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Fiat to Chrysler: Cut Labor Costs or the Merger's Off

Italian automaker Fiat SpA will abandon its proposed merger with Chrysler LLC unless Chrysler's American and Canadian unions agree to substantial labor cost reductions by the end of the month, according to the Toronto Globe and Mail. In an exclusive interview with the Canadian newspaper, Fiat CEO Sergio Marchionne says the unions must match the lower labor costs of Japanese and German automakers in both the United States and Canada. "Absolutely we are prepared to walk. There is no doubt in my mind," he says. "We cannot commit to this organization unless we see light at the end of the tunnel." Both President Barack Obama's automotive task force and the government of Canada have given Chrysler until the end of the month to reach a partnership agreement with Fiat; if that agreement is not reached, both countries will cease any financial assistance and Chrysler will be forced into bankruptcy. Marchionne says that Fiat does not plant to put any money into Chrysler and instead will use technology transfers and a corporate overhaul modeled on the one that rescued Fiat several years ago to pull Chrysler out of its financial hole. He also suggests that he might offer himself up as CEO of a merged company and would close some of Chrysler's plants, although he does not specify locations.

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