The Good, Bad, And Ugly In Chrysler/Fiat Deal

Deal, Handshake
Deal, Handshake

Like a Clint Eastwood spaghetti western, the alliance between Chrysler and Fiat is an intriguing piece of work that leaves you scratching your head.

With that said, cue Ennio Morricone’s theme to "The Good, the Bad, and the Ugly" and look at this new alliance.

• The Good

Chrysler and Fiat make a perfect strategic fit. They don't overlap, they can leverage the other's facilities in the markets they want to enter or expand (Chrysler in Europe, Fiat in the U.S.), and the built in distribution networks make this a perfect plug and play situation for both companies.

• The Bad

There is not a financial infusion from Fiat so a Chrysler company bleeding cash will continue limping along in the near future. Giving up 35% of the company and not getting any money in exchange shows how desperate Cerberus Capital is to extricate itself from a no-win situation with Chrysler. Yes, Chrysler will talk about the cost synergies it can derive in an alliance with Fiat, but when there's little in the kitty, those savings look hollow at best.

• The Ugly

That's going to be the reaction in Washington if Chrysler now goes to the Treasury Department and asks for another $3 Billion. There will be people asking Chrysler why they should further help a company that is now 54% owned by foreign companies (Fiat 35% Daimler 19%)? Yes, Chrysler and the UAW say the deal helps the auto maker become more viable because it allows the expansion into new markets at a relatively low cost, but many will come back to the question of how quickly Chrysler can cut its mounting losses.

So as they said in Eastwood’s epic western, "There you have it Blondie."

    • Fiat to Get 35% in Chrysler, but Won't Inject Cash

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