TribLIVE

| Opinion/The Review


 
Larger text Larger text Smaller text Smaller text | Order Photo Reprints

Chrysler, Fiat deal backfires

Le Pelerin

Daily Photo Galleries

Saturday, Nov. 10, 2012, 8:48 p.m.
 

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 eheyl@tribweb.com).

 

 

 
 


Show commenting policy

Most-Read Stories

  1. Rossi: At start, are Pens already finished?
  2. Coach’s firing causes ruckus in Steel Valley
  3. Morton, Pirates blank Red Sox in series opener
  4. State tour touts Auberle facility
  5. Duquesne hearing clears way for TIF extension
  6. Steelers notebook: RT Gilbert not in danger of losing his job
  7. Identical twins born at West Penn Hospital a rare medical marvel
  8. Steelers’ Roethlisberger still hurting after hard hit from Ravens’ Upshaw
  9. Car, truck collide near Taco Bell in New Kensington
  10. Penguins notebook: Martin not concerned about expiring contract
  11. City of Pittsburgh detective, 2 boys finalize adoption before judge
Subscribe today! Click here for our subscription offers.