Breaking News

Fiat Opel Bid More Advanced Than Rival, Officials Say

Fiat SpA, the Italian carmaker that’s seeking to take over General Motors Corp.’s Opel unit, may have an advantage over rival bidder Magna International Inc. by guaranteeing German jobs and the brand’s future.

A week after GM started due-diligence talks with suitors, Fiat yesterday submitted its plan to the German government, promising to keep the Opel division and at least three of the division’s four factories in the country. The proposal is “more detailed than anything we’ve seen from Magna so far,” said Felix Probst, a spokesman for Economy Minister Karl-Theodor zu Guttenberg, who yesterday called the plan “interesting.”

“Fiat definitely has the edge,” said Juergen Reinholz, the economy minister in the German state of Thuringia, who’s involved in the talks. About 1,900 of Opel’s 25,000 German employees work in a factory that assembles Corsa cars in Eisenach, one of the state’s largest cities. “They submitted their offer faster. Magna has some homework to do to erase that lead,” Reinholz said in a phone interview.

Detroit-based GM, surviving on U.S. loans, is reorganizing to avert a potential June 1 bankruptcy. Aurora, Ontario-based car-parts maker Magna is making a joint bid with OAO Sberbank and OAO GAZ, Reinholz said. Sberbank is Russia’s biggest lender, while GAZ is country’s second-biggest carmaker and is controlled by billionaire Oleg Deripaska.

Fiat Shares Rise

Fiat fell 6 cents, or 0.7 percent, to 8.07 euros in Milan trading. The stock has risen 76 percent this year, valuing the Turin-based company, Italy’s biggest manufacturer, at 9.7 billion euros ($13 billion).

Magna is seeking a stake in Opel of no more than 25 percent, a German government official said on April 28. Magna confirmed in a statement yesterday that it’s in talks with Germany’s government and GM, without mentioning any possible linkup with Russian investors. Deripaska held a stake in Magna until he sold it late last year to help pay off debts.

While GM, the largest U.S. automaker, hasn’t yet selected a frontrunner, a tie-up with Fiat may offer the best strategic solution in terms of sharing platforms, technology and management, a person familiar with the discussions has said.

Chrysler Agreement

Fiat reached an agreement on April 30 to acquire a stake in Auburn Hills, Michigan-based Chrysler LLC. A combination of Fiat, Chrysler and GM’s European operations would generate 80 billion euros in annual revenue, Fiat’s board said on May 3.

GM is looking at selling a stake in Opel, which sells models under the Vauxhall brand in the U.K., as part of a global reorganization to qualify for further U.S. government lending.

The U.S. company is cutting ties with its unprofitable Trollhaettan, Sweden-based Saab Automobile division and trying to find a buyer for the unit. Gunilla Gustavs, a spokeswoman at Saab, said today that Fiat isn’t among the 10 companies looking into buying brand.

Fiat Chief Executive Officer Sergio Marchionne wants to overtake Volkswagen AG as Europe’s biggest carmaker, according to Guttenberg, who oversees the Opel talks for Germany. Marchionne will be in New York, Detroit and Washington this week for further negotiations on the Chrysler partnership, a Fiat spokesman said today.

“Fiat is today the world’s most influential auto company,” with potential to control more than 10 percent of the global car market, analysts at Morgan Stanley, including Adam Jonas in London, said today in a research report. “At a time when governments are having the greatest bearing on private industry since World War II, Fiat may be able to gain from its new vantage point in the eye of the storm.”

Debt Pledge

Seeking to defuse German unions’ opposition, Marchionne promised he won’t transfer any of Fiat’s 6.6 billion euros in net debt to Ruesselsheim, Germany-based Opel, Guttenberg said. Opel employs about 55,000 people across Europe.

Klaus Franz, the chief of Opel’s works council, has softened his opposition since saying on April 28 that workers were “open to working with Magna, but not with Fiat.” Speaking at a press conference at Opel’s Eisenach factory yesterday, Franz said that all bids would be reviewed for risks to Opel and that workers “aren’t hostile” toward Fiat.

