Workers worry about Fiat's deal to buy Chrysler shares from UAW trust
7:24 PM, January 2, 2014 |
A combo of the logos of Italian car maker Fiat and U.S. automobile heavyweight Chrysler. Fiat now owns 100% of Chrysler. / AFP/Getty Images
By Brent Snavely
Free Press Business Writer
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Fiat’s stock soared 16% today as investors celebrated the benefits of the automaker’s total ownership of Chrysler.
But some Chrysler employees are concerned that their employer provided more than half the $4.35 billion needed to buy the UAW Retiree Medical Benefits trust’s 41.5% stake in Chrysler.
“Here we go again. Chrysler gets some operating cash, and Fiat is right there to take it,” said Gary Pacheco, who works at Chrysler’s Trenton engine plant.
Under the terms of the deal announced Wednesday
Chrysler will use $2.6 billion of its own money to buy the trust’s shares, while Fiat will pay $1.75 billion. The transaction is expected to close on Jan. 20.Fiat CEO Sergio Marchionne sold the full merger as the most efficient way for both automakers to continue sharing technology and product development.
Fiat will have spent only
$3.7 billion since 2009 to acquire 100% of Chrysler — barely 10% of what Daimler paid for the company in 1998. Fiat’s access to Chrysler’s cash can fund its reorganization in Europe.
Workers like Pacheco remember how Daimler touted the 1998 combination as a “merger of equals,” but Chrysler gained little in new products and technology.
On the UAW’s Chrysler Facebook page, a number of union members expressed doubts. “They are going to **** money out of Chrysler like Daimler did,” read one post.
“We thought it was bad after Daimler had us. Watch now that Fiat has its hands in the cookie jar,” another worker wrote.
There is concern in Italy as well. Italian unions have feared the merger with Chrysler could weaken their job security, pay and benefits. Their leaders appealed to the Italian government to safeguard their future.
“It is indispensable that Fiat say what it intends to do in our country,” Susanna Camusso, leader of Italy’s CGIL labor confederation, said in a statement.
However, European investors see the deal as a coup for Marchionne because it will unify Chrysler and Fiat without spending much of Fiat’s cash.
Fiat’s stock soared to 6.92 euros on the Milan Stock Exchange, its highest close since July 2011.
“The most surprising aspect of all is the source of funding — over 50% of the upfront cash will come from Chrysler,” Bernstein Reseach analyst Max Warburton said today in a research note.
Other analysts say Chrysler would probably not exist today at all if Fiat had not become its controlling shareholder in 2009. At that time the U.S. government was the only investor willing to take a chance on Chrysler.
“If this deal would not have happened, Chrysler’s ability to be nimble and efficient and be able to face the market challenges, especially from a marketplace perspective in Asia, would have become more and more difficult over time,” said Michael Robinet, managing director of IHS Automotive.
Chrysler’s U.S. market share has rebounded from about 9% in 2009 to more than 11% as new management oversaw the launch of 16 new cars and trucks. The company has added thousands of new workers.
Chrysler has developed three new models with platforms based on Fiat’s Alfa Romeo brand, including the Dodge Dart, Jeep Cherokee and the 2015 Chrysler 200 that will be shown later this month at the North American International Auto Show.
Chrysler also adapted Fiat’s 1.4-liter, 16-valve engine for use in five vehicles and a diesel engine made by Fiat subsidiary VM Motori for the Grand Cherokee and Ram 1500 pickup that goes on sale early this year.
Under the terms of the agreement, Fiat and the UAW Trust will end litigation over the value of Chrysler’s shares. Chrysler will drop its planned initial public offering.
“The question of whether the new company uses Chrysler’s cash to support European operations is no longer relevant,” said IHS analyst Stephanie Brinley. “As one global entity, the strengths and weaknesses of each region are reflected in one company.”
Contact Brent Snavely: 313-222-6512 or [email protected]. Follow him on Twitter @BrentSnavely
The Associated Press contributed to this story.
