GM bailout used in Brazil, Fiat wants bailout money to buy Chrysler

Date: Thursday, January 22, 2009 1:01 AM
depends on bailout

<<<<< JOB DESTRUCTION NEWSLETTER No. 1961 -- 1/21/2009 >>>>>

GM will use some of its bailout money to invest in Brazil. The article below
didn't mention Ford, but it did link to a video that shows how Ford is
building cars in Brazil with equipment that is supposed to be the most
advanced in the world. The UAW is side swiped at the end of the video -- a
narrator says that such a modern plant can't be built in the USA because the
unions are opposed to innovation. Ouch!

http://info.detnews.com/video/index.cfm?id=1189
Ford's most advanced assembly plant operates in rural Brazil

Meanwhile, Fiat of Italy announced that they are willing to save Chrysler by
buying 35% of the company. Salvation comes at a price though -- for U.S.
taxpayers! Fiat is making the deal contingent on the U.S. coughing up an
additional $3 billion more dollars in bailout money on top of the $4 billion
that Congress has already agreed to give them.

+++++++++++++++++++++++++++++++++++++++++++++++++++

http://www.laht.com/article.asp?ArticleId=320909&CategoryId=12396

General Motors to Invest $1 Billion in Brazil Operations -- Money to Come from
U.S. Rescue Program

By Russ Dallen
Latin American Herald Tribune staff

SAO PAULO -- General Motors plans to invest $1 billion in Brazil to avoid the
kind of problems the U.S. automaker is facing in its home market, said the
beleaguered car maker.

According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding
will come from the package of financial aid that the manufacturer will receive
from the U.S. government and will be used to "complete the renovation of the
line of products up to 2012."

"It wouldn't be logical to withdraw the investment from where we're growing,
and our goal is to protect investments in emerging markets," he said in a
statement published by the business daily Gazeta Mercantil.

Meanwhile, he cut the company's revenue forecast for this year by 14% to
$9.5 billion from $11 billion, as the economic crisis began to cause rapid
slowdowns in sales.

GM already announced three programs of paid leave, and Ardila added that GM
Brazil "is going to wait and see how the market behaves in order to know what
decision to take" with regard to possible layoffs.

For Ardila, the injection in Brazil's automobile sector of 8 billion reais
($3.51 billion) recently announced by the federal and state governments of Sao
Paulo "has already begun to revive sales," which fell by 12% in October.

The executive said that the company will operate a "conservative" scenario in
2009 with an estimated production of 2.6 million units, and another more
"optimistic" that contemplates sales of 2.9 million.

This year sales will reach 2.85 million vehicles, which represents a growth of
15% over last year.

+++++++++++++++++++++++++++++++++++++++++++++++++++

http://online.wsj.com/article/SB123245224622497573.html

JANUARY 21, 2009, 4:54 P.M. ET Chrysler-Fiat Deal Needs U.S. Loans Article

more in Europe ;By JOHN D. STOLL and STACY MEICHTRY Chrysler LLC has found an

international partner in Fiat SpA but the auto maker isn't out of the woods,
mainly because the deal is contingent on Chrysler getting $3 billion in
additional government loans, said people familiar with the pact.
On Tuesday, Chrysler and Italy's Fiat confirmed they had reached an agreement
on an alliance that would give Fiat a 35% stake in the American company. Fiat
would not put any cash into Chrysler but would provide technology and vehicles
that Chrysler could build and sell in the U.S.
View Slideshow

Fiat
The Panda could be one of the vehicles that Fiat sells in the U.S.
But the deal becomes binding only if Chrysler gets $3 billion more in
financial help from Washington, said the people familiar with the terms of the
agreement.
A Fiat spokesman declined to comment on the matter. Chrysler spokeswoman Shawn
Morgan wouldn't comment on Fiat's demand, but said Chrysler believes the $3
billion in loans are necessary for its viability.
Chrysler nearly ran out of money before the U.S. Treasury agreed to loan
Chrysler $4 billion last month. To meet the Treasury's terms for loans, and to
qualify for an additional $3 billion in aid, Chrysler needs to devise a plan
by Feb. 17 that shows how it intends to return to profitability.
While having Fiat as a partner helps Chrysler offer a longer-term vision, it
does little to ease its current cash crunch.
All its plants have been shut temporarily since before Christmas, and dealers
have been scaling back orders as sales declined steeply in the last few
months.
As a result, Chrysler is barely generating any revenue and will likely need
more government loans to keep going beyond the first quarter, people familiar
with Chrysler's operations said.

