchionneís daring exploits into Fiatís value, it becomes clear how necessary the deal was to Fiatís survival. Even with Chryslerís cash, U.S. distribution network and huge truck and SUV profits, Fiatís losses, debt and dependence on a moribund European economy still threaten the consolidated automaker. With Fiatís own market cap on par with analyst estimates of a Chrysler IPO valuation (about $11.5 billion), itís clear that eponymous brand's problems are a serious drag on the automaking group.

After all, where Marchionne has had a near-perfect negotiating record with U.S. government and union officials, he has struggled to remain in the good graces of Italyís labor left. And rather than abandoning Fiatís home market, Marchionne is doubling down on Italian manufacturing despite losing share in a shrinking European market. Using Chrysler's large-sedan and SUV technology, Fiatís Maserati and Alfa-Romeo brands hope to generate high-margin, volume-boosting autos marketed globally to exploit Made-in-Italy cachet.

Itís a counterintuitive strategy for the global age, in which one-time national-champion brands such as Volvo and Jaguar are owned by Chinese and Indian companies and build-where-you- sell trumps nationalistic brand associations. Though some might argue that stressing its heritage is just the approach Fiat needs to catch up in the luxury-obsessed Chinese market, I wonder if itís less of a strategy at all than the only way to possibly justify high Italian manufacturing costs. In any case, Italian Industry Minister Flavio Zanonatoís interpretation was clear, stating that Fiatís acquisition of Chrysler would allow the company to ďfurther consolidate its position in Europe and internationally, putting [Italian] factories, know how and...technology at the center of its growth strategies.Ē

In the short-term, however, American consumers will continue to pay the bills at the consolidated Fiat-Chrysler. And not because of sales of Italian-branded or Fiat-powered vehicles either, but from strong sales of large trucks and SUV's with Jeep and Ram nameplates on them. In fact, the only Fiat-branded cars to be sold at U.S. Chrysler dealerships, the retro-styled Fiat 500 family, have failed to meet Marchionneís sales goals, demonstrating that his Italian-centric marketing strategy is hardly a cinch. Even larger cars using Fiatís small turbocharged engine, such as the Dodge Dart Eco, have stalled on the market.

So, like Michael Caineís getaway bus, Fiat is caught in an awkward balance: on one hand it seems committed to remaining an Italian national champion company, but on the other itís absolutely dependent on U.S. consumers. If Jeep, Dodge and Ram lose their American appeal under Italian management, Fiat goes over a cliff. But if Fiat-Chrysler were to rationalize as a Western Hemisphere-based-and-focused company, leaving its high-cost European overcapacity behind, Italy itself might well go over a cliff. If nothing else, this ambiguity will plague the companyís culture, as happened during the so-called Daimler-Chrysler ďmarriage of equals.Ē

Michael Caine eventually revealed that "The Italian Job" had filmed an alternate ending, in which the stolen gold eventually tipped the bus into the valley, leaving his character empty-handed. In the final analysis, it seems likely Marchionneís epic Italian Job will have similar results. Though the exploits of the auto industryís most daring CEO have been breathtaking, the debt and political entanglements Fiat has acquired along the way now weigh heavily on the companyís future. Unless, of course, Mr Marchionne happens to have one last great heist in mind.
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Old 6th January 2014, 15:10   #2
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In case some of you never saw the original "Italian Job" with Michael Caine:
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Old 7th January 2014, 07:07   #3
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I'm really NOT sure how all of this is going to play out; guess we'll see.
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Old 7th January 2014, 19:18   #4
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Hopefully not this way.......
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Old 11th January 2014, 11:31   #5
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Originally Posted by Black 6050 View Post
Hopefully not this way.......
Now that is a Hot Rod there!
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