Simanaitis Says

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IS THAT WALTER P. SPINNING TO REDLINE?

NO, ACTUALLY the metaphor for Chrysler’s founder spinning in his grave is long out of date. True, Fiat Chrysler Automobiles is being courted today by possibly four—count them, four—Chinese automakers. But it’s no big deal. The founder’s grave has experienced more action than this.

Walter Percy Chrysler, 1875–1940, American auto industry executive, founder of Chrysler Corporation.

Back in the 1970s, Walter P.’s tach may have blipped when Chrysler linked up with Mitsubishi, neared bankruptcy, and required $1.5 billion in U.S. government loan guarantees. Revs would have definitely picked up in 1998, with a Mercedes-Benz “merger of equals” (now you tell one). And how could the tach have avoided redline in 2007 when Wall Street’s Cerberus Capital Management, which knew squat about running an automaker, bought up the remains after an Ehescheidung, German: divorce (presumably of equals). Or in 2009, when Chrysler filed Chapter 11, got another bailout, this time through the U.S. government’s Troubled Asset Relief Program.

I’d say Troubled too.

On June 10, 2009, Fiat S.p.A. took advantage of the fire sale, along with the United Auto Workers pension fund, and the U.S. and Canadian governments in becoming principal owners of Chrysler. By 2014, Fiat bought out the UAW and established Fiat Chrysler Automobiles, NV, an Italian-controlled company registered in the Netherlands, now with headquarters in London.

If you suspect tax laws helped determine these varied locales, full marks.

So how about those Chinese?

Image from Automotive News, August 21.

An Automotive News editorial, August 21, 2017, says “Chinese Could Turn FCA into a Leader.” The editorial offers a great summary of recent Chrysler ownership: “Its owners are Italians. Before them came Germans, unions and aliens from the planet Private Equity.”

I wish I had said that about Cerberus. I probably will.

The phrase “having several Chinese suitors” requires a qualifier: Companies apparently seeking due diligence are, in alphabetical order, Dongfeng Motor Corporation, Great Wall Motors Company Limited, Guangzhou Automobile Group, and Zhejiang Geely Holding Group.

The Jeep display at the Guangzhou Auto Show, November 2016. Image from Automotive News, August 21, 2017.

Guangzhou already has a joint venture partnership with FCA in China. Geely has done a credible job of keeping Volvo Swedish (which is more than Ford did with Jaguar/Rover; though the Indian company Tata appears to be doing fine now with this Brit acquisition).

Great Wall Motors Company Limited, seventh-largest automaker in China, 3.8-percent market share, founded in 1984. Sales in 2016: 1.1 million vehicles, of which 933,000 were SUVs. Image from Automotive News, August 21, 2017.

Great Wall (sorry, Don, the name’s already taken) appears to be the most serious of the Chinese suitors. However, Great Wall is interested in buying only Jeep, not the rest of FCA.

This is equivalent to a music distributor buying Beatles’ rights and leaving the Trogg’s.

How does this all work out with Making America Great Again?

FCA is a Dutch company with headquarters in London and factories in Argentina, Brazil, Canada, China, India, Italy, Mexico, Serbia, Turkey, and the U.S. Jeep is an American legend dating back to World War II.

Eric Kulich writes about the complexities of such a deal in “China Auto Bid Could Hit a U.S. Wall,” Automotive News, August 28, 2017. An example noted by Kulich: “The Committee on Foreign Investment in the United States, an interagency working group led by the U.S. Treasury Department, is responsible for reviewing deals that affect control of U.S. businesses and brands, even if the parent company is overseas, as in the case of Fiat Chrysler Automobiles, and even if the affected business lacks obvious defense ties.”

The CFIUS includes heads of the U.S. Departments of Commerce, Defense, Energy, Homeland Security, Justice, State, and Treasury, along with the Office of the U.S. Trade Representative and the Office of (you’ll excuse the word) Science & Technology Policy.

I predict there’s enough complexity here to put scads of lawyers into Bentleys. (Or at least that’s what I would buy.) ds

© Dennis Simanaitis, SimanaitisSays.com, 2017

One comment on “IS THAT WALTER P. SPINNING TO REDLINE?

  1. Bill urban
    September 8, 2017

    CFIUS? Is that the guy that couldn’t roll the stone up the hill?
    Naah . . . the guy that couldn’t get the deal past the paperwork.

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