Finance Minister Jim Flaherty says he's more concerned about the outlook for General Motors Corp. GM-N than Chrysler because GM lacks a strong partner.
In an interview at the close of the Group of Eight finance ministers' meeting in the southern Italian city of Lecce, Mr. Flaherty said Chrysler's partnership with the Italian auto maker Fiat, led by Italian-Canadian chief executive officer Sergio Marchionne, will give it a restructuring advantage.
“The fact that Sergio Marchionne is going in as CEO of Chrysler makes a difference,” he said.
“He will drive cultural change at Chrysler. GM is more of a concern because there isn't a white knight there.”
Both GM and Chrysler were propped up with billions of dollars in loans from the Canadian, Ontario and U.S. governments. Chrysler emerged from 42 days in Chapter 11 bankruptcy proceedings in the United States a few days ago and is now under the management control of Fiat, which has a 20-per-cent stake in the company and has the right to earn more.
In a rescue attempt
modelled on the one that turned Fiat around five years ago, Mr. Marchionne immediately announced a management shakeup at Chrysler, naming 23 executives, some from Fiat, who will report to him.
The Canadian government, which will share a 2-per-cent ownership of Chrysler with the Ontario government, this week intends to appoint a director to the new Chrysler, ahead of the company's first post-bankruptcy board meeting.
Mr. Flaherty said Ottawa had not yet picked the final candidate as of Saturday. “We have a preliminary list and we're getting close,” he said.
Speculation is that the director is likely to be a former chief executive officer who is not from the auto industry. Mr. Flaherty said he talked to former Manulife Financial CEO Dominic D'Alessandro, but “he wants to take some time off.”
The Canadian and Ontario governments, which together are contributing $9.5-billion (U.S.) to GM, and will own 12 per cent of that company, have the right to appoint one GM director. But the need to find a board candidate quickly is less pressing, because GM is not expected to shed its Chapter 11 status before the end of the summer.
“We need Canadian [board] representatives who are tough-minded, culture change advocates,” Mr. Flaherty said. “GM is a company that, in one generation, went from 40-per-cent market share to less than 20 per cent. This is a major turnaround effort.”
Canada's support for another automotive deal – the proposed takeover of GM's German division, Opel, by a group led by Canada's Magna International Inc. MG.A-T and Russia's Sberbank – played a minor role in the G8 Lecce meeting.
On Saturday, German Finance Minister Peer Steinbrueck said both the Canadian and Russian governments back the sales effort. “I have spoken about [Opel] with [Russian Finance Minister Alexei] Kudrin and also with [Mr.] Flaherty,” he told journalists. “Both have made clear that they welcome the deal and that they will support it as much as possible.”
Mr. Flaherty confirmed that he vouched for Magna's credibility, an auto parts company better known in North America than in Europe, in a phone call with Mr. Steinbrueck.
“I told him that Magna's reputation is strong, that it's a global company, innovative, reliable and would be an asset in the car business.”
If the deal goes through, Magna would own 20 per cent of Opel, which is bleeding cash and has about 55,000 employees across Europe. Sberbank, controlled by the Russian government, would own 35 per cent. GM intends to have an equal amount and 10 per cent would be put aside for Opel employees.
The German government picked the Magna-Sberbank group as the preferred bidder for Opel, beating Fiat, which had wanted to merge the Fiat and Opel auto businesses and launch new models on shared platforms.
But the German government is hedging its bets in case the Canadians and Russians can't seal the deal. Last week, Karl-Theodor zu Guttenberg, the German Economy Minister, said at news conference in Berlin that “We are still in contact with other investors.”
One of them, he said, is Chinese auto maker Beijing Automotive Industry Corp. (BAIC). He also said he believes Fiat is still interested in Opel. Fiat recently said it's still keen to merge with Opel, but is focused entirely on repairing Chrysler at the moment.
