Chrysler, Fiat deal backfires
John Berlau is the senior fellow for finance and access to capital in the Center for Economic Freedom at the Competitive Enterprise Institute, a Washington, D.C.-based think tank advocating free markets and limited government.
Berlau spoke to the Trib regarding the ramifications of European automaker Fiat's purchase of the federal government's stake in Chrysler following the 2009 bailout of the Detroit auto manufacturer.
Q: Three years after the fact, would you say that Fiat's involvement in the bailout was a good idea?
A: No. Giving (Chrysler) to a company whose credit rating in 2009 had been downgraded to junk — and now it's even further into junk — was a big mistake. If (Chrysler) had gone through a traditional bankruptcy before receiving the (bailout) funding, I think they would have had the possibility for other bidders for some of Chrysler's business.
Q: With Fiat losing money on its European business and not expecting to turn a profit there until at least 2015, is the company dragging down Chrysler?
A: I mean, look at the headline from Barron's that said Chrysler is now bailing out Fiat. Certainly, if (Fiat) didn't have all those mouths to feed in Italy, where they're supporting 63,000 jobs and are limited in (laying off) people or reducing their hours because of the labor laws there, there certainly would be more money to expand (Chrysler) in the U.S.
Chrysler is Fiat's cash cow now, and (it) is going to be looking to build more (Chrysler) models — ironically not the small cars the Obama administration touted when arranging this sort of shotgun marriage, but through (models) that America likes and I guess the world likes — the SUVs and Dodge Durangos and light trucks.
Q: That doesn't mean expanded jobs and production in America?
A: They will try to expand production, but like all companies they will try to do it as cheaply as possible to maximize profit. They could be looking to make more (cars) in China or consolidate operations in Italy. Propping up the company's home office and main operation is going to be the priority and Chrysler will be just a tool for that.
If Chrysler were somehow free-standing or somehow merged with an automaker not facing these European legacy costs, (it) could concentrate on growing the Chrysler division and growing profits. But Fiat has to plug the holes in Italy. To use a car metaphor, Chrysler and its (domestic) jobs are going to take a back seat to that.
Q: To use another car metaphor, would it be fair to say the Chrysler bailout has backfired?
A: It certainly has backfired. And I think it's unfair even to characterize what happened as the Chrysler bailout. I think this has been much more of a Fiat bailout than it's been a Chrysler bailout — especially when you consider that to acquire its initial 20 percent stake in Chrysler in 2009, Fiat paid nothing in cash or stock. They just contributed their intellectual property, which they really haven't used for Chrysler.
You know, Chrysler is still making the SUVs, the trucks, the Jeeps they've always made, and that is what is propping up Fiat. So this has been much more of a Fiat bailout than it has been a Chrysler bailout.
Eric Heyl is a staff writer for Trib Total Media (412-320-7857 or email@example.com).
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Couple attempts theft at North Huntingdon Walmart
- Rossi: After L.A., NFL should tread carefully
- Unquestionable courage & sacrifice
- Starter Liriano strikes out 12, leads Pirates to series sweep of Mets
- The solar problem: Subsidized inefficiency
- Acme man’s ephemeral sculptures appear to defy laws of physics
- Pirates notebook: Substance rule a sticky subject
- Memorial Day 2015: Lest we forget
- Oncologists wary of scaled-back guidelines in cancer screenings
- Memorial Day service in National Cemetery of the Alleghenies still growing
- Gameday: Pirates vs. Marlins, May 25, 2014