Fiat’s deal to take full control of Chrysler on better-than-expected terms has cemented CEO Sergio Marchionne’s dealmaking reputation, but he might face a bumpy road on its drive into operational success for the business.
The toll taken by two years of talks and an accompanying investment freeze has already delayed the Italian carmaker’s recovery, and as Marchionne has said he might retire in 2015, his legacy could depend on how his successor plays the hand.
Under the $4.35 billion deal unveiled on New Year’s Day, Fiat will acquire the 41.46 % of Chrysler it does not already own from the United Auto Workers (UAW) union’s retiree healthcare trust.
Now, Italy’s industry minister said the deal should be a premise for it to complete investments it had already planned in Italy.
“The agreement is the premise for the new Fiat-Chrysler group to further consolidate its position in Europe and internationally, putting the factories, know how and Italian technology at the center of its growth strategies,” Industry minister Flavio Zanonato said in a statement.
Fiat has said it plans to build Jeeps and a new line of Alfa Romeos in Italy for export to markets in Asia, Latin America and the United States to offset flagging demand in crisis-hit Italy and to conserve jobs.
Still, analysts, predict that Fiat shares which got a 16 % boost from the deal on Thursday, would hereafter be kept in check by the scale of the task ahead.
Getting access to Chrysler’s cash and industrial scale is critical to Marchionne’s expansion plan for the Alfa Romeo and Maserati brands, designed to help Fiat’s idling Italian plants export their way out of trouble. But Marchionne’s determination – some say obstinacy – in holding out for the right price has led to costly delays for Fiat’s investment and recovery plans. And the Italian factories are still waiting as they tick along at just 41 % of capacity, according to 2013 estimates from IHS Automotive.
While completing the Chrysler buyout may be his last big stunt for Fiat and its controlling Agnelli family, it could well be his successor who has to navigate the complex realities of a cross-cultural car merger, which have proven insurmountable for many other pairings.