More U.S. Taxpayer Help For Fiat

DETROIT -- The federal government already paved the way for Italy's Fiat to take control of Chrysler back in June, when it orchestrated the carmaker's exit from bankruptcy. Now the state of Michigan is greasing the skids with more taxpayer money.Michigan officials Tuesday approved a $4.6 million tax credit to help convince Chrysler (or really, Fiat ( FIATY.PK - news - people ), which owns 20% and is calling the shots at the U.S. automaker) to build small, fuel-efficient engines at a practically new engine factory in Michigan. The deal was meant to dissuade the carmaker from choosing a competing site in Mexico. (The village of Dundee is likely to offer its own tax break in support of the project too.)It really wasn't much of a contest. Fiat already had an incentive to build its four-cylinder engines here: another free helping of Chrysler stock.Fiat didn't pay a single dollar for the 20% stake in Chrysler it received in June. (A UAW trust fund owns 55%, and U.S. and Canadian taxpayers own 10%.) All Fiat promised to do was contribute technology and powertrains for small- and medium-size cars so Chrysler could develop a more fuel-efficient lineup. The deal crafted by the Obama administration's automotive task force included some come-ons to give Fiat an even bigger stake. The Italian carmaker could boost its stake in five percentage point increments, to 35%, once it achieved certain government-mandated milestones.No big surprise: The first milestone is building a fuel-ef...
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Power At The Nano Scale

Scientists can be cruel to one another. In his early years building A123 Systems, company co-founder Yet-Ming Chiang faced skepticism from others in his field about his approach to making a more powerful lithium ion battery. In 2001 and 2002 Chiang was putting in 80- to 100-hour weeks trying to convince naysayers he could make a battery that would sell. "In the early papers we published, people even questioned whether we did the measurements right," says Chiang.Few are now questioning his math. A123's breakthrough design, achieved by manipulating materials at the nano scale, yielded a battery that lasts longer than traditional lithium ion batteries; weighs less per kilowatt of power; can deliver short, powerful bursts of energy; and recharges quickly. Black & Decker ( BDK - news - people ) began selling a line of cordless DeWalt power tools in 2006 with A123's battery and since then the company has inked partnerships with General Motors and General Electric ( GE - news - people ). Daimler is using A123 batteries in its city buses throughout the U.S. In September, A123 held a public offering, raising $378 million. The firm now employs more than 1,600 people and has a market c...
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Ford Learns The Price Of Solvency

In plant-by-plant voting over the last few weeks a large majority of the 41,000 United Auto Workers (UAW) workers employed by the Ford Motor Company voted to reject modifications to their collective bargaining agreement negotiated by their own national union. The modifications were designed to bring the Ford-UAW agreement into parity with concessions the UAW gave to GM and Chrysler as part of their government-brokered bankruptcies. They included a wage freeze for entry-level workers until the 2015 contract, a commitment to binding arbitration with no strikes until 2015, and other concessions. In return Ford promised to keep work in various UAW plants in the U.S., and to pay a $1,000-per-worker bonus. This rejection also ends for now the UAW’s long-standing commitment to "pattern" bargaining, meaning that the Detroit 3 all get the same labor agreement. Not since Chrysler's near bankruptcy and federal loan guarantees in the late 1970s has this pattern been broken.Instead of the 50% required for approval, some UAW locals rejected the agreement overwhelmingly; in the Ford truck plant in Kansas City it was defeated with 92% opposed. There is a sense in the UAW rank and file that they have given enough, and that Ford doesn't need any more help. It is true that, coming off the Cash for Clunkers" incentives, Ford's North American auto business made $357 million in the third quarter, but this was their first positive result since early 2005. Ford also remains encumbered by interest payments to its creditors, on which GM and Chrysler simply defaulted. Thus, despite the efforts of the UAW leadership, we have the irony that the one American car company that has so far avoided bankruptcy will be penalized for its solvency.Of all the losers in the automotive crisis, the working UAW members have lost the least. The most egregious of the excesses have been eliminated; there is, for example, no more "Jobs Bank," where thousands of UAW workers earned their pay while playing cards in the plant ca...
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Chrysler broke even in September

NEW YORK (CNNMoney.com) -- Chrysler Group broke even in September and ended its first post-bankruptcy quarter with more cash on hand than it had at the beginning of the period, the company's new boss said Wednesday.Sergio Marchionne, the head of the Fiat Group, made the announcement at the beginning of a full-day presentation in Detroit about the Italian automaker's plans to turnaround Chrysler. Marchionne became the new Chrysler CEO when Fiat took a controlling stake in the company in June. Chrysler is not publicly traded (although Fiat (FIATY) is) and this is the first financial results of any kind that the company has released since filing for bankruptcy.Marchionne said Chrysler had $5.7 billion on hand at the end of September, up from $4 billion at the end of June. He did not detail where the increase in cash came from. The comments come two days after rival Ford Motor Co. (F, Fortune 500) reported a nearly $1 billion profit in the third quarter, bucking expectations of another loss. But Ford sales have been much stronger than those at Chrysler.Chrysler emerged from bankruptcy on June 10. Fiat holds a 20% stake in the company, and that is due to eventually rise to a 35% stake. U.S. taxpayers own an 8% stake, while trust funds set up to pay for Chrysler retirees' health care coverage control 55% of the stock.Marchionne said financial targets for Chrysler are being met, despite weak sales. He also said the new product line coming from Fiat will make a significant change in the offerings U.S. customers will see in Chrysler, Dodge and Jeep showrooms. He expects 75% of the product line will be changed within the next 14 months."That's the plan. It's comprehensive. It's ambit...
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Is Fiat Helping Chrysler--Or Fiat?

Fiat's proposals for Chrysler appear more to be aimed at helping Fiat rather than at saving Chrysler.That, at least, is the impression from looking at the information that has leaked out before the Italian company's formal announcement of its plans on Wednesday. Maybe there are things we've missed or gotten wrong, but right now it appears that Fiat ( FIATY.PK - news - people ) thinks it must burn down the village in order to save it.The survival plans will be revealed by Sergio Marchionne, chief executive of Fiat and now Chrysler too. He led Fiat's turnaround but has said that the Italian maker of low-priced cars needs millions more sales to survive in today's market. And Fiat officials have said he wanted to get back into the American market by manufacturing here. All this came before the U.S. government ordered Chrysler to give control to Fiat--plus a 20% stake to start--without any payment from Fiat.It appears that this deal will give Fiat a major objective: a manufacturing base in North America. The company plans to build its small 500 model in Chrysler's Mexican plant and apparently plans to use another plant here to build Alfa Romeo models. In addition, Fiat apparently plans to use Chrysler's rear-drive platform, used on the Chrysler 300 and Dodge Charger models, to build larger, higher-priced cars, maybe Alfas, in a European plant.And what does Chrysler get? Not much. Still no Fiat money as far as we know. The Dodge car brand will eventually be reduced to some niche models, and, apparently, the Dodge Grand Caravan minivan, the best-selling minivan in the world, w...
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