Edmunds CarPool

A number of years ago I was working for a company that went bankrupt. We arrived in the morning and the doors were chained shut. There were some people there we didn't know telling everyone they were now out of work. Everyone.

We didn't get a lay off package, any notice and even our last pay cheque was never deposited. All the benefits stopped right away.

If it weren't for Fiat and government money, that's what would have happened for GM (and Chrysler). All the plants closed, all the employees out of work without packages, benefits and pensions either gone or tied up in courts for years. All the dealers would be closing too and and huge numbers of supplies would also end up out of business. The number of affected people is massive.

I'm not thrilled about signing it over to another company (or spending massive amounts of taxpayers money either) but it's still beter then the alternative.

And the whole world continues to laugh... In Europe, Fiat is seen in the same light as Chrysler: An also-ran that is hanging onto solvency by mere threads. I doubt there is any real resolve by Fiat to save or fix Chrysler. They just want access to Chrysler's existing dealer network to cheaply fund Fiat's re-entrance to the U.S. market, and maybe use Chrysler's production facilities if the already-failed-in-the-US-once Fiat brand gains any traction here.

A news story that I watched last night really put the whole bailout of Chrysler, GM, and the financial sector in perspective. Tonight, our local school boards are widely expected to pass next year's budget the only way they can: Permanently eliminating all athletics, music, and art programs. It's either that or lay off more teachers and bring classroom sizes up to 60 students per room. And the budget shortfall that caused this? It's severely less than the total amount of bonuses that were authorized by the administration to be paid out by AIG from taxpayer money.

What are we doing? Even with all of this taxpayer money and signing companies over to foreign entities, the entity that invented the DMV and post office, and the entity that demanded $28/hour to operate a screw gun, is there still a good chance that these companies will fail anyway? After trillions of dollars spent, is the economy just going to collapse anyway? All the while having to resort to slashing education budgets to make ends meet? Not only will we be unemployed and broke, but dumber as well.

I dunno, I still have very mixed feelings about all this. If Fiat in some way can save Chrysler's bacon while letting Chrysler be Chrysler (meaning that Fiat won't turn all Chrysler/Dodge models into 4-banger tin crackerboxes), then I'm all for it.

But instead I'm having flashbacks to 1979 when Renault merged with AMC (talk about the blind leading the blind...). AMC was in seriously deep defecation and Renault was supposed to be its savior (sound familiar?) - they even had the Alliance and Encore a few years later (remember those? Didn't think so).

Anyone who remembers this alliance (no pun intended) also remembers that it ultimately crashed and burned - HUGE. AMC went tits-up anyway and Renault folded up their tents and went back to France.

Will history repeat itself? I surely hope not.

firstwagon,

Do you know what happened to debtors before bankruptcy was a means of exiting their debts?

Nobody forced Ford, Toyota, Honda, VW, or Fuji Heavy Industries (Subaru) run the other way. It was theirs for the taking. If what you say is true, then shame on Ford especially for not jumping on this before the sweetheart deal was given to a foreign company.

ahightower... What would Ford gain out of a relationship with Chrysler? More inventory? More brands? More dealerships? More plants? More legacy costs? There are many reasons that Ford is still in a relatively good position, and not teaming up with a bailed-out-by-the-government-once-before-but-we-still-can't-figure-out-how-to-stay-in-business-and-we-should-just-be-put-out-of-our-misery-once-and-for-all Chrysler is one of them.

And speaking of Ford... the May 2009 sales figures are out, and the Ford brand outsold every other brand for the month (Toyota and Chevy were second and third, respectively). Only one brand actually posted a sales increase from this month last year, and this is a shocker: Lincoln. Of the multi-brand companies, Ford Motor posted the best overall results with only a 24.25% drop is monthly volume (21.33% drop in DSR). Toyota Motor, Honda America, and Chrysler Group all saw greater than 40% drops in monthly sales volume.

Not surprisingly, Chrysler Group saw the largest decline in sales of all the multi-brand companies, with a nearly 50% drop in monthly volume. Good luck Fiat! You'll need it. (Suzuki was the worst performing brand with a staggering 75% decline in monthly volume!)

This is certainly a sweet deal for FIAT: no money down, and their only "risk" is their reputation (such as it is).

I would fully expect FIAT-Chrysler (ChryFIAT, FIATsler?) to implode if FIAT also manages to get their hands on Opel (where they actually have to put money on the table). FIAT is more likely to put real effort into Opel, since that gives them a future. Chrysler's big draw for FIAT is definitely the dealer network, and I can see FIAT, over a period of time, slowly shutting down the various Chrysler models, while adding the FIAT product at the same time. Expect to see the Pentastar and Wings logos on some decidedly un-Mopar products.

