Chrysler – Fiat Deal in Trouble

In “Fiat CEO: Cut Wages or No Chrysler Deal,” I detail how the Obama administration’s attempt to shepherd a shotgun marriage between Chrysler and Fiat appears to be in serious trouble. Fiat CEO Sergio Marchionne is demanding major concessions from labor unions before agreeing to any deal — and is offering next to nothing in return.

It’s bizarre enough that the U.S. government is trying to force an American company to merge with an overseas firm as a condition of receiving another massive infusion of U.S. taxpayer money.  But it gets better:  Fiat is offering no cash infusion of its own while demanding huge pay cuts and promising to shut down multiple plants.

If the point of the bailout is either to 1) save an important American company or 2) prop up one of the last remaining vestiges of highly paid, union manufacturing jobs, it’s not looking so good.

FILED UNDER: General, , , , , , , ,
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Bithead says:

    That’s because this was never about saving the automobile business. Liberals have always always always been down on American business, so why would this occasion be any different?

    What this has always been about was saving the UAW… which was never sustainable, absent huge import duties on foreign cars. Gas prices going up didn’t help matters, either, nor did the ever increasing scope of governmental regulation on the auto industry, which is in the end failing for the same reasons trains did… Governmental over-regulation.

    Irony abounds. the UAW suffers from the worldview of the party they work so hard to keep re-electing.

    In the end, the unions have to fall for the business to survive. Fiat’s smart enough to see that, and outside politics enough to be able to say it without causing themselves governmental backlash issues.

    Cheers to them, I say.

  2. DC Loser says:

    Ignoring Bitsy’s predictable union bashing, this development was not unforeseen and was the inevitable result of Uncle Sam’s desire to palm off Chrysler from federal bailout. Everyone knows Chrysler is beyond saving and this was just the last desperate step to find a savior before the curtain closed. Fiat knew this and was (predictably) going to wring every last bit of concession out of the unions and Uncle Sam to take the bait. There is no downside for Fiat in this deal. They can walk away and not suffer in the slightest. They’ve given up on the North American market for 25 years and still manage to make money. In the end I see them walking away from this deal as there’s really no upside for them.

  3. Bithead says:

    Bashing? No, simply observing.

    Interestingly, Fiat, of the two is the one acting as an agent of the free market. That they’re now in a position to play as they are, suggests that the free market was also the more successful path.

  4. Michael says:

    Interestingly, Fiat, of the two is the one acting as an agent of the free market. That they’re now in a position to play as they are, suggests that the free market was also the more successful path.

    Are you suggesting that Fiat doesn’t have the same Union problems that Chrysler has? That maybe a car company with unionized labor can be successful in the free market?

  5. JKB says:

    It’s kind of like publicly telling your daughter that she must be nice and do what ever the neighbor wants or she’ll be thrown out of the house and left to starve on the streets, and then being surprised when you find her naked, bent over his kitchen table. Really, who could have foreseen that happening?

    This whole negotiate from a position of weakness, I guess there is lots of hope that after several millennia of it not working out that the strategy’s outcome is bound to change.

  6. Bithead says:

    Are you suggesting that Fiat doesn’t have the same Union problems that Chrysler has? That maybe a car company with unionized labor can be successful in the free market?

    The answers to that question are far longer than I want to get into today; my attentions are diverted to the various protests around the country.

    That said, a few thughts off the top:

    Yes, of course Fiat has had issues with Unions in the past. What they apparently have less of than we have in the states is laws and regulations (Government) supporting only the union end of that relationship.

    Their having dealt with unions both in the east and the west, Fiat seems to me less likely to NOT play hardball with the unions… and in many ways, because of that vaired experience, they’re left in a more powerful position to do so in Europe, and the former Soviet Bloc. (Their plants in Poland, versus their plants in Italy, for example)

    Then too, the unions involved with Fiat also have their problems with some of their own members… the Strike at Melfi where the Marxist dominated local refused to deal with the CISL’s back to work call, back in 2004 roars to mind.

    Part of the problem of measuring that is how the Marxist movements to this day are tied to the unionist movements, even in the land of Lech Walesa. Clearly, they’re not all of a mind.

  7. anjin-san says:

    What they apparently have less of than we have in the states is laws and regulations

    Yes. A car company cannot function well with government involved. Just look at Japan. Government regulation has resulted in an inferior product and unprofitable companies.

    Oh, wait…

  8. anjin-san says:

    my attentions are diverted to the various protests around the country.

    Well, I am trying to imagine something more pathetic than this, but the mind just wont stretch that far…

  9. Bithead says:

    Yes. A car company cannot function well with government involved. Just look at Japan. Government regulation has resulted in an inferior product and unprofitable companies.

    Which, absent their ability to dump their stuff on our shores, they would still be… or hadn’t that idea occurred to you?

  10. anjin-san says:

    absent their ability to dump their stuff on our shores,

    Your right, of course. Have you ever met anyone who actually WANTS to drive a piece of junk like a Toyota or a Honda? Of course not…

  11. Bithead says:

    You’re looking at what’s there NOW, as a result of their ability dump their stuff here. As usual, you forget the little nagging facts that blow your argument out of the water.

    Do a little research, on those companies and the quality of their stuff, early on. A very different picture emerges.

    Let’s add Subaru to that list. (PDF)
    These people put the W in Kwality, huh?

    (Aside, I actually remembered this article from when it was originally printed. I’m amazed I found it online.)

  12. anjin-san says:

    You’re looking at what’s there NOW, as a result of their ability dump their stuff here.

    Right, because back in the days of the CVCC engine, Americans were being forced at gunpoint to buy Japanese cars.

    Oh, wait…