Marchionne regrets his "shyster" comment - but lets stand another suggesting the joint Chrysler/Fiat could base itself in the U.S.
Chrysler CEO Sergio Marchionne has expressed his “regret” at a remark he termed “inappropriate” referring to the loans the automaker got from the U.S. and Canadian governments following its 2009 bankruptcy.
Following a weekend meeting with Chrysler retailers at the annual conference of the National Automobile Dealers Association, Marchionne said, “I want to pay back the shyster loans” as soon as possible, a term normally associated with usurious lenders.
It would be one of the steps that needs be taken before any merger between Chrysler and Fiat, something the Canadian-educated executive hinted he is considering. Marchionne also left open the possibility that a consolidated Chrysler/Fiat might headquarter out of the U.S. Such a move, he hinted, might follow their operational consolidation.
Chrysler is paying 11%, the company has reported, on the $5.8 billion in remaining debt to the U.S. Treasury and Canadian governments. The loans were issued as part of the bailout that kept Chrysler in business – and put Fiat in a position to control the U.S. maker. The Italian company put up no direct cash to obtain its 20% stake in Chrysler.
“I used a term in reference to the interest rate being charged on our government loans that has raised concerns,” Marchionne subsequently stated from San Francisco, where the NADA conference is being held. “I regret the remark which, in hindsight, I consider inappropriate.”
Nonetheless, while acknowledging the two governments were the only ones willing to underwrite Chrysler after it emerged from bankruptcy in June 2009, Marchionne still stressed his belief that the 11% interest rate is now, “above current market conditions.”
As a result, said the executive, who serves as CEO for both Chrysler and Fiat, the current plan is “to repay these loans in full at the earliest opportunity.”
While critical of the loan rate, Marchionne has otherwise offered praise to the U.S. and Canadian governments for helping keep Chrysler alive. Indeed, the maker and its Italian partner have generally received favorable terms as part of the bailout.
The Italian maker last month increased its stake in Chrysler from 20% to 25% for meeting the first in a series of goals laid out as part of the bailout. Eventually, Fiat is now expected to increase its holdings to 51%. In January, Marchionne indicated his intentions to do so before Chrysler’s planned initial public offering. That IPO, he noted, will likely occur during the second half of 2011.
During a question-and-answer session at an industry conference, over the weekend, Marchionne made what appears to be his strongest statement yet about the long-term relationship between Chrysler and Fiat. While the two makers must yet “integrate operationally,” Marchionne said, “Who knows? In the next two or three years we could be looking at one entity.”
What was particularly significant was his terse mention that the combined entity, “could be based here.”
That reflects the ongoing frustration Marchionne has had with running a company out of Italy, which he has repeatedly expressed faces it with serious competitive problems. The executive recently won key concessions from Italian unions after threatening to transfer production of several vehicles to the United States.
It’s unclear whether Marchionne’s weekend comments reflected a serious focus on shifting Fiat’s base to the States or was yet another effort to press Italian workers and government leaders to meet the company’s demands for further concessions.