True to what Chrysler LLC Vice Chairman Tom LaSorda alluded to last week, Chrysler has not been broken up, but something still needed to be done. That’s why a formal partnership deal has been reached between the embattled Detroit automaker and Fiat, as the Wall Street Journal reported early this morning.
Fiat is clearly the stronger of the two, so why would they do this? You may already know, but if you’re really curious, follow the jump to confirm your suspicions.
It seems that, much like other firms that don’t currently have vehicular representation in North America who have been making noises about wanting a piece of the hot Chrysler action, the main draw here for Fiat is access to their plants in the US. In fact, that’s the main part of the partnership deal. They’re not immediately handing over any cash to Chrysler; instead, they’re accepting payment in the form of the barter system. Chrysler is to cover the costs of transitioning one of its existing plants so that it can manufacture at least one (and possibly more) Fiat models to be sold in the market they (like Renault) pulled out of so long ago.
So what of Renault-Nissan’s alleged interest? While that particular deal never came to fruition, Chrysler did arrive at an agreement with Nissan last year which included manufacturing some light-duty trucks that would eventually be badged and sold as Nissans. In exchange for this, Nissan had agreed to manufacture some compact vehicles that would be badged and sold as Chryslers—which analysts say could, of course, be seen as direct competition with Fiat vehicles. So this deal could complicate matters slightly in that regard.
Fiat doesn’t want a controlling stake in the company; in fact, part of the terms of the deal would be that Cerberus would retain its majority in its member of the troubled US triumvirate. But the move could be a wise one for both companies, who have been struggling separately and desperately in need of a larger global reach to pull themselves forward. So despite the fact that even Tennessee Senator Bob Corker (who is famously anti-union) thinks it is a good idea, it probably actually is.
And it might just mean that your beloved CarEnvy.ca has psychic powers after all. We promise to only use our powers for good.