Fiat CEO Threatens to Walk: Unless Chrysler Unions Cut Costs

April 15, 2009

(ChattahBox)—Fiat SpA’s CEO Sergio Marchionne made an Easter week visit to Chrysler plants in Canada and the US, and he wasn’t there to deliver chocolate Easter eggs. Marchionne threatened to walk from the Chrysler partnership deal unless the carmaker’s unions cut costs. He told the Toronto Newspaper, the Globe and Mail that the deal only had a 50-50 chance of succeeding.

Marchionne is demanding that the unions lower their labor costs to match those of Japanese and German carmakers operating in the United States and Canada. He said the Canadian unions are particularly resistant to negotiating.

Both car companies are rushing to make this partnership deal a reality by the US government imposed deadline of April 30. The Obama administration told Chrysler to make this deal happen or the US carmaker will be cut off from additional bailout funds and be forced into bankruptcy.

Chrysler has already received $4 billion and is hoping to get its hands on an additional $6 billion of government funds, if the Fiat deal can be finalized by the deadline. Under the terms of the deal, Fiat would take a 20 percent stake in Chrysler in exchange for Chrysler’s technology to make small cars and access to the large US market.

If the deal goes through, Fiat would sell its tiny Cinquecento to US buyers and produce its Alfa Romeo in North American plants.

Marchionne would bring a ruthless management style to Chrysler, doing whatever it takes to make the beleaguered carmaker profitable again. When he took over the near bankrupt Fiat, he came in and started firing managers until he completely restructured the company to his liking. However, he quickly turned Fiat around.

Marchionne doesn’t rule out a role as chief executive at Chrysler, saying he may have to divide his CEO duties between Fiat and Chrysler once the two companies enter a partnership. Marchionne also says he believes some plants will have to close, to produce a leaner and meaner automaker.

Meanwhile the clock is ticking and Chrysler is fast running out of options if this deal doesn’t materialize by April 30.



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