Tuesday, April 28, 2009

So, What’s In This for Fiat?

In the government re-do of Chrysler, the United Auto Workers get a 55% stake. The Treasury is planning on keeping 10%. What’s left for Fiat is a 20% share, plus an opportunity to grow that to 35% if Chrysler meets “performance targets”. The banks – no doubt strong armed by the government as TARP “beneficiaries” – have apparently agreed to write down about $5 billion or so in debt for a minor, and soon to be worthless, equity position.

Given that Treasury hasn’t exactly been up front with anybody regarding the bailouts, TARP, the Bank of America / Merrill Lynch deal, etc., why would you want to do business with them? Geithner may not be able to do his taxes, but he’s certainly capable of intensive bureaucratic meddling, as well as changing the rules midstream.

Plus, at the first signs of success, there’s the chance that Congress will want to re-write the rules as well. Furthermore, there’s a high probability that either Congress or the Administration will force Chrysler to build a bunch of expensive, impractical, and unsafe “green” cars that nobody wants to buy. Jeeps, SUVS, and mini-vans are, of course, evil, because people like them.

So, what is in it for Fiat?