Marchionne Flies to US as Fiat and Chrysler Reach Agreement
Italian-made eco-technology clinches deal. Six billion dollars in aid. Fiat CEO thanks Obama, promises to pay US taxpayers back
MILAN – The satisfaction is obvious, the justifiable pride evident. When was the last time an American government told one of the former icons of US capitalism: “You’ve got just one chance to avoid collapse. Take some Italian medicine”? Yet that was precisely what happened and it made a great start to the day in Turin. By itself, it would have been enough to distract some at least of Fiat executives’ attention from the plummeting stock exchanges that were dragging the company’s shares down with them (-9.35%). But late afternoon brought further news that left everyone open-mouthed and very flattered. The praise that came straight from the mouth of the president of the United States went beyond all expectations: “...the current [Fiat] management team has executed an impressive turnaround”.
Even Sergio Marchionne, who has collected more than his fair share of plaudits, was stunned. He said: “I want to publicly thank President Barack Obama, on behalf of the entire management team, for his words of appreciation for the work done in the past five years, and for his encouragement to finalise a solid alliance between Chrysler and Fiat. Talks with the task force have been hard but fair. We are convinced that we can achieve a result that will offer a credible future to this crucial sector of the economy. We are extremely happy that Fiat can play a key role in this effort”.
But Mr Marchionne wasn’t taking time off to preen. First of all, the game isn’t over yet and second, the conditions of the Chrysler aid package allow 30 days to close the deal and Fiat will also have to make adjustments. Yesterday, the Fiat CEO was in Turin waiting for the verdict of the task force and the word from the White House but his aircraft was ready and waiting at Turin’s Caselle airport. In a matter of hours, Mr Marchionne was in the air heading for the States. He will be working on the final details of an agreement that Chrysler boss Bob Nardelli said was already reached. But the American was perhaps being less than sincere in an attempt to bring the spotlight back onto Detroit, or to show that while Chrysler’s stand-alone viability may have been ruled out, it was all part of the plan. The parallel preliminary understanding with Fiat “still has significant obstacles to overcome”, as Mr Nardelli admitted later, but he followed Treasury Department indications from the start.
The fact is, and President Obama’s words leave no doubt, that Mr Marchionne is the main player. When he proposed the agreement a couple of months ago, his reasoning was straightforward. Washington is only going to help US groups if they restructure on eco-friendly lines, with small cars and low-pollution engines that you – he said to Chrylser execs – do not have while Fiat enjoys long-standing leadership. Chrysler saw at once that this was the key and agreed, offering Turin 35% and an option on a controlling interest in exchange for Italian technology (but no cash).
At a certain point, the Fiat CEO compared the US venture to buying a “lottery ticket”, but luck doesn’t come into it. It’s been hard work as Mr Marchionne and his small team developed a plan while shuttling between Turin, Detroit and Washington. The Fiat CEO established his credentials with the president’s men at two crucial face-to-face meetings that were, as we said above, “hard but fair”. “Rarely, and never in Europe, have I seen a team so determined to solve a problem”. Now, as he left on what everyone at Fiat hopes is the final task force mission, Mr Marchionne was preceded by the message he has been sending out for the past two months. Fiat is not going to America as a predator. “We are firmly convinced that this alliance will enable Chrysler to reinforce its financial solidity and contribute to safeguarding jobs in the US”. Mr Marchionne’s final promise will probably turn out to be decisive. The public aid will be paid back and Fiat “has assigned appropriate priority to paying back taxpayers’ funds”. In 30 days at most, Chrysler could be speaking Italian. Or out of business.