Analysis: Fiat Can't Save Chrysler

3:07
WSJ's Mean Street columnist Evan Newmark says despite Chrysler's recent
agreement with Fiat, the U.S. auto maker is still "destined for the dustbin."
He tells colleague Heidi Moore why he believes the company will eventually go
bankrupt.
More coverage
Chrysler's Jim Press Calls Fiat Deal a 'Piece of the Puzzle' Nardelli's Letter
to StakeholdersDeal Journal: Auto Makers Without BordersFiat CEO Builds Record
Of Bold Strategic MovesHeard: Who Wants to Pair Up With Fiat?Detroit Auto
Show: Build It or Bag It"Chrysler's got to get revenue going now," said one
supplier-company executive who works closely with the company. The Fiat
partnership "gives them a better story" to present while asking for additional
government help, but "doesn't change what's happening on the ground."
Under the terms of the deal, the Italian auto maker will be given three seats
on Chrysler's seven-seat board, two people familiar with the matter said.
If Fiat meets goals for improving Chrysler's operations within 12 months of
the agreement, Fiat would have the option of buying an additional 20% of
Chrysler for about $25 million, said people familiar with the matter.
Details of the goals weren't clear.
The price is a small sum for a 20% stake in company the size of Chrysler.
In 2007, private equity group Cerberus Capital Management LP was required to
put $5 billion in cash into Chrysler's auto operations as part of its
acquisition of the company from Daimler AG. In 2007, Chrysler had revenue of
about $60 billion.

For its part, Chrysler will be able to use Fiat's engine technologies and

develop new small cars for its Chrysler brand based on Fiat models, such as
the Fiat 500 subcompact.
But that won't give Chrysler much help now while it is struggling to keep
going. It typically takes auto makers a year or more to re-engineer European
vehicles to meet U.S. safety standards.
Chrysler could face tough questions about why taxpayers should put more money
into the company when neither its majority owner, Cerberus, nor its new
partner, Fiat, are doing the same.
Giving more loans to Chrysler is "somewhat troubling for all of us as U.S.
taxpayers, but for Chrysler itself, it may be the best outcome," Sen Bob
Corker (R., Tenn.) said Tuesday in a phone interview. He said he is concerned
that by investing more money in Chrysler, the government is enabling Cerberus,
which is privately held, to be in a better position to offload its stake in
the troubled auto maker.

Fiat
The tiny Fiat 500 is one of the vehicles that could be built at a Chrysler
plant.
"It's an interesting set of questions for American taxpayers, who in essence
could have $8.5 billion into Chrysler and the finance company when it is all
said and done," Sen. Corker said.
Chrysler declined to make executives available to discuss the Fiat alliance.
In a conference call with dealers, Vice Chairman Jim Press said the
partnership gives Chrysler not only "a lot of solutions to make us viable, but
also profitable," according to people who listened to the call.
"This is a piece of the puzzle that makes the whole thing work."
Cerberus acquired Chrysler in August 2007, and began talks to extend
Chrysler's reach beyond North America.
Chrysler reached agreement to build pickup trucks for Nissan Motor Co. and
sell a small car made by Nissan. Fiat emerged as a potential partner because
it wants to re-enter the U.S. market, which it left in 1982.

Jeff Bennett and Neal E. Boudette contributed to this article.

Write to John D. Stoll at john.stoll@wsj.com and Stacy Meichtry at
stacy.meichtry@wsj.com

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