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Chrysler has
been showing off proposed now electric
vehicles from its Chrysler (middle), Dodge
(top) and Jeep (bottom) brands at this
month's North American International Motor
Show in Detroit. |
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More details
have emerged about the proposed alliance between Fiat
and Chrysler that was confirmed on Tuesday as unions
give their initial support the deal while US Congress
members say that they have some reservations.
Fiat will
take an initial 35 pct stake in Chrysler LLC in exchange
for supplying its architecture and technology, and will
then have up to a year in which to decide it it wants to
boost its stake to 55 pct. "If Chrysler looks like it
will get through the crisis they will draw the necessary
conclusions and decide what to do," a source familiar
with the negotiations told Reuters yesterday.
Meanwhile Bloomberg, also quoting sources close
to the negotiations, reckoned that Fiat would initially
receive three of the seven Chrysler board seats.
There has
been much speculation over the last couple of days that
the implementation of the alliance will be subject to
Chrysler getting the additional US$3 billion loan from
Congress that it is currently seeking on top of the US$4
billion it has already received. Last week Chrysler's
financing division was given a US$1.5 billion loan. The
Wall Street Journal, and other sources, reported
that this additional funding was conditional on the
deal; however Fiat spokesperson Gualberto Ranieri
responded by saying it was 'absolutely not'. He said
that the deal was contingent on US Treasury approval and
that the additional US$3 billion would come as a
"consequence" of this approval.
With several
media sources reporting on the conditionality of the
additional funds, Chrysler official reiterated that they
had always been looking for US$7 billion in one amount,
rather than it coming in chunks. "I think that is part
of the deal," said Chrysler Executive Vice President
Frank Klegon when questioned by reporters yesterday on
the additional US$3 billion. That is part of the
process, the expectation is that that is an important
part of it."
There has
been mixed reaction from US Congress, with Republican
Senator Bob Corker, who talked tough on the current
financial situation that the 'Big 3' carmakers find
themselves in, saying that the takeover of Chrysler by a
foreign manufacturer posed "an interesting dilemma for
US taxpayers". He added that "Cerberus made a bad
investment and in order for them to get that investment
out of their portfolio of holdings, US taxpayers have
had to write an US$8.5 billion check to Fiat. For the US
taxpayer, they have to be scratching their head a little
bit." However Corker did add that the proposed alliance
could be an important key to the business plan that
Chrysler has to submit to Congress by February 17, and
it could turn out to be "the best thing that could
happen with Chrysler."
"The idea of
a partnership, not an ownership situation, but a
partnership which allows Chrysler to enjoy and receive
some technology input in return for building small cars
in this country," said Democrat Senator Tom Carper,
"that may be a good idea." Other Senators, including
Democrat Debbie Stabenow, were very concerned to see
exactly how American jobs would be protected.
Ron Gettelfinger, the
powerful head of the UAW (United
Auto Workers) union gave his thumbs
up to the deal. "I think we all knew
Chrysler needed to partner with
somebody," he said at the
Automotive News World Congress.
"It was a matter of who and what
would do the least harm to people.
Do we want to see Chrysler go away?
I don't think that's a good idea. I
personally think that of all of the
options out there, this was the best
one." Gellefinger sees the new Obama
administration backing the deal. "I
think you'll see a meeting coming up
with the Big Three CEOs and the
president very shortly," added
Gettelfinger.
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