Fiat controls Chrysler, but can't get its cash stash
Updated 2012-08-05 2:36 PM
By Brent Snavely and Chris Woodyard, USA TODAY and the
Detroit Free Press
CAPTION
AP
Even though Italy's Fiat controls Chrysler and is facing losses in Europe, it can't get its mitts on the Detroit maker's growing cash stockpile, CEO Sergio Marchionne said last week."Firewalls are up; (Fiat) can't get to it," Marchionne said during a conference call with analysts.
Chrysler has cash and credit worth $13 billion, an impressive stockpile. Chrysler and Fiat, the Italian automaker, are both run by Marchionne. But Chrysler is under federal rules laid down as a condition of the government bailout that saved it.
Fiat can keep the profits, however. During the second quarter, Fiat earned $440 million. But without Chrysler's profit, that would been a loss of $302 million.
Marchionne is adding shifts and workers at Chrysler's U.S. plants to meet growing demand. Chrysler is spending more on product development and upgrading plants -- $1.9 billion so far this year, up from $1.2 billion for the same period in 2011.
By contrast, Fiat has cut capital expenditures by about $612 million this year, delayed the launch of a new subcompact for Europe and extended the traditional summer shutdown of a plant in Pomigliano, Italy, by two weeks.
Despite those actions Fiat, by itself, spent about $245 million more than it took in during the second quarter. While that is a major improvement over the more-than $1.7 billion of cash it burned in the first quarter, analysts asked Tuesday about Fiat's remaining cash and credit.
Marchionne said Fiat ended the quarter with plenty of cash and available credit -- $14.9 billion, which is slightly more than Chrysler's cash and credit.
"We have an obligation to ensure that we deal with market uncertainty, and there is a high level of market uncertainty," Marchionne said.
