Fiat flies on Chrysler takeover
Italy hopes for investments on home turf02 January, 17:10
In exchange, Fiat and Chrysler will pay out $3.65 billion in cash to VEBA, sharing the cost, while Chrysler has agreed to pay it over the next three years an additional $700 million starting once the deal closes.
The deal, which is expected to be finalized January 20, is part of a plan by CEO Sergio Marchionne to merge Fiat and Chrysler into the world's seventh-largest auto group.
While Chrysler has been largely profitable as of late, Fiat has not, compacting risks surrounding its sizable debt, which analysts expect will rise to around 10 billion euros following the transaction, making it the most indebted automobile manufacturer in Europe. Marchionne is counting on sales in the North American market, where those of Chrysler have risen 50% since 2009, to compensate for losses in Fiat's European market. Fiat announced last month only 55,600 vehicle registrations in Europe in November, down 5.8% over the same month last year.
Total European market share was 5.7%, down 0.4% compared to November 2012.
Fiat Group reported that continuing sales contraction in its home market of Italy heavily penalized the results.
Unit sales in Italy fell by 4.5% in November compared to the previous year.
On the global scale, Fiat registered a total of more than 688,600 vehicles in the first eleven months of the year, slipping 0.3% from the same period last year.
The new deal has raised hopes in Italy that Fiat factories will be used to produce planned new models of Alfa Romeos and Jeeps for export to growing markets in North America, Latin America and Asia. In the US, the Fiat brand has performed better than expected since it took control of Chrysler in 2009, opening the door to exporting popular models there such as the Fiat 500, a sporty remake of the classic coupe. According to Fiat brand head Olivier Francois the Fiat brand has gobbled up more than a 60% share of its segment and 25% sales growth in California alone, where 4,000 orders had been racked up for Fiat's new electric vehicles.
Francois said Fiat was still small compared to the "great American brands", but that the company sees the US as a big "gym" in which to reposition the brand as "premium" and "cool".
Meanwhile labor unions wanted to know how the Fiat-Chrysler deal would pay off for Italy and its autoworkers, who have seen their numbers dwindle in the face of outsourcing and the global financial crisis. "After this important step that clarifies the ownership structure, it is indispensable for Fiat to tell us what it intends to do in our country," said Susanna Camusso, head of Italy's largest labor confederation CGIL. Camusso went on to demand Fiat explain how it plans to integrate Italian production facilities into the newly formed entity that would arise from the complete purchase of Chrysler. She added that she hoped that company management, including company strategy and divisions, remained Italian.