Catching Up with the Fiat-Peugeot Deal

With the General Motors (GMGMQ) bankruptcy taking center stage, and with Chrysler coming out of Chapter 11, it’s easy to forget about Fiat (and now Chrysler) CEO Sergio Marchionne’s insistence that for a global carmaker to survive, it must produce 5.5 million new cars annually.

That was why Marchionne wanted to get his hands on Opel, GM’s main European brand. Opel now looks as if it will go instead to Magna, a Canadian parts supplier (with financing from a Russian bank). So Marchionne has switched his efforts to partnering with French carmaker Peugeot.

Forbes summarizes the whole thing. But be sure you do what I’ve now trained myself to do with scrutinizing a Marchionne deal: read on until you find out where the real money is coming from. Because Fiat doesn’t have any. And neither does Peugeot. The French government does, however.

Marchionne has really pioneered a new form of bailout capitalism here. Reading between the lines, it’s not as if he cares what various finance pundits have to say about whether Fiat-Chrysler, Fiat-Opel, Fiat-Peugeot or any other permutation makes sense. Rather, Marchionne is setting himself up as a private-sector turnaround specialist who can essentially go to work for a government to save jobs and national pride.

True, there are good reasons, product-wise, for Fiat and Chrysler of Fiat and Peugeot to join forces. But it’s those taxpayer billions that seal the deal.