Fiat will walk out on Chrysler deal unless labour cost go down

Posted on 15 Apr 2009 by The Manufacturer

Fiat boss Sergio Marchionne has warned Chrysler that it will pull out of the proposed partnership between the two car makers unless the North American company’s unions agree to labour cost cuts by the end of the month.

The Italian Fiat has proposed buying 20% of the troubled US automotive giant, though its ownership could rise up to 49% if Chrysler start releasing new models based on Fiats.

However, in an interview with the Globe and Mail, Marchionne said the deal has now only a “50-50” chance of going through due to lack of progress in negotiations with US and Canadian unions over labour costs. He said talks with the Canadian Auto Workers union (CAW) have stalled and that “they need to see what state the industry is in.”

“We cannot commit to this organization unless we see light at the end of the tunnel,” he said.

The deal would see the US government plough $7bn into Chrysler while Fiat rejuvenates the company and sells its own models through Chrysler dealerships. The White House has given the partnership an April 30 deadline to be finalised after which point it will cease support to Chrysler and bankruptcy proceedings will begin.

If the deal goes through Marchionne may become chief executive of Chrysler himself, splitting his time between it and Fiat. But “the title isn’t important,” he said. “What’s important is that they hear me.”

He said some of Chrysler’s plants in North America will close and its headquarters in Michigan will be “thinned out” with a “flat management structure”, similar to Fiat’s, introduced.