Fiat Buys Out The Feds, Becomes Majority Owner Of Chrysler

[Pardus]

Article

It's hard to believe that two years have passed since Chrysler's Chapter 11 hearings concluded (next Friday is the grim anniversary). Now, the automaker is preparing to begin a new chapter -- one with Fiat fully at the helm: Chrysler announced yesterday that Fiat will buy out the U.S. government's remaining 6% ownership in the company, leaving Fiat with a 52% stake.

During the exchange, Fiat will cough up $500 million for the fed's remaining 98,461 shares in Chrysler. Fiat will shell out an additional $75 million for the government's call option on shares of the UAW retiree trust fund. For all intents and purposes, the U.S. government will be formally separated from Chrysler after the transaction takes place. (No word on a closing date just yet, though.)

But Fiat isn't going to be content with just 52% of the company. It's set to receive an additional 5% stake in Chrysler when it delivers a new 40mpg model for the Dodge lineup later this year. That addresses a stipulation set by the Treasury that put limits on Fiat's ownership position until it met certain benchmarks -- in this case, the delivery of a new fuel-efficient vehicle.

So, where does this leave everyone?

For Chrysler, the announcement is a huge development -- and a big step forward. Not only does it allow the company more freedom (under Fiat's watch, of course), but it helps rehabilitate the automaker's image with consumers. Chrysler's bailout was highly divisive, and many Americans promised to shun the brand because of it. This news, paired with Chrysler's recent announcement that it was repaying loans ahead of schedule, helps buff the automaker's brand.

For Fiat, this is where things get real. With a majority stake in the company, CEO Sergio Marchionne & Co. now have no one else to blame if Chrysler begins to falter. Marchionne has always struck us as fairly level-headed and conservative in his estimations, and so far, he's followed through on his pronouncements. We'll see if he can continue delivering.

For the feds, this means the end of a long, curious road. The bailout of Chrysler and GM was a major stumbling block for Obama during his first year as president (though technically Bush set the bailout ball in motion for both automakers and financial institutions). In the end, the bailout hit a number of hitches, but it wasn't as much of a bust as doomsayers predicted. Thanks in large part to the rebounding U.S. economy, GM and Chrysler are both doing fairly well today.

For taxpayers, this means a sigh of relief -- or groan of despair, depending on your point of view. The U.S. government invested about $12.5 billion in Chrysler, and once its transactions with Fiat are completed, the feds will have received $11.2 billion of that back in the way of repayments, mixed with some loan forgiveness. The remaining $1.3 billion? Not going to happen.

Some would -- and will -- argue that a $1.3 billion loss is completely indefensible. Others will say that $1.3 billion is a small price to pay to keep thousands of jobs in play and resuscitate one of the world's biggest auto brands. Feel free to share your opinions in the comments below.

 

[Doppel]

Poor Fiat

 

[Lotheron]

Poor Fiat

What are you talking about. Fiat bought a top tier auto manufacturer for pennies on the dollar.

 

[Bignate603]

What are you talking about. Fiat bought a top tier auto manufacturer for pennies on the dollar.

Not to mention a fully established dealership network in the US, something that Fiat doesn't have.

 

[drnickriviera]

Did the Germans make any money off Chrysler?

 

[Atty]

Fiat owns Ferrari still, correct? So does this mean I'll eventually be able to get my Ferrari serviced at my nearby Chrysler dealership?

All I need is a Ferrari now...

 

[OVerLoRDI]

I'm surprised fiat has that kind of cash. Are they doing that well in other markets?

 

[Atty]

I'm surprised fiat has that kind of cash. Are they doing that well in other markets?

Wikipedia lists their revenue for last year as being $35.88 billion with $179 million being profits.

 

[Demo24]

I just hope we can buy fiat branded cars and not have them all be Dodge or Chrysler logos on them. I guess I'm just picky that way.

 

[Sid59]

Did the Germans make any money off Chrysler?

The Germans took all Chrysler's money.

 

[ponyo]

Did the Germans make any money off Chrysler?

Chrysler was what floated the Germans. After they bleed it dry they dumped the empty carcass.

 

[M0RPH]

Chrysler Confirms 2011 Fiat 500 On Sale By End Of Year http://www.motorauthority.com/news/1042520_chrysler-confirms-2011-fiat-500-on-sale-by-end-of-year

 

[Arkaign]

I like the 500, but not sure it makes a whole lot of sense outside of cities like LA and Chicago. That thing is tiny, and we already have the Mini, unless the 500 is magically going to be much cheaper. If they try to charge as much or more than the Mini, people will just buy the Focus instead, better space, more features, same or better fuel economy.

 

[Atty]

Isn't the Fiesta more competitive with the 500? And anyway, the 500 is sexy. I'd own one if I wanted that class of car just because it won't be as popular as Focus and Fiesta's. I see one of those every 10-15 cars right now, hell, my GF's neighborhood has three from the entrance to her house. D:

 

[Knavish]

Chrysler was what floated the Germans. After they bleed it dry they dumped the empty carcass.

I've always been curious about this. Daimler paid like $30-40 billion for Chrysler in the 90s, and then had to pay Cerberus Capital management somewhere in the $100s of millions to take Chrysler off their hands. Did Daimler really "drain Chrysler dry"?

They probably got some styling help from Chrysler's designers, and *perhaps* they took the Viper prototype and made it into the SLS coupe for sale today, but they also improved several of Chrysler's designs. Before Daimler bought Chrysler, all Chrysler / Dodge cars were low-end rental fleet material. The Mercedes-based 300 / Charger / Magnum broke this trend a bit...

