The U.S. government's viability assessment for Chrysler is about as harsh a report card as you'd ever like to see. For example, upon review of the facts, the government declares:
- The Company is burdened with an unfavorable product mix ...
- Given Chrysler's limited financial resources, it can not make the necessary catch-up investments in R&D required to refresh its portfolio and bring it up to par with its competitors.
- Chrysler ... lags its competitors in terms of manufacturing flexibility:
- ... the gap in perceived brand quality for Chrysler, Dodge and Jeep relative to their competitors has increased meaningfully over the last several years, suggesting that Chrysler's market share, if not for significantly increased incentives that have further eroded profitability, is even more vulnerable than history suggests.
Only in the very last line of the assessment does the government throw out a possible lifeline.
However, a partnership with another automotive company, such as Fiat or another prospective partner, which addresses many of these issues could lead to a path to viability for Chrysler.
So let it be written, so let it be done. Bloomberg reports:
March 30 (Bloomberg) -- Chrysler LLC said it, Fiat SpA and Cerberus Capital Management LLC have reached an agreement on a global alliance.
Chrysler said it still has "substantial hurdles to resolve" and that it is "committed to working closely with Fiat" and U.S. officials.
You can color me skeptical that this represents anything other than a last-gasp effort to keep some skeletal fraction of Chrysler's U.S. operations functioning. Daimler couldn't make a go of it with Chrysler, and the private equity group Cerberus, which took over Daimler's stake, undoubtedly is taking a bath on its investment. But it is at least interesting that within hours of the U.S. government declaring that Chrysler's only option was a deal with Fiat, that's what appears to be happening.