Chrysler/Fiat: Just Kicking the Can?

As I continue to watch the unfolding saga of Chrysler and Fiat, I have thought a lot about the motivations that each party brings to the table. It’s widely believed that the Obama administration would not allow a complete failure of either GM or Chrysler. Another point often agreed upon is that GM could withstand a quick rinse in bankruptcy, with the “Good GM” being separated and quickly brought out of bankruptcy. Sadly, many experts fear that Chrysler would not be able to hold up under Chapter 11 and would quickly slip into Chapter 7 liquidation.

Given these beliefs, Chrysler’s only true hope it Fiat. Now, Fiat is an interesting partner to be sure and in typical Italian fashion, she seems to run hot and cold. In one sound bite, we hear Sergio Marchionne say that he sees no reason a deal cannot be complete by the end of April. The next quote I read, Sergio says that he will walk away from Chrysler if the unions don’t accept cuts. Well, which is it? I think it’s more the former rather than the latter. The treasury has hinted that it will accept a swap of debt for equity and undoubtedly it hopes that others will follow suit. It’s hard to believe that unions will go out Thelma and Louise style, but I guess it is possible.

Okay, so let’s say the deal goes through. There would be no way to judge the success or failure of the alliance for at least four years, which conveniently enough would skip over the next major election cycle, effectively kicking the can down the block far enough that the economy will have recovered and will no longer be a focus for the public’s ire.

I’m still in favor of the deal myself. The country really doesn’t need the wind knocked out of it again with a huge business failure right now. Is Sergio Marchionne all that and a bag of chips? I hope he is, but let’s not forget that he had a lot of help from GM in the form of a two billion dollar payoff.

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