Newspaper article International New York Times

Chrysler Acquisition Opens Global Competition to Fiat's Chief

Newspaper article International New York Times

Chrysler Acquisition Opens Global Competition to Fiat's Chief

Article excerpt

With Chrysler in his pocket, Sergio Marchionne can turn his attention to trying to increase production in order to compete with the world's leading carmakers.

The boss of the Italian automaker Fiat, Sergio Marchionne, has finally won complete ownership of Chrysler and can begin trying to realize his dream of building a world-class competitor to the industry leaders Toyota, General Motors and Volkswagen. At the top of the to-do list: Stanch the deterioration in Fiat's home market and fix a glaring hole in its Asian business.

Mr. Marchionne, the chief executive of Chrysler and Fiat, rescued the Detroit automaker from bankruptcy in a 2009 deal with the Obama administration that gave Fiat 58.5 percent of Chrysler and the potential to raise that stake. In an agreement announced on Wednesday, the companies said that Fiat would buy the remaining 41.5 percent from a United Automobile Workers union retiree health care trust for $4.35 billion. The deal consolidates a company that last year had $114 billion in combined sales.

Mr. Marchionne has long held that to be competitive and profitable in the global auto market, a carmaker needs to sell at least six million vehicles annually. The Chrysler-Fiat alliance, which sold about 4.5 million vehicles last year, remains short of that target.

The agreement capped months of thorny negotiations and opens the way to a possible New York listing of Fiat-Chrysler shares. It also smoothes the way for a return of the Alfa Romeo brand in the United States.

"It's a deal that Fiat had to get done," said Harald Hendrikse, an analyst in London for Nomura. "As usual, Mr. Marchionne's pulled a rabbit out of the hat."

Investors welcomed the news. Fiat's shares soared 16 percent Thursday on the Milan bourse.

To lift sales, Mr. Marchionne must look to emerging markets, analysts said.

Fiat already has a good presence in Brazil, enjoying a healthy 23 percent of that market, though that share is under threat from aggressive entrants like Toyota and Hyundai.

But it has only a minimal presence in China, the world's biggest car market. Massimo Vecchio, an analyst at Mediobanca in Milan, said the only hope of reaching Mr. Marchionne's goal of six million vehicles was through a partnership with an Asian automaker that would allow it to gain access to the Chinese car market.

"Fiat is late to the game in Asia," Mr. Vecchio said. "That's the only way they'll be able to recover the lost ground." He suggested the Japanese automakers Mazda and Suzuki as possible partners.

While Chrysler is doing well in the United States, with sales having risen 9.3 percent last year, Fiat is faltering in Europe. Its European sales -- which include its own brand as well as Lancia, Chrysler, Alfa Romeo and Jeep -- fell 7.8 percent in the first 11 months of 2013 from the period in 2012. That was far worse than the 2. …

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