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MANAGEMENT

JULY 15, 2011

Fiat Preps Chrysler Merger
CEO Marchionne Set to Appoint Single Management Team Over Both Companies
By JEFF BENNETT

Chrysler Group LLC and Fiat SpA, auto makers that bounced back from severe financial crises a few years ago, are preparing to rejoin the auto industry's top ranks through a merger that would have the financial and production heft to compete globally. Sergio Marchionne, European Pressphoto Agency chief executive Fiat and Chrysler CEO Sergio Marchionne shown last month in Monterotondo di Gavi, Italy, has said he wants a 'single line of command' over both. officer of Chrysler and Fiat, has begun selecting a single executive team to oversee the companies' business operations, said people familiar with the matter. Currently, Fiat and Chrysler each has its own team of 25 executives who separately report to Mr. Marchionne. Fiat recently completed agreements that will give it majority ownership of the Auburn Hills, Mich.-based auto maker. A single management team and consolidated financial reporting now makes a previously expected Chrysler public stock offering unlikely. The combined company would have the scale now only available to global giants, building autos and trucks in North and South America, Europe, and Asia. Together the two produced 3.58 million cars and light trucks last year and generated $81.47 billion in revenue.

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Fiat Preps Chrysler Merger - WSJ.com#printMode

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Neither Chrysler nor Fiat is a world leader on its own and any management distraction from the merger could generate quick financial problems. For potential pitfalls, one only has to look at Chrysler's nine-year merger with Germany's Daimler AG, which fell apart over the inability to cleanly meld German and American operating styles. Details of the management consolidation are likely to be discussed by Mr. Marchionne on July 26, these people said. Fiat will report financial results including Chrysler for the first time that day. Mr. Marchionne said this week a combined team would lead to a "single line of command" for both Fiat and Chrysler and an announcement could come within the next 10 days, a Fiat spokesman confirmed on Thursday. He declined to provide any further details. A Chrysler spokeswoman declined to comment. The meshing of the two auto makers takes Chrysler from a North America automotive player to a global competitor with access to production plants and markets such as Latin America, Russia and China. Fiat, in turn, gains wide access to the North American market, which it re-entered this year after more than a 25-year absence. Together, Mr. Marchionne has said, the two companies should be able to produce more than six million vehicles a year by 2014—almost twice the number they made in 2010 with more than $141 billion in revenue and an annual income of as much as $7 billion. The combined business would be on a sales par with Honda Motor Co., which last year sold 3.56 million vehicles globally. Its profit and revenue would place it a distant sixth among the world's largest auto makers. Third-placed Ford Motor Co., for example, finished 2010 with $6.6 billion in profit and revenue of $120.9 billion. Mr. Marchionne earlier this year said technically there would be no reason for him to take the company public if he was able to mold the companies and buy out Chrysler's remaining shareholders. He since cut a deal to buy the U.S. Treasury's remaining shares, is in talks with Canada on its stake and may soon approach the United Auto Workers' health trust fund. All were given stakes as part of the bankruptcy. He has grown more adamant about consolidating management and running the two auto makers as one since taking over Chrysler's daily operations during its 2009 bankruptcy. At the time, Fiat was portrayed as a partner who would share technology and help get Chrysler back on its feet while operating the company independently. There was also talk Chrysler would conduct its own initial public offering. But bolstered by the success of Chrysler's financial turnaround and support from the United Auto Workers union, Mr. Marchionne is focusing on cost-savings and the ability to move production to different plants around the world to fit the appropriate market. For example, Mr. Marchionne is already mulling a plan to build a Maserati style sport-utility vehicle at Chrysler's Detroit assembly plant. Chrysler executives have said they may consider building vehicles—such as Jeeps—at a plant in China Fiat is building with Guangzhou Auto Group Co. "To me, when you talk to me about Chrysler or Fiat, I don't distinguish," Mr. Marchionne said in an interview this year, adding that they are "joined at the hip." Write to Jeff Bennett at jeff.bennett@dowjones.com

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http://online.wsj.com/article/SB10001424052702304521304576446131124829422.html?K... 8/21/2011

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