Stupidest deals: Fiat-Chrysler
With few mergers and acquisitions taking place now, and a growing number falling apart, we will start looking at the deals over the last few years that have turned out to be disasters. Not for executives, consultants, private equity groups, and bankers - they've (mostly) managed to get their money out. But shareholders and stakeholders (employees primarily) have been the victims, and the disastrous Citigroup and Bank of America deals are threatening to bring down the economy as a whole.
But let's just look at a recent deal that, while it was met with incredulity, got a reaction that was not full with enough puzzlement and outrage. When Fiat announced it would take on 35% of Chrysler from Cerberus Group, Adam Smith must have rolled over in his grave. Let's face it Chrysler is worth nothing, it is toxic. Its only value is the difficulty of the US government has inletting all those jobs just disappear all at once. Cerberus which got the hot potato from Daimler (and how the hell did Daimler buy Chrysler in the first place?), got paid to take it and have doubtless extracted what little blood was left.
Now, as the details are revealed it turns out that no Fiat money would be changing hands if the deal goes through. In theory, Fiat will give Chrysler the small-car technology it lacks in return for the shares. But it would take years for Chrysler to adopt any of that technology, given its track record. This might have been a good idea a few years ago, but now? And Fiat itself is hardly financially stable; it is itself being kept in business by the Italian government, and it has its own plant closures coming up.
Of course the deal was saluted by Chrysler CEO Robert Nardelli "This alliance has the potential to greatly benefit America, by preserving American jobs, stabilizing the economy including the important domestic auto industry and expanding the availability of small, fuel-efficient automobiles." Yeah, right.
But saving GM, which at least has some brands with value, some technology it can build on, will be an expensive and messy affair for us taxpayers. GM is sick, almost on its deathbed, but Chrysler is already in the funeral parlor. Chrysler us now forcing its dealers, who themselves are going out of business at record rates, to take even more cars into their crowded-with-SUVs but empty-of-customers lots, just in order to cook its books for another quarter. And clearly Cerberus isn't interested in investing any more in the company.
But as a Wall Street Journal article ("Fiat Races U.S. Deadline To Set Deal With Chrysler", 2/9/09) paraphrases one analyst's comments: "For Fiat, the alliance is a 'lottery ticket' that could be worth nothing if Chrysler doesn't recover."
But even if Fait backs off, don't its executives have anything more important to do than play the lottery?
9:39:16 PM 
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