In recent news, Fiat will purchase 20% of bankrupt automaker Chrysler, which received $15.5 Billion from the U.S. Treasury between Jan. 2 and May 27. The 20% stake may increase to 51%, assuming certain "milestones" are met. The deal also excludes "eight manufacturing sites, dozens of pieces of real estate, equipment leases and contracts with 789 U.S. auto dealerships."
President Obama will fulfill his promise of keeping 54,000 United Auto Workers employed. But for the dealerships, things don't look so good. 1,300 dealerships have closed shop during the past year, according to the Wall Street Journal. However, this means less competition for the surviving dealerships.
Now we get to GMAC.
GMAC became a bank on December 24, 2008, which allowed the corporation to receive $5 billion of TARP money right off the bat. Before it was the finance provider for GM, providing credit to 75% of GM dealers and helping buyers finance their purchases. According to the New York Times, GMAC needed an additional $11.5 billion (roughly half its equity) after reports came back from the stress tests that evaluated 19 banks. GMAC placed 17th, only in front of Bank of America and Wells Fargo
From a June 8 TIME article:
"If GM's only task were to make money, the company would shutter its car factories (or move them to low-cost countries) and churn out light trucks."
"His [Marchionne, CEO of Italy's Fiat] lowball--bid seems the wrong word--offer went like this: If the U.S. government would wipe out Chrysler's shareholders, buy out its bondholders, cut wages and jobs, deal with its retirement liabilities and fund the warranties, then Fiat would take a crack at Chrysler. The Italians would bring their cars to Chrysler's showrooms and share their advanced diesel technology with Chrysler engineers. Chrysler might sell some cars in Fiat's markets--Jeeps may have the best overseas appeal. Marchionne would lend his managerial chops. And if things worked out, Fiat would take a controlling share."
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