 

[Ape]

Never been a fan of Chrysler but damn I love the Fiat 500.

 

[Pocatello]

In a few years, Fiat will be paying off some company, probably from China, to take Chrysler off its hand.

 

[Arkaign]

Isn't the Fiesta more competitive with the 500? And anyway, the 500 is sexy. I'd own one if I wanted that class of car just because it won't be as popular as Focus and Fiesta's. I see one of those every 10-15 cars right now, hell, my GF's neighborhood has three from the entrance to her house. D:

Unique is cool and all, but the fun of owning a less common car kind of wears off if the cost and value doesn't add up. And yes, I think the Fiesta is a much closer match to the specs of the 500, but at the expected pricing for the 500, I don't quite 'get' it.

101hp 1.4L, 38mpg highway gas engine, ~2200lbs. Or in other words, the power/weight ratio of a 200hp 4400lb car. About what the non-Si model CRX was back in the day, right down to the fuel economy (the more recent EPA tests are more stringent than the ones used in the CRX's era). The current 500 is also kind of old, it was launched in 2007, and has recieved modest updates since that time. $15,500 to $23,500 price.

compare to the Fiesta :

120hp 1.6L, 38mpg highway gas engine, ~2400lbs. So pretty close on the power/weight ratio, but a shade roomier and with nicer equipement/options. $13k-$17k pricing.

It would be a different story if they imported the 500 with the little diesel motor that gets a bit over 60+mpg on the imperial gallon measurement. The extra torque and great fuel economy would make a compelling case for it. As it sits I think it will be somewhere between the smart and the mini in sales, but far below Fit and Fiesta just due to common sense.

 

[M0RPH]

The Fiat 500 is a small, CUTE car. It will sell to people who like Mini Coopers and VW Beetles.

The Fiesta really doesn't have a cute look and I think Ford made a mistake there. The Fiesta and Focus pretty much have the same look. They should have separated the Fiesta more and given it more of a small, cute styling.

As for the Honda Fit, it's just ugly... but of course people will continue to buy it because it's a Honda.

 

[Arkaign]

The Fiat 500 is a small, CUTE car. It will sell to people who like Mini Coopers and VW Beetles.

The Fiesta really doesn't have a cute look and I think Ford made a mistake there. The Fiesta and Focus pretty much have the same look. They should have separated the Fiesta more and given it more of a small, cute styling.

As for the Honda Fit, it's just ugly... but of course people will continue to buy it because it's a Honda.

Yeah, I agree about it being cute. It's not as practical as a Beetle or Mini though (have to lol at using 'practical' to describe either, but oh well). It's smaller, and kind of occupies that Smart car space of nonsensical car for the $. The smart might make sense if it were either $8k or less, or got 60mpg. But it's expensive and gets the same fuel economy as a decent compact. The 500 is kind of similar. It's slow, it's small, it gets average fuel economy thats matched by bigger/better cars, and it's expensive. That's not a recipe for success beyond marginal numbers.

The Fit is indeed kind of homely. I think the 1st gen looks better than the current one. That said, it's an excellent car overall, tons of room and a very easy to configure interior with seats that do anything you could want. That combined with pretty good fuel economy and a simple drivetrain make it attractive in spite of mediocre looks. It really looks like a minivan got hit with a shrink ray, lol.

 

[Bignate603]

I like the 500, but not sure it makes a whole lot of sense outside of cities like LA and Chicago. That thing is tiny, and we already have the Mini, unless the 500 is magically going to be much cheaper. If they try to charge as much or more than the Mini, people will just buy the Focus instead, better space, more features, same or better fuel economy.

The Fiat 500 MSRP starts at $15.5k, the Mini starts at $19.4k. I'd say that is a decent drop in price. The 500's combined fuel economy rating is also 1 mpg better than the mini's, for both the manual and the automatic versions of the cars. I think with the cheaper price it's got a chance to do well.

 

[Arkaign]

The Fiat 500 MSRP starts at $15.5k, the Mini starts at $19.4k. I'd say that is a decent drop in price. The 500's combined fuel economy rating is also 1 mpg better than the mini's, for both the manual and the automatic versions of the cars. I think with the cheaper price it's got a chance to do well.

I'd agree if they competed in anything but cuteness. The smallest mini is still over 5 inches longer, and it's also wider and much more roomy inside. The 500 is a step between a subcompact (like a Fiesta) and a microcar (like a Smart). It's really that small. Go look at a comparo online, it's nuts.

 

[ElFenix]

Did the Germans make any money off Chrysler?

they used its cashflow to fix MB, so, maybe?

 

[Pariah]

Chrysler Confirms 2011 Fiat 500 On Sale By End Of Year http://www.motorauthority.com/news/1042520_chrysler-confirms-2011-fiat-500-on-sale-by-end-of-year

Is this a national rollout? I've seen a couple of these in my area, so they must already be for sale in limited quantities here in the US.

Edit, nevermind, just saw the linked article is over a year old.

 

[Bignate603]

I'd agree if they competed in anything but cuteness. The smallest mini is still over 5 inches longer, and it's also wider and much more roomy inside. The 500 is a step between a subcompact (like a Fiesta) and a microcar (like a Smart). It's really that small. Go look at a comparo online, it's nuts.

I know the thing is tiny, but it's a cute cheap car that gets good mileage and still functions as a car. The snob factor of getting a less well known, cute, European car that has some "environmentally friendly" credibility will sell plenty of these things.