Kamis, 14 Mei 2009

Fiat's Sweet Deal




The details of the Fiat deal are leaking out in the Chrysler bankruptcy. Such a deal. Fiat gets 20% of Chrysler for a promise, no cash, to give technology. Fiat then gets another 5% if Chrysler builds a Fiat motor. No word on whetherer it has to be in a Chrysler or on what a Fiat motor is (is a head assembly enough). Easy enough. Fiat then gets another 5% if Chrysler builds a green car, a 40 mph car, with Fiat technology. No word on whether the car is any good or whether it must sell. Easy enough. Fiat already has the technology in diesel cars, cars that will not sell in the United States. Build a few a year, get another 5%. Finally Fiat gets another 5% and and option for 16%, if Chrysler sells $1.5 million cars abroad. Simple enough, rebadge a Fiat a Chrysler, finish building it (with just adding a door do?) in the United States and ship it to established markets abroad. Just like that, Fiat gets 51% of Chrysler without paying Chrysler shareholders or bondholders a dime.


Moreover, the "partnership" of Fiat and Chrysler is governed by a board of three Fiat nominees and three Chrysler nominees from the beginning -- Fiat has 50% control of Chrysler from the get go even with only 20% of the stock. This deal is ridiculous and shows that the United States government, desperate to give unsecured creditors, union workers pension claims, priority over secured creditors, banks, would agree to about any partnership. It will not work, of course. Fiat wants to sell Fiats build in Italy in the United States, using Chrylser dealers. It will fudge and interpret the agreement to do so. Moreover, Chrylser's big problem has been quality control and Fiat's big problem in selling cars in the past in the United States is -- quality control. Finally, Italy has labor unions too and they will fight the United States unions for production wages. In the end, Fiat will split, keep some dealership, and the "partnership" will close some plants and sell a few, in a forced sale, to GM, another entity asking for government cash.




(sumber : Dale Oesterle, Professor of Law, J. Gilbert Reese Chair in Contract Law, Moritz College of Law, The Ohio State University)

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