The Rolla Daily News - Rolla, MO
  • And Then There's The Truth: My Jeep has an Italian accent

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  • “Chrysler’s Now Fully an Italian Auto Company.”
    This was a recent Time magazine online headline. Most of us are aware 
    of the recent auto bailouts but do you know that the end result was 
    the giveaway of a major American car company? Here’s what happened:
    Chrysler was hit hard by the recession and filed for bankruptcy 
    protection on April 30, 2009.
    Two months later, Chrysler emerged from the proceedings with the new 
    principal owners being the United Auto Workers Retiree Health Trust, 
    Italian auto maker Fiat, and the U.S. and Canadian governments. Over 
    the next few years Fiat gradually bought the other parties' shares.
    On January 21, 2014, Fiat bought the last remaining shares making 
    Chrysler a wholly owned subsidiary of Fiat.
    This was a save the company at all costs plan but the costs appear to 
    be way too high. Here’s what I mean: the U.S. government pitched in 
    approximately $12.5 billion, but Fiat paid nothing to acquire its 
    initial ownership stake.
    Fiat was given a 20% ownership in Chrysler and access to its North 
    American distribution network. In return, it provided Chrysler with 
    technology to build more fuel-efficient vehicles and provided access 
    to Fiat's global distribution network. Fiat then used the money it was 
    getting from its share of the profit to acquire the remaining shares 
    of the company.
    Fiat also had its credit rating downgraded to junk status by Moody’s 
    investment service so it used its Chrysler money to pay its own bills 
    instead of expanding production and adding jobs in the U.S.
    In December 2012, Fiat announced it would be making a line of Jeeps in 
    Italy to export to “markets worldwide”, including the U.S., and that 
    it was expanding its production in China.
    This makes it very unlikely that Chrysler’s future profits will be 
    reinvested in the U.S. It’s most likely that the majority of that 
    profit will instead be reinvested in Fiat’s operations in Italy and 
    Chrysler is now an Italian company operating within the United States. 
    Fiat and Chrysler CEO Sergio Marchionne argues that the location of 
    its headquarters is meaningless.
    That's because the new company is now managed by a 22-member executive 
    council whose members are divided between North America, Europe, and 
    Page 2 of 2 - Latin America. Regardless, many people still view the location of a 
    corporate headquarters as a symbol of pride.
    Chrysler itself might still have an American headquarters, but it’s a 
    fully-owned subsidiary of an Italian company. That’s an important 
    distinction because, just like Anheuser-Busch, Chrysler will now send 
    its profits overseas.
    According to Barron’s, “Chrysler’s resurgence has been so strong that 
    it now provides a lifeline for Fiat.” CEO Sergio Marchionne told 
    Barron’s: “The Fiat Group has a future because of Chrysler.”
    Now, however, Chrysler and its auto workers are being dictated by an 
    Italian auto maker and the Italian economy.
    Of the $12.5 billion bailout there's still some $1.3 billion owed by 
    the bankrupt former Chrysler. According to a release issued by the 
    U.S. Treasury department, the government is "unlikely to fully recover 
    the difference."
    Still, government officials say the loss is worth it. "This is a major 
    accomplishment and further evidence of the success of the 
    administration's actions to assist the U.S. auto industry...” Losing 
    $1.3 billion is now a “major accomplishment” and giving Fiat 100% 
    ownership of the third biggest American auto maker is now apparently 
    “assisting the U.S. auto industry.”
    As a free market advocate, bailing out a specific business is 
    something I don’t support. It rewards failure and it’s unfair to a 
    struggling company's competitors.
    Had Chrysler gone through a traditional court-approved bankruptcy, the 
    court would have had the opportunity to investigate Fiat’s financial 
    viability, and the whole merger likely would’ve never happened. Also, 
    given the popularity of the Chrysler brand, it’s not likely that it 
    would have gone the way of the scrap heap.
    The company would have been able to renegotiate contracts, sell off 
    less profitable divisions, and likely emerge smaller but stronger.
    There’s no word yet on how this will affect the Chrysler brands.
    I would be surprised if Fiat decided to rename any existing Chrysler 
    owned models, but it’s not entirely unimaginable. Pretty soon you may 
    be buying a Fiat Grand Cherokee.