From the vault of “Oh Gee, What a Shock” comes the latest pronouncement from Fiat: Concessions or No Chrysler Deal. According to the Associated Press:

Automaker Fiat Group SpA will walk away from a deal to take a 20-percent stake in Chrysler LLC if the U.S. automaker’s unions don’t agree to major cost cuts, Fiat CEO Sergio Marchionne said in an interview published Wednesday.

…Chrysler…needs concessions from creditors and unions to ink the Fiat deal.

My comment: As I suggested in a prior post (see Finally a Sensible Approach), Chrysler needs much more to survive than Fiat and the $6 Billion that the US Government has promised. Moreover, since Chrysler has no other options and the federal government has given Chrysler an ultimatum with respect to the Fiat deal, Fiat can play a very strong hand in any negotiation. And they will.

“Absolutely we are prepared to walk. There is no doubt in my mind,” Marchionne told the Toronto Globe and Mail. “We cannot commit to this organization unless we see light at the end of the tunnel.”

Marchionne said there is a 50 percent chance the deal will fail because of lack of progress in labor negotiations in both the United States and Canada.

“The dialogue is out of sync,” Marchionne said. “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. … No one else would put a dollar in. This is the worst condemnation of the viability of this business.”

My comment: I think Marchionne’s estimate, that there is 50% chance that the deal goes through, is wildly optimistic. As with GM, it will be very difficult for Fiat/Chrysler to extract meaningful concessions from the auto unions and Chrysler’s various creditors. Some creditors (e.g., secured bondholders debtholders) would likely be better off with Chrysler in bankruptcy than make the kinds of concessions that would allow the Fiat deal to go through. Therefore, and as I alluded to in my previous post, Chrysler now needs a miracle to survive.

And we wait…

This entry was posted on Wednesday, April 15th, 2009 at 2:01 pm and is filed under Bankruptcies, Corporate Strategy. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.