Following the announcement of its plan to buy the remaining 41% of Chrysler, shares of FIAT have jumped more than 15%. That 41% represented the remainder of Chrysler FIAT had yet to purchase. This is, by no means, a surprise and for many investors, it’s a welcome start to 2014. Since 2009, Fiat has owned a majority stake in Chrysler and this move officially makes FIAT the seventh largest automaker on earth.
By the way, “Capro” is how you say male goat (basically – Ram) in Italian.
The final obstacle for FIAT was the long-fought negotiations with Veba, the United Auto Workers’ union (UAW) healthcare trust. The Veba trust handles the benefits for 117,000 retired Chrysler workers and their dependents. Chrysler/Fiat will pay the trust an initial $3.65 billion and Chrysler will pay Fiat another $700 million, after the deal is completed.
Robert Naftaly, chair of the committee that governs the trust, said: “This agreement is in the best interests of the trust’s UAW Chrysler retiree members and their families who rely on the trust to provide vital health care benefits.” – – BBC
Not all is peachy, there is a considerable amount of debt FIAT carries:
“David Bailey, professor of industrial strategy at the Aston Business School, told the BBC that while the deal has been well received by the markets, there were still outstanding financial concerns at Fiat.
He said: “Chrysler has been doing well of late, having been rescued by the Obama government, and the previous tie up with Fiat has helped both firms. The idea is that the sharing of platforms, technology and components will enable the new combined entity to reduce costs and compete more effectively with bigger players like Volkswagen.”
However, Prof Bailey warned that the company still faced challenges.
“The deal still leaves Fiat hugely indebted when the European market is pretty moribund, despite a nascent pick up from a 20 year low. After the deal, the firm’s net debt will rise to some 10bn euros (£8.3bn), making Fiat-Chrysler the most heavily indebted car assembler in Europe. That’s a big debt burden to be carrying,” he said. – – BBC
So, is Chrysler still a member of the “Big Three?”
Simply put – no. All ownership of Chrysler (Chrysler Group LLC) falls to FIAT and they are responsible for its future. FIAT’s debts, through a tad intimidating, may be mitigated by the upward rise of Chrysler over the past few years. If you look at Chrysler’s meteoric rise since hooking up with FIAT in the early 2000s, they have managed positive gains on every front. Chrysler is a money maker once again and that bodes well for FIAT.
Trucks or camions?
Fans of Ram need not worry right off the bat, Ram is doing very well and FIAT knows a good thing when they see it. That’s not to say Ram won’t make inroads overseas. Many have long suspected FIAT/Ram were looking to bring a small truck to market and adding to the Ram presence overseas. The full-size Ram is far too large for many European markets, but maintaining that identity with a smaller version might benefit North America too. Maybe a new Dakota? One can only hope.
Looking forward to seeing the next step? Tell us what you think.
Check out our Sneak Peek into early 2014!
Camion = ‘truck’ in Italian.
