Nearly 20 years ago, former Chrysler president Bob Lutz and I had a nice chat after a memorable dinner at Stars restaurant in San Francisco. With an after dinner drink in one hand and a cigar in the other, Lutz talked about the coming resurgence of Chrysler. Not remarkably, the venerable automaker was on the ropes financially, with an aging product lineup of K-cars that Lutz described as "unremittingly rectangular."
Bob was quite upbeat, despite the dire news in the business and trade media about Chrysler's woes. When I asked how he could be so positive, he replied that Wall Street had written them off, so he and colleagues like designer Tom Gale were free to concentrate on new products and not worry about quarterly profit. I asked what he thought of the speculation that Fiat might acquire Chrysler. Lutz laughed in response and thought that would be a crazy idea.
So here we are in 2009 with Lutz at General Motors, Gale retired, and the current management of Chrysler dying to tie the knot with the little car company from Italy. Of course at this point Chrysler's owner, Cerberus Capital Management, and its investors would gladly bequeath the automaker to anyone with six figures in a bank account and an American Express card with a decent line of credit.
Reasonable people might conclude that the few Chrysler veterans who remain with the company would hardly welcome another cross-the-Atlantic joining of two very different car cultures. Chrysler people went to that 1998 movie titled Merger of Equals, starring Jürgen Schremp, Dieter Zetsche, Robert Eaton, and a cast of (mostly German) thousands. The comic/tragic plot that produced DaimlerChrysler didn't end well and there's little reason to believe that FiatChrysler will play any better in Peoria or Motown.
From a product point of view, combining Chrysler's trucks, SUVs, and minivans with Fiat's small and midsize cars makes sense. Back in '98, Daimler was sure that Chrysler's bread and butter offerings would blend nicely with its loftier Mercedes-Benz. But alas, synergies don't just happen -- especially when things like culture, laws, language, and distance separate the two dance partners.
Then there's the money. Fiat has a bit more than Chrysler, but in major automaker terms, it's a degree of poverty. The Italian company has its own history of fortune turning to famine and while it's currently turning a small reported profit, Fiat's debt has jumped to three times its recent forecast to $8 billion. So to make this union work, we (you and I) have to loan Chrysler another $3 billion so Fiat can own 35% of Chrysler.