Daily Auto News Fiat Dampens Expectations of Chrysler Deal
Daily Auto News
Chrysler is facing a White House-imposed deadline of May 1 to negotiate a merger with Italian auto giant Fiat, or see federal aid withdrawn – which would probably push the company into bankruptcy. But the Italian company apparently doesn’t want anyone to expect too much – Fiat is working to quell rumors that a deal is close.
Reuters reports, “Italy’s Fiat SpA denied on Wednesday a reported comment by an Italian union official that it was close to a deal to form a partnership with U.S. car maker Chrysler LLC.” Italian union Chief Bruno Vitali had told reporters yesterday, “The agreement between Fiat and Chrysler is ready and even this evening, at 90 percent, it could be finalized.” But today, Fiat officials denied the report, and even Vitali “toned down his comments about the talks when he spoke to Reuters by phone, saying a deal had yet to be reached.”
In a separate story, Reuters quotes a Fiat spokesman saying that talks are “totally open…it is not possible to foresee the outcome.”
Fiat is facing its own challenges, experiencing a larger-than-expected first-quarter loss yesterday. The Financial Times reports, “Fiat denied any plans to invest directly into Chrysler, the heavily indebted US carmaker, or fund it in the future as it reported a wider-than-expected first-quarter loss.”
The Italian automaker is fighting off rumors that it will intervene to save several automakers. The Wall Street Journal reports, “Fiat Thursday refuted a report in German magazine Der Spiegel that said the Italian carmaker will acquire a majority stake” in Opel, the European division GM is looking to shed. “Fiat Chairman Luca Cordero de Montezemolo firmly denied the company has any plans to buy Opel, but investors and analysts are looking favorably at a possible Fiat-Opel tie-up,” with some arguing that the deal would make more sense for Fiat than a Chrysler merger.
Fiat may not find it necessary to save Chrysler from bankruptcy in order to get what it wants from the Detroit-based automaker. The U.K.’s Guardian explains, “Both General Motors Corp and Chrysler LLC — currently being kept afloat by billions in taxpayer dollars — have warned they could file for bankruptcy if they are unable to reach deals with key stakeholders. A bankruptcy for either company is expected to save the stronger and more profitable parts of the companies, such as GM’s Chevrolet and Cadillac divisions and Chrysler’s Jeep unit, but some parts could be destined for fire-sales or liquidation as the U.S. auto industry grapples with sharply reduced consumer demand.”
It is possible that Fiat could wait for liquidation, then buy the parts of Chrysler that it wants at very low prices. In the end, that approach might cost the Italian company less than simply absorbing Chrysler and all of its liabilities.
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