Fiat on Poll in Chrysler drama

04 May 2009

TURIN: Italian car giant Fiat, in particular its chief executive Sergio Marchionne, could be the big winner in the Chapter 11 reconstruction of the third-biggest US carmaker.

Fiat has gained a ‘free' 20% stake in stricken Chrysler in return for giving access to its smaller car technology at the same time as some of Chrysler's creditors are appearing in court to contest the US government-backed Chapter 11 deal.

Marchionne, 56, was brought in by the Agnelli family to run Fiat five years ago and since then the company has produced a number of successful smaller car models, although Marchionne has said publicly that it needs to be bigger to survive.

Marchionne has said he's prepared to take a leading role in the new company, telling Agnelli-owned La Stampa, “We can't make any mistakes now, the whole world is watching us and the responsibility is enormous.”

It certainly will be; Chrysler has had a number of partners, most recently Mercedes maker Daimler-Benz, which extracted itself from its merger with Chrysler in 2007 at an estimated cost over nine years of $30bn (€23bn, £21bn).

Since then the company has been controlled by private equity giant Cerberus, which owns an 80% stake.

US president Barack Obama has said he wants a quick, surgical Chapter 11 procedure in return for all the government money (at least $11bn) that's going into Chrysler.

But, with some of the smaller investors clearly unhappy with the terms - and car parts makers across America refusing to supply the company because they fear they won't be paid - Marchionne and his team at Fiat have much to prove.

Data sourced from Bloomberg; additional content by WARC staff