Employees have a say in any stake sale because GM’s rescue plan for the European unit calls for workers to make $1.2 billion in concessions.

According to Fiat’s plan, a fourth Opel assembly factory, in Kaiserslautern in the state of Rhineland-Palatinate, may be “negatively affected,” Guttenberg said yesterday after his meeting with Marchionne. He didn’t elaborate.

‘Unacceptable’ Idea

“We shouldn’t feel obliged to jump at the first available bidder,” Rhineland-Palatinate Economy Minister Hendrik Hering said in a phone interview. Keeping the other Opel plants at the expense of Kaiserslautern, where the company employs 3,400 workers making engines, would be “totally unacceptable.”

The new company, which may be called Fiat/Opel, would create synergies of 1 billion euros a year, the Financial Times reported yesterday, citing Marchionne.

“One shouldn’t jump to any conclusions until one knows what Fiat’s precise intentions are,” said Reinholz, the Thuringia economy minister. “Ultimately, GM isn’t preoccupied with striking a deal with German politicians. But it may well do so with Fiat.”

Sourced via bloomberg.com

Despite Fiat threat, CAW says no to more concessions

Despite a threat from Fiat that it may walk away from a merger with Chrysler unless workers make more concessions, the head of the Canadian Auto Workers says the union won’t stray from its previously established negotiation pattern.

Ken Lewenza said the union won’t concede anymore of wage cuts than it did in its recent agreement with General Motors, but is willing to help troubled Chrysler find savings in other ways.

“We always said that the economic pattern is important to the auto industry to make sure that one company doesn’t have an advantage or a disadvantage, but we also said to Chrysler that we’ll use our creativity, the same as we’ve done in the past, to increase productivity and increase the bottom line at Chrysler without touching the economic pattern,” Lewenza told a news conference Wednesday.

The GM agreement is estimated to save the automaker about $7 an hour per worker.

But Fiat CEO Sergio Marchionne told the Globe and Mail the company will renege on a proposed partnership with the struggling North American automaker if the CAW doesn’t cut its compensation package by $19 an hour.

The cut would whittle their wages down to $55 an hour — including so-called “legacy costs” such as pensions and other benefits — the rate Toyota and Honda workers make in the U.S.

Fiat’s hard line to the CAW was immediately repeated by senior Canadian government officials.

“CAW is going to have to realize that Chrysler has to be cost competitive with Toyota and Honda, not just Ford and GM,” Industry Minister Tony Clement said Wednesday.

Speaking on CTV’s Power Play, Lewenza disputed the dollar numbers that Fiat was using and said he was “surprised by the comments.”

“I’d like to talk to Sergio (Marchionne) and ask him where he got those numbers,” he said. “I’m disputing those numbers.”

The Italian automaker has emerged as Chrysler’s best hope for survival after both American and Canadian governments told the company it would not provide a bailout loan until it came up with a satisfactory long-term restructuring plan.

“Absolutely we are prepared to walk. There is no doubt in my mind,” Marchionne told the Globe from Fiat headquarters in Turin. “We cannot commit to this organization unless we see light at the end of the tunnel.”

He said as of now, there is a 50 per cent chance the partnership agreement will go through.

Chrysler has 15 days left to reach a deal with Fiat that would satisfy the federal governments.

A non-binding agreement reached between the two companies in January gives Fiat a 35 per cent stake in Chrysler.

Fiat is not investing money into the company but instead is giving Chrysler access to its successful platforms for small cars and access to fuel-efficent, eco-friendly technology for engines. In exchange, Fiat would gain access to the North American market.

If Chrysler fails to form a partnership with Fiat, the company will go bankrupt and tens of thousands of jobs will be lost.

