The Italians are paying nothing -- no cash, no shares in Fiat SpA, no magnanimous offers to assume debt -- for a 35 percent stake in Chrysler LLC.
Tells you everything you need to know.
This is as sad as it is encouraging, in the sense that a reprieve from imminent execution is good news. Chrysler again is a pawn in a larger, transatlantic gambit, this one between its shadowy Wall Street owner, Cerberus Capital Management LP, and an Italian national icon, even if the alliance -- assuming it becomes reality -- appears to forestall the collapse of Detroit's smallest automaker.
"The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding in the future," says their joint statement issued Tuesday. Evidently no entity, save the federal government, is willing to pump a single dime into the automaker that says it still needs another $3 billion in bridge loans to pay its bills and survive the first quarter.
How, exactly, does this work? How does an automaker competing in a global industry, where fresh products are the lifeblood of success, keep operating and keep investing in the development of new cars and trucks when both its would-be foreign partner and its New York owner refuse to invest cash in the enterprise?
Even more, would partial foreign ownership invalidate terms of the initial bridge loans that wouldn't have been disbursed but for a last-ditch intervention by a lame-duck White House? The companies say no, but maybe so, says Rep. Barney Frank, D-Mass., chairman of the powerful House Financial Services Committee.
"It might well trigger a repayment," Frank told CNBC, referring to the Chrysler-Fiat alliance. "We put it into our bill -- and while the bill was defeated by a Senate filibuster -- the Bush administration has carried this out. We're very high in the repayment list. So, uh, depending on the deal they make it could very well trigger Chrysler having to repay the $4 billion, I think, that they got."
And would the Italian-American alliance complicate additional efforts by Chrysler to wrest more bridge loans from Congress? Probably. Like it or not (and I mostly don't), the zeitgeist is slouching toward a neo-xenophobia, especially in the beleaguered Detroit auto business. I wouldn't be surprised to see a grandstanding politician or two use the prospect of a Fiat tie-up as a way to bash Chrysler's owners or try to block more taxpayer loans.
In announcing the strategic alliance, Fiat and Chrysler stressed the business logic -- their complementary geographic footprint (Chrysler in North America, Fiat in Europe and the developing world), their technical synergy (Chrysler in large cars, trucks and SUVs, Fiat in fuel-efficient small cars and engines), and their mutually useful distribution networks (Chrysler can use Fiat dealers outside North America, Fiat can use Chrysler to reintroduce its upscale Alfa Romeo to the States).
All of which is fair and perfectly logical. But then so was the alliance between Fiat and General Motors Corp. that ended in nasty legal wrangling, a $2 billion payment from GM to Fiat and very little to else to show for it, no matter what GM says.
The survival of Detroit's automakers, confronting the most harrowing financial conditions since the Great Depression, depends as much on politics and appearances as it does business strategy and investment plans. And the optics are this: Cerberus wants out, Fiat is determined to minimize its exposure and American taxpayers are expected to write the checks.
We've seen this movie before, in German. Eleven years ago, Daimler-Benz AG bought Chrysler Corp. in a $36 billion deal and pledged to create a global behemoth with multiple headquarters and storied brands. It would migrate class-leading Mercedes-Benz technology into Chryslers and Jeeps, open new distribution channels and reap the synergies of combined purchasing, engineering and staff services.
The acquisition masquerading as a "merger of equals" did nothing of the sort, save giving former Chrysler CEO Dieter Zetsche a launching pad to the top job back in Stuttgart. The nine-year union ended in recrimination, a hollowed-out product portfolio for Chrysler and a new owner, Cerberus, that began looking for buyers as soon as the deal closed in August 2007.
So forgive the troops up in Auburn Hills if they're skeptical of Europeans in tailored suits describing grandiose plans with foreign accents and inimitable continental flair. Sure, the Alfas are sexy. Yeah, it'd be neat to be connected to Ferrari, Fiat's gem, even if Chrysler really wouldn't be any more than it was "connected" to Mercedes back in Germany.
Look, they've heard it all before and it didn't end well. Second, they're smart enough to know an effectively insolvent company operating in a punishing market cannot survive without cash. Third, this feels like a hastily brokered plan between a desperate private equity shop that made a bad bet and a second-tier European player with a mixed history of success in alliances and in the U.S. market.
When does this serial abuse of Chrysler and its people end? We all want this to save jobs and communities, to share the optimism expressed by leaders of the United Auto Workers. But for Chrysler, that would be the triumph of hope over experience.