Fiat Now Is In Chrysler's Driver's Seat
Wednesday, June 10, 2009SUSIE GHARIB: A new Chrysler was born today. The troubled auto maker, now out of bankruptcy, sold most of its assets to Fiat. No money exchanged hands, but the Italian auto maker gets a 20 percent stake in Chrysler. Chrysler, in return, gets badly need technology. Here's what the new Chrysler looks like. First, new management, Fiat CEO Sergio Marchionne takes over as CEO of Chrysler and Robert Kidder, the former head of Duracell, is chairman and Chrysler President Jim Press becomes deputy CEO. Second, new products, Fiat will provide Chrysler with smaller cars, including a sub-compact by the year 2010. Chrysler will continue to sell its Dodge, Jeep and Chrysler brands. Fiat's Marchionne told Chrysler employees today the new company will be more nimble, saying it'll have significant strategic advantages, including a healthy balance sheet, competitive cost structure and a more efficient dealer network. Well, that dealer network now has 2,400 franchises -- down from more than 3,000. Those closures have been painful for hundreds of Chrysler dealers across the country. Last week we visited one of them -- Tamiami Chrysler Jeep -- which was fighting hard to stay open. Jeff Yastine went back today to find out what's next for this family business that was once a top seller of Chrysler cars.
JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The signs are still up at what, until yesterday, was Tamiami Chrysler Jeep in Miami. But they won't be up much longer. General Manager Alex Planas, whose family owns this dealership, says the most stunning part of the termination came last night.
ALEX PLANAS, GENERAL MGR., TAMIAMI CHRYSLER JEEP/MIAMI: We're here until the wee hours of the night selling cars, delivery cars. And then all of a sudden come midnight, Chrysler kind of unplugged us from their computer systems and kind of terminated us. Not even a thank you card after 20 years, not even a thank you card of doing business and selling cars for you or nothing. It's sad.
YASTINE: Another immediate change for this dealership? Today, Planas laid off 40 of his 100 workers, many of them longtime employees. But the big question is what's next? The Planas family will turn their sales lot into a used car business for now. But they're already receiving feelers from other auto makers interested in awarding them a new car franchise and if executives here have anything to do with it, Chrysler may rue the day they terminated the dealership.
PLANAS: You have a lot of foreign vehicles that are being sold here - - your Toyotas, your Hondas -- and to compete against that, you got to make sure you keep your best dealers and they didn't do that. If you're going to start a new company and you've had bad decisions in the past and you're going to start a new company, wouldn't you want to have your best dealers move forward with you?
YASTINE: Once he has a new franchise, Planas will aggressively sell that brand to the dealership's loyal customers. Among them, Beth and Keith Hollingsworth who bought a used PT Cruiser today, despite mixed feelings about the bargain they were driving.
KEITH & BETH HOLLINGSWORTH, CUSTOMERS: Everyone's going to have to take a pinch and I'm thankful because I'm now walking out with a very nice automobile. But I hope this helps them as much as it possibly can, so they can stay here in our community and service us for many more years.
YASTINE: And that's something this dealership hopes to do as it faces a future without Chrysler.
PLANAS: There's disappointment. There's the end of an era for us, for Chrysler. But it's also a good day for us. It means the beginning of something new for us and life throws you curveballs every once in awhile and you just got to (INAUDIBLE) adversity and you just got to get back on your feet and move forward and that's what we're doing.
GHARIB: All right, very interesting story Jeff and thanks for coming on the set to talk to us a little bit more about it. What I find interesting here is everybody talks about new chapters and new begins for Chrysler. They've had so many new beginnings.; There was a time in the 90s when Daimler-Benz took over as the new owner and then in 2000 whatever that Cerberus Capital Management took over and now it's Fiat. So I don't know, is three times going to be the charm here?
YASTINE: It really depends on the leadership from Sergio Marchionne and of course what happens here with Chrysler coming when it comes out of bankruptcy. They have a situation where they have a lot less in the way of debt, of course, lower labor costs, but they also have an aging fleet of vehicles that's still tilted more towards SUVs and trucks and they need to bring in that small car technology that Fiat is known for and that's probably the biggest positive for them.
GHARIB: Yeah, but here's the thing, are people going to buy those small cars? We hear anecdotally that a lot of American consumers still like those big SUVs so Chrysler's going to have to deal with that whole issue of demand and what the customers really want.
YASTINE: In some ways, it's a bet on fuel prices but also the trend change in SUVs has been occurring for some time. In 2005, that was the peak for SUVs as a category and just this year in May, 200,000 more cars sold in the U.S. than light trucks and that includes SUVs, minivans and pickup trucks and those types of vehicles.
GHARIB: And Jeff, there's this whole question of management of the company. You've got Sergio Marchionne. You got the UAW on the board. You got the U.S. government with its representative. Sounds like a lot of agendas, too many cooks in the kitchen.
YASTINE: Yeah and it really depends on the kind of leadership that Marchionne can bring to the table here. If he's given a free hand, he helped to turn Fiat around when he ascended to the top position in 2004 and if he can do that there, many believe he can do that here but as you said, it depends on what kind of a free hand that he as a car guy can do.
GHARIB: All right. To be continued. Jeff, thanks a lot for coming on. Jeff Yastine reporting from Miami.