Tom LaSorda, Chrysler’s president, said the company needs to cut its labour costs by about $20 an hour in order to compete with foreign automakers who also manufacture cars in Canada. Those who work in Canadian assembly plants manufacturing Japanese cars get paid around $47 an hour while those who work for North American manufacturers make around $76 an hour.

If labour costs can’t be cut, LaSorda warned that Chrysler may have to shut down its operations in Canada.

CAW ‘too tough’

Lewenza has said repeatedly that Chrysler’s problems run deeper than the wages of the company’s unionized workers and that it should look at other solutions to restructure the company effectively.

The CAW’s position on negotiations is “too tough,” according to Tony Faria, an auto industry analyst.

Faria, the co-director of the automotive research centre at the University of Windsor, said the CAW might be putting Canadian jobs at risk, particularly if Chrysler is able to reach a better deal with its unionized American workers.

I felt all along that the CAW has been too tough in their negotiations in Canada and that has lost us jobs in Canada to lower labour-cost countries,” Faria said in an interview with The Canadian Press.

One of the concessions the American United Auto Workers union has made is to agree to a two-tier wage system where current employees retain their current wages but new hires will make significantly less in benefits and wages.

“If we ever get to a point in time where the North American market starts turning back up again … they’re going to be hiring back workers at a significantly lower rate based on the two-tier wage system now in effect at their plants in the U.S.,” Faria said.

“That doesn’t bode well for future auto assembly CAW jobs in Canada, and that’s something the CAW just has to recognize: that it may be much, much better to have jobs at a little bit lower labour rate than to have no jobs whatsoever,” he added.

Sourced via ctv.ca

3rd UPDATE: Auto Sales Remain Bleak In April; Toyota Lags

Despite bankruptcy, Chrysler still has fans who say car company will survive

When it comes to car buying, a good deal’s a good deal – even if it’s offered by newly bankrupt auto giant Chrysler.

“It’s still a great, classic American car,” said Darnell Leacock, the proud new owner Thursday of a 2008 Chrysler 300. “The company’s going through an adjustment.”

The 27-year-old Cambria Heights resident was among the optimists at Star Chrysler Jeep & Dodge in Queens Village, where three cars were sold in one day despite the company’s latest financial mess.

“People who think Chrysler is going down are nuts,” said Michael Vega of Franklin Square, L.I.

While the carmaker didn’t get deep-sixed, it was bruised and bloodied after filing for bankruptcy protection.

The once-unthinkable move was followed by word that its embattled CEO was leaving and its plants would temporarily close Monday.

It took a deal with Italian automaker Fiat and another $8 billion in federal bailout money to save the Michigan-based firm from the corporate junkyard.

Despite the setbacks, the company launched in 1925 will continue car sales as usual – and emerge in two months “stronger and more competitive,” President Obama predicted.

“No one should be confused about what a bankruptcy process means,” Obama said. “This is not a sign of weakness, but rather one more step on a clearly charted path to Chrysler’s revival.”

The government will back Chrysler’s warranties in the bankruptcy period. The President promised consumers that buying or servicing the company’s cars won’t be affected.

Chrysler’s plants will shut down for up to two months until the restructuring of its $6.9 billion debt is complete. The company has received $4 billion in government money.

Once the bankruptcy ends, CEO Robert Nardelli will leave after two disastrous years where the company’s sales and earnings tanked. He was disappointed when a deal to avoid the court filing failed just hours before an 11:59 p.m. deadline.

“We came into the last pit stop, had the car tuned up, and ran out of laps,” Nardelli told reporters.

Obama blasted hedge-fund creditors for submarining a proposal that would have spared Chrysler from bankruptcy.

“I don’t stand with those who held out when everybody else is making sacrifices,” he said.

Four banks holding 70% of Chrysler’s debt signed off on a deal to accept $2 billion – about 30 cents on the dollar. The hedge fund creditors, seeking a better payoff, declined to go along.

Fiat will get 20% of Chrysler in return for giving the American business access to its fuel-efficient technology.