Fiat’s deal to take full control of Chrysler on better-than-expected terms has cemented chief executive Sergio Marchionne’s deal-making reputation, but he might run out of road to channel that 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 car maker’s recovery, and as Marchionne has said he might retire next year, his legacy could depend on how his successor plays the hand.
Under the $4.35 billion (R45.7bn) deal unveiled on New Year’s Day, Fiat will acquire the 41.46 percent of Chrysler it does not already own from the United Auto Workers retiree health-care trust.
But Bernstein analyst Max Warburton predicted that Fiat shares, which got a 16 percent boost from the deal on Thursday, would hereafter be kept in check by the scale of the task ahead. “Fiat and Chrysler is still very much a work in progress,” he said.
The timing of the deal and the price, which was below expectations and financed mostly by Chrysler cash rather than by Fiat, impressed even those familiar with Marchionne’s track record.
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 percent of capacity, according to 2013 estimates from IHS Automotive.
The Fiat brand’s ageing models have lost market share in western European, tumbling from 6.7 percent of the market in 2007 to 4.5 percent in the first 11 months of last year. The lost ground may be hard to recover.
While completing the Chrysler buyout may be Marchionne’s 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. These realities have proved insurmountable for many other pairings. – Laurence Frost from Reuters