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.
Read the rest here.