And all of this funded by the taxpayers, represented by lenders that are the least likely to every try to collect on the debt. When you consider how willingly the money was handed out in the first place, I can see those loans being "forgiven" in a few years because the maintenance of those loans is contributing to the cost of operations. I fully expect to hear that the servicing of those loans is hurting their return to profitability, and that it is "critical to the survival of the company" that they be forgiven or converted to stock. Of course, since the government will basically be diluting itself, it won't care, and the loans will just disappear.

"Suzuki was the worst performing brand with a staggering 75% decline in monthly volume!"

How Hyunday is doing so good whileSizuki (a.k.a. Daewoo)is not? Both are discount Korean brands and that is exactly the reason (discount) why Hyunday is doing so well.

Regarding FIAT if you read anything about Marchionne - there is nothing in common with Renault-AMC. Marchionne will reorganize (simplify, flatten) management, improve efficiency and processes. He is no BS guy and is more American workaholic kind of guy rather than relaxed Italian CEO.

Chrysler makes unique and pretty good fullsize RWD sedans that need only be improved and further developed. Plant that makes Sebring and its Dodge twin will be shut down. I think only full size sedans, minivans and trucks will remain what makes perfect sense. And FIAT will sipply the rest. FIAT small cars are pretty good ftd cars and often win ECOTY award. Italian design speak for itself too - they may help to improve style of Chrysler vehicles. Chrysler also designed pretty good according to press V6 engine called Phoenix and has Heni which is also good V8 engine.

I hadn't heard that Fiat didn't have to contribute anything. That is surprising. But then again, that's market forces at work. Minus all the government intervention and all....

Btw, I would have given them $1 for the whole enterprise. Sure, it exposes me to tons of debt, but a quick fire sale would solve that.

=====

So there's an official date for the end of the bankruptcy? I'm still skeptical.

"So there's an official date for the end of the bankruptcy? I'm still skeptical."

Me too.

Yes there is an end date. The sale will be finalized this month and Chrysler will exit bankruptcy.

Fiat is offering platforms, cars and engines worth billions. Thats not the same as cash but it will allow Chrysler to get brand new cars and powertrains without the billions in capital investment that would normally be required. This means Chrysler will have lots of new models over the next few years without spending much money and that is a huge advantage for them. Also, Fiat's reputation in Europe is irrelevant. If Chrysler debuts Fiat based models with nice styling and fuel economy Americans will check out those models. They could care less about the European reputation of the platform donor.

I would say Fiat's reputation is going to play a significant role in the process. I would imagine that a significant percentage of the American consumer base doesn't know anything about Fiat beyond their name.

So, from a public perception standpoint, how is a company that's a small player on the world stage going to convince buyers to come back to dealerships that they've largely been ignoring the past several years?

As someone who's had 5 Dodges out of 7 cars, I'd certainly pop back into a Chrysler Co. dealership. But what about the people who long ago decided they'd never purchase anything from Chrysler? Will Fiat have enough credibility to pull them back in?

"I would say Fiat's reputation is going to play a significant role in the process. I would imagine that a significant percentage of the American consumer base doesn't know anything about Fiat beyond their name."

I think a majority of those Americans (probably older) familiar with Fiat, do not have a favorable view of Fiat.

I hope Fiat/Chrysler has a lot more success than I expect. I expect them to fail within five years, likely less.

+1 mnorm

Hyundia made worst cars then Fiat for decades and now they are doing great.

I know a lot of Europeans through work and have family in England. The impression I get is Fiat has quite a positive reputaion. They may not be quite as reliable as the Japanese makes but are seen as a cool car to have by the young people.

Hondas and Toyotas are looked at as cars more for just basic reliable transportation.

I'm willing to give Fiat a chance. It will be great to see something new and different for a chance.

I am still concerned that when Chrysler comes out of bankruptcy, they will have a difficult time convincing buyers to keep purchasing their cars. With 50% down in sales in the month of May, how do you suddenly get better. Chrysler doesn't have strong brands and even their niche brand Jeep is suffering from quality and reliability issues.

Ford and GM have much better quality line up and while GM is going through bankruptcy right now, I think that once they come out, they will be able to sway customers back to their dealerships. What does Fiat have to offer to Chrysler? They can't just bring their cars to US overnight and start selling them.

I haven't heard of any new products coming out from Chrysler in the near future besides new Jeep Grand Cherokee and possibly Chrysler 300. But both cars are gas guzzlers and will they be a hit with consumer?

I am also not convinced that even if Fiat brings their product portfolio to USA it will become a strong competitor to Honda, Toyota, or even Ford. It's all about the image and perception, and most of us still remember those old Fiats that were complete junk when they were selling here, in US.