As one Italian boss said to another about to be ex-boss "it's not personal, it's just business."
Rich Wagoner’s head wouldn’t be the only one to roll as a result of taxpayer financed restructurings at General Motors Corporation and Chrysler LLC, according to one interpretation of an e-mail that Chrysler CEO Bob Nardelli sent to employees yesterday.
In an update on restructuring plans at the ailing automaker, Nardelli said that the United States Treasury and Fiat Spa would select a new board comprised of independent directors not associated with either company, if negotiations conclude with Fiat taking a large stake in the automaker. The board would then presumably elect a new Chairman. What that means for Nardelli, the current chairman, is unclear, and Chrysler did not immediately respond to request for comment.
A “Fiat Alliance” would provide the Chrysler with access to competitive fuel-efficient vehicle platforms, distribution capabilities in overseas markets and cost-saving opportunities. Since the U.S. Treasury Department has already concluded that Chrysler is not viable as a stand alone company, Fiat appears to be able to dictate whatever deal it wants.
Sergio Marchionne, Fiat’s Chairman and CEO told reporters earlier this week that he could end up running Chrysler and he also said he would walk away from the deal if unions do not agree to cut their wage rates.
Chrysler was forced to respond: “As a requirement of Chrysler’s loan agreement, the UAW must agree to a 50% reduction in its VEBA and match the transplants hourly labor costs in the U.S.” The Canadian Government is taking an identical position with the CAW. “All parties have complete understanding that Chrysler must achieve the necessary concessions and restructuring targets that have been established. As it moves through this process, the Company believes it is important to keep all options open but Chrysler’s goal is to reach a conclusion by April 30 that the Government deems viable, given the guidelines that have been set. ”
Nardelli addressed the following critical areas in his e-mail:
“While we have made progress with most constituents, there are significant challenges remaining, and I wanted to provide you with a brief update on where we are in the process.
“UAW: As required by our U.S. Treasury loan, we submitted a viability plan on Feb. 17 that included tentative agreements with the United Auto Workers union related to modified VEBA terms and hourly wage rates competitive with the transplants. Unfortunately, the Administration reviewed the plan and determined that Chrysler was not viable as a standalone entity, and as noted above, even with an alliance partner, Chrysler must ask for additional sacrifices. The additional concessions we are seeking from the UAW are critical to receiving continued support of the Administration, completing our Fiat alliance and achieving sustained viability.
“CAW: Chrysler and the Canadian Auto Workers union have held a series of meetings, but unfortunately, have not reached an agreement on concessions as outlined by the Canadian government. The CAW has been unwilling to abide by the terms of the Canadian government loan, which requests that the union meet local transplant all-in labor costs. This issue is also critical. Without a successful resolution, the alliance with Fiat and our continued viability is at risk.
“Canadian government: The Canadian government has been very supportive of our viability, providing a loan of $1 billion (CDN $750 million drawn to date), with an agreement to provide additional support in proportion to the loans received from the U.S. Treasury.
“Creditors: The U.S. Treasury has been meeting regularly with our creditor group, which has been asked to make significant additional concessions. The U.S. Treasury has extended a concessions proposal to the group, and the creditor group is expected to respond shortly.
“Suppliers: In these troubled times we have had success with our suppliers, with some being very supportive. Others have become involved in the Federal Automotive Supplier Support Program. To date, Chrysler has approved 150 suppliers for the program.
“Dealers: Our dealers were among the first constituency groups to meet their concession goals and continue as strong supporters of Chrysler. In spite of the negative perceptions surrounding our industry, our dealers show tremendous enthusiasm for our company, our brands and products in their local communities with their optimism and steadfast support of our customers.
“Chrysler Employees: As a result of extensive downsizing and de-layering, Chrysler employees continue to do more with less throughout the organization. Significant costs and benefits have been eliminated and all federal guidelines are being met.
“Fiat: We continue to review the status of all stakeholder discussions with Fiat, as the achievement of concessions is a condition of the alliance. Fiat strongly believes in the mutual benefits the alliance would create for both of our companies, our customers, employees and other constituents.
“To help set the record straight in light of recent media speculation, let me share with you a few facts on the alliance. Upon successful completion of the alliance, a board of directors for Chrysler will be appointed by the U.S. government and Fiat. The majority of the directors will be independent (not employees of Chrysler or Fiat). The board will have the responsibility to appoint a chairman. The board also will select a CEO with Fiat’s concurrence,” said Nardelli.
Fiat appears to be on the verge of taking over the company, if the needed concessions are forthcoming. If not it’s curtains for the whole enterprise, not just Nardelli.