The Amazing Decline of Chrysler

A blog about business and economics.
Jan. 2 2014 10:50 AM

The Amazing Decline of Chrysler

You're Italian now!

Photo by Scott Olson/Getty Images

Italian automaker Fiat, which owns a 58.5 percent stake in Chrysler, reached an agreement over the holidays to purchase the 41.5 percent of the company that's owned by the United Auto Workers through a health care benefits fund. UAW will get $4.35 billion for its trouble, coming in the form of a $1.75 billion payment from Fiat, a $1.9 billion payment from Chrysler, and four subsequent annual $700 million payouts from Chrysler.

Relative to where Chrysler was four years ago on the brink of liquidation, this is a great happy ending for the brand and especially for the people who work there. But it's really striking what a collapse in the value of the enterprise this is relative to where things were in 1998 when Daimler-Benz bought Chrysler for $36 billion. That'd be just more than $51 billion in 2013 dollars. Cerberus Capital Management paid $7.4 billion for 80 percent of Chrysler back in 2007. And even though the UAW is getting a $4.35 billion payout, Fiat will only have put a total of $3.7 billion in cash into the two-phase acquisition since a lot of the money coming the UAW's way is cash flushed out of the enterprise. There are a few different ways you could look at the company's current valuation, but however you slice it, the decline over the past 15 years has been staggering in scale.


Moving forward, by becoming sole owner of Chrysler the Italian automaker will have the chance to build a real integrated company. In the short-term, that's going to mean Chrysler's profitable North American operation will subsidize Fiat's losses in Europe. The business case is that this cross-subsidy era will be temporary as the eurozone returns to growth and that integrated technology and dealership networks across the two companies will create long-term efficiencies. But for the immediate future it creates a situation in which the Fiat Group becomes even more indebted and Chrysler's cash will be managed with a view to a global enterprise rather than an American one.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



More Than Scottish Pride

Scotland’s referendum isn’t about nationalism. It’s about a system that failed, and a new generation looking to take a chance on itself. 

What Charles Barkley Gets Wrong About Corporal Punishment and Black Culture

Why Greenland’s “Dark Snow” Should Worry You

Three Talented Actresses in Three Terrible New Shows

Why Do Some People See the Virgin Mary in Grilled Cheese?

The science that explains the human need to find meaning in coincidences.


Happy Constitution Day!

Too bad it’s almost certainly unconstitutional.

Is It Worth Paying Full Price for the iPhone 6 to Keep Your Unlimited Data Plan? We Crunch the Numbers.

What to Do if You Literally Get a Bug in Your Ear

  News & Politics
Sept. 16 2014 7:03 PM Kansas Secretary of State Loses Battle to Protect Senator From Tough Race
Sept. 16 2014 4:16 PM The iPhone 6 Marks a Fresh Chance for Wireless Carriers to Kill Your Unlimited Data
The Eye
Sept. 16 2014 12:20 PM These Outdoor Cat Shelters Have More Style Than the Average Home
  Double X
The XX Factor
Sept. 15 2014 3:31 PM My Year As an Abortion Doula
  Slate Plus
Slate Plus Video
Sept. 16 2014 2:06 PM A Farewell From Emily Bazelon The former senior editor talks about her very first Slate pitch and says goodbye to the magazine.
Brow Beat
Sept. 16 2014 8:43 PM This 17-Minute Tribute to David Fincher Is the Perfect Preparation for Gone Girl
Future Tense
Sept. 16 2014 6:40 PM This iPhone 6 Feature Will Change Weather Forecasting
  Health & Science
Medical Examiner
Sept. 16 2014 11:46 PM The Scariest Campfire Story More horrifying than bears, snakes, or hook-handed killers.
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.