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Fiat says it could abandon Chrysler due to unions

Fiat says it could abandon Chrysler due to unions

Marchionne says Fiat won’t ask for extension

Luca Ciferri

Automotive News | April 15, 2009 – 2:59 am EST


TURIN, Italy — Fiat S.p.A. CEO Sergio Marchionne said he is ready to abandon plans to form a partnership with Chrysler LLC unless the U.S. carmaker’s unions accept substantial labor cost reductions by the end of the month.

In an interview with a Canadian newspaper, Marchionne confirmed he could become Chrysler’s CEO if the alliance goes ahead. He denied that Fiat is considering buying General Motors’ Saturn brand as a “Plan B” to return to the U.S. market if the Chrysler deal fails.

"Absolutely we are prepared to walk," Sergio Marchionne said in an interview published on the Web site of Canada’s Globe and Mail today. "We cannot commit to this organization (Chrysler) unless we see light at the end of the tunnel."

Also today, Marchionne said Fiat will not ask the U.S. government for an extension to complete a deal with Chrysler.

"I still intend to reach a good conclusion," Marchionne said, speaking at a press conference. "There is not a single reason why Fiat cannot close by April 30."

But in the newspaper interview, Marchionne said there is only a 50-50 chance the Fiat-Chrysler partnership will be formed because of the lack of progress on labor negotiations, especially on the Canadian side.

“From what I can tell from a distance, the Canadian Auto Workers may have taken more rigid positions," he said. "The dialogue is out of sync. I think they need to see what state the industry is in. Canada and the U.S. are coming in as the lender of last resort."

Fiat confirmed Marchionne’s comments to the newspaper.

In the interview, Marchionne said he could become Chrysler’s CEO. "Fundamentally, that’s possible, but the title isn’t important," he said. "What’s important is that they hear me. It’s possible that I will have to divide my time between running Fiat and running Chrysler," Marchionne said.

Marchionne holds both Italian and Canadian citizenships and speaks accent-free English. He spent a decade working in Canada after earning university degrees in Toronto and Windsor, Ontario.

No ‘cherry-picking’ planned

Sources familiar with the negotiations said Fiat is not interested in “cherry picking” Chrysler’ assets from an eventual bankruptcy sale, because it wants an alliance with a full-fledged North American automaker.

Fiat and Chrysler are in talks with Chrysler’s unions and bondholders to agree a partnership before the April 30 deadline set by the U.S. government.

Washington has warned that Chrysler would go into bankruptcy if they fail to complete a deal.

If Chrysler and Fiat prove their alliance is workable, the U.S. government will grant Chrysler up to $6 billion in additional loans. Chrysler already has received $4 billion and C$1 billion from the Canadian government.

Chrysler and Fiat negotiators are in talks with UAW officials about reducing Chrysler’s $10.6 billion obligation to the union’s health care trust.

The U.S. Treasury Department also is negotiating with the major banks holding $6.9 billion in Chrysler debt, according to a Bloomberg News report. Bloomberg said the four largest lenders are JPMorgan Chase & Co., Citigroup, Goldman Sachs Group and Morgan Stanley.

Fiat execs to join Chrysler board

Sources close to the merger negotiations told Automotive News last week that if a Fiat-Chrysler alliance goes ahead, the plan is to elect a seven-member Chrysler board that would include representatives from Fiat and possibly President Barack Obama’s automotive task force.

A person familiar with the negotiations said the new management structure would divide the roles of CEO and chairman between two executives. The job of Chrysler chairman would be held by an American, the source said.

Since 2007, Chrysler’s chairman and CEO jobs have been held by Bob Nardelli, who was appointed by majority owner Cerberus Capital Management LP.

When asked about buying Saturn, Marchionne told the Globe and Mail: "It’s not a brand I have any affinity for."

Reuters contributed to this report

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