Monday, July 25, 2011

Shocker! Chrysler Bringing Home More Bacon than Fiat...

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Two years ago, Chrysler was saved from oblivion when the federal government provided a $15 billion bailout and orchestrated a rescue plan that gave the Fiat Group the management control of the company.

 Seen On www.coolpicturegallery.usLast week, the Italian automaker raised its share in Chrysler beyond 50% for the first time, to 53.5%.So Fiat saved Chrysler in 2009, right? Well, yes, but 2011 is another story altogether.

You see, Chrysler’s US sales increased by 21% in the first six months of the year, whereas Fiat’s European deliveries dropped 12.7% in the same period. But that's only half the story. With the exception of the Maserati and Ferrari brands, the Chrysler Group will contribute to the alliance €155 million for June alone, while Fiat €175 million for the past three months.

If you're looking for an explanation, the answer can be found not only in Chrysler’s rise and Fiat’s fall, but also in the nature of Fiat’s sales as the Italians are mostly active in small car categories where profits are slim compared to the larger and more expensive cars that comprise the bulk of Chrysler’s sales.

Sergio Marchionne, who is the CEO of both Chrysler and Fiat, recently admitted that he intends to unify the management teams into a single, smaller and more efficient entity.

"Chrysler will generate a lot more cash flow and growth than Fiat very soon," said Bruno Lapierre, an analyst with brokerage Cheuvreux.

A merger would be profitable for both automakers, due to economies of scale, and it looks inevitable, as Goldman Sachs stated this week: “With the business of Fiat and Chrysler irrevocably linked, we believe a merger is a logical next step”.

But the question remains: who will benefit from it most? Chrysler, as everyone originally thought, or the former knight in shining armor, Fiat?

Via Reuters


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