Chrysler in Global Alliance with Fiat

In an effort to try to rise from the ruins once again, Chrysler LLC has reached a framework agreement on a global alliance with Italian automaker Fiat SpA (FIA.MI) which has the U.S. Treasury’s support, Chrysler’s CEO Bob Nardelli said on Monday.

Nardelli said in a statement, “We appreciate the willingness of the (autos) Task Force, along with industry and financial experts, to consult closely with us in order to achieve this significant step.”

Private equity Cerberus Capital Management owns Chrysler, but it was deemed not viable as a stand-alone company by the task force and was given 30 days to complete an alliance with Fiat or be cut off from U.S. government funding.

The U.S. Treasury would consider investing up to another $6 billion, if Chrysler can complete an alliance with Fiat and cost-saving arrangements with creditors and its major union.

People who have knowledge of the discussions have said that the boards of Chrysler and Fiat have given executives approval to complete an alliance that now hinges on the terms for additional aid for Chrysler.

For those who don’t remember, Chrysler was saved from the brink of bankruptcy in the period from 1979-1981 and perhaps reshaped the automotive industry and business-government relationships, which is perhaps we are right back where we started from.  In July 1979, then Chrysler Chair man John Riccardo went public with Chrysler’s problems.  He admitted in a press conference that Chrysler was so deep in the red that Chrysler owed nearly 10% of all US corporate debt ($4 billion).  We all know the ending, losses kept mounting, Chrysler cars remained unsold in car lots, and in stepped Lee Iacocca to save the day.

Perhaps that oversimplifies things, but it gives a general idea of the situation which is really not that far from what is going on today.  It was Jimmy Carter who had to fight with Congress over the amount of the bailout bill.

One can look at Iacocca’s warnings back then…”the need for assistance is very real” and it is essential that the legislation move through Congress as quickly as possible,” and see them reverberate globally.  Lest we forget, it was then GM Chairman Thomas Murphy who said, “I do not think that is (the bailout) in accordance with what made this country great,” but they came calling at the government’s door some 30 years later.

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