Marchionne to head Chrysler

[May 07, 2009]  MILAN (AP) -- Fiat Group CEO Sergio Marchionne will become the chief executive of Chrysler after the U.S. automaker emerges from bankruptcy, a Fiat spokesman confirmed Thursday.

Marchionne, the 56-year-old dual Canadian and Italian citizen, has been tipped for the job since the Italian automaker reached a deal to take a 20-percent stake in the bankrupt Chrysler. Chrysler CEO Bob Nardelli has said he would step down when the bankruptcy is complete, which would make room for Marchionne.

U.S. President Barack Obama's administration has said Chrysler could comes out of a "surgical" bankruptcy in 30 to 60 days -- much more quickly than usual.

Marchionne, meanwhile, also is in talks to take over General Motor's operations in Europe -- Germany's Opel, Britain's Vauxhall and Sweden's Saab, and Fiat confirmed that it is also interested in GM's Latin American operations.

Marchionne's vision to create the second largest automaker in the world and the largest in Europe has startled analysts, who wonder if he can pull it off. Marchionne, who returned the loss-making Fiat since taking over as CEO in 2004, has said that automakers will need to made some 5.5 million autos a year -- more than twice Fiat's current production -- to survive.

"In a way all of this has come a little bit too fast," said Howard Wheeldon, a senior strategist at BGC Partners. " One would like to see two or three years of really strong results in Europe and in Italy for Fiat before they delve out this far and fast. I am extremely worried about this German thing and their wanting to become No. 2 in the world. It will end in tears."'

Fiat's vision is to spin off Fiat Group Automobiles, which includes the Fiat, Lancia and Alfa Romeo brands, to create a new car company including Chrysler, GM Europe and, now, GM's Latin American operations. Fiat said the new company would make over 6 million cars.

Fiat would leave the company's debt -- which was euro6.6 billion at the end of the last quarter -- with Fiat Group SpA, which will also retain the Ferrari and Maserati brands, Fiat said.

Unlike the Chrysler deal, where Fiat assumed no debt, Fiat said talks in Germany include assuming Opel's debt.

Marchionne, who was in the United States for talks with GM executives, was to depart Thursday for more talks in Germany.

He met Monday with Chancellor Angela Merkel and her Economics Minister, Economy Minister Karl-Theodor zu Guttenberg, who said Fiat is seeking euro5-7 billion ($6.6-9.3 billion) in short-term financing from governments in countries where GM Europe operates. Europe-wide, which could be covered by loan guarantees from various governments. That would also include Britain, Spain Belgium, Poland.

Germany's Handelsblatt daily said Fiat presented a 46-page paper "Project Phoenix" to the Economics Ministry that confirms that Opel's engine factory in Kaislerslautern is threatened with closure, as zu Guttenberg said. The work force at two other factories, in Ruesselsheim and Bochum, are to be reduced but not closed.

Opel employs some 26,000 people in Germany and the nation's powerful unions have been reluctant to embrace Fiat's plans amid fears that jobs will be slashed.

Marchionne turned around the loss-making Fiat since taking over in 2004, ending a 17-quarter string of losses that held until the current crisis hit Fiat's bottom line in the first quarter of this year.

Marchionne's achievements have also won him favor with the Obama administration, which has tapped Fiat to take on a 20-percent stake in the bankrupt automaker Chrysler and supply it with small car technology that it lacks and help it expand beyond its only market, North America.

UBS auto analyst Philippe Huchois agreed that Marchionne was moving swiftly, but "if someone can do it, I would put money on him."

"From the beginning, he considered this a nonsensical industry in terms of the amount of capital being spent. The real world has provided him with an opportunity that fits his need to reduce capital. Those opportunities didn't exist six months ago," said Huchois.

[Associated Press; By COLLEEN BARRY]

AP writer Melissa Eddy contributed to this report from Berlin

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