Where Chrysler can benefit from Fiat

Logo for Italian carmaker Fiat displayed on a Fiat 500 car

TEXT OF INTERVIEW

Steve Chiotakis: There is a ticking clock that Detroit will be watching very closely. One that the Obama administration is setting today, and one that will no doubt reshape the American automobile industry. The president says carmakers can either become lean and mean or wither and die.

Now so far, the president's none too happy with what General Motors and Chrysler have proposed so far. The GM casualty is Rick Wagoner, the CEO who stepped down yesterday at the administration's request. It's giving GM 60 days to come up with a better plan or be left for dead. And as for Chrysler, the administration wants to light a little fire under a partnership deal with Italy's Fiat. It's giving the two 30 days to make it happen if they want another $6 billion in federal loans.

Our man in London, Stephen Beard, joins us now. Stephen, how likely is it that this deal can take place in a month?

Stephen Beard: A leading British analyst that I've been talking to this morning says yes, in spite of this deadline, just 30 days, this actually could happen. Fiat could be willing to do the deal, because if Chrysler's been through bankruptcy, they'd be largely debt-free. And Fiat will be acquiring a major presence in the U.S. market -- which of course is flat on its back at the moment, but it is still the richest auto market in the world, and come the recovery it should make good profits for Fiat.

Chiotakis: So Stephen, what will Fiat then bring to Chrysler in this deal?

Beard: Well, survival apart from everything else. Because this task force has made it clear that unless Chrysler does form a partnership with a big foreign company like Fiat, it's not going to get any more taxpayers' money after 30 days. But quite apart from that, according to Professor David Bailey of the Birmingham Business School, Fiat would be a pretty good partner for Chrysler:

David Bailey: They'll bring two things. One is expertise and technology, but also they've done a great turnaround job outfield. If you go back five years, it was in pretty bad shape. They're now in good shape, producing good cars with a good position in the market.

Chiotakis: And is Fiat not worried about these costs though, Stephen, such as the retirement and health care benefits, all of those things that go along in a deal like this?

Beard: Well indeed, you would think that this would be a major concern, that this might be a millstone and they would like to deal with this very much before these 30 days are up and not after they've done their deal with Chrysler. Nevertheless, Fiat is very, very keen indeed on getting into bed with Chrysler. We're in a period of great upheaval in the whole world auto market. We could wind up with only six or eight major international car firms at the end of all this period, process of transition. And it does appear that Fiat would like to be, wind up as one of those six or eight giant car companies along with Chrysler.

Chiotakis: All right. Our European correspondent, Stephen Beard, in London. Stephen, thank you.

Beard: OK, Steve.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...