Fiat Looks In Many Places for a U.S. Market Partner

By Brendan Moore

03.26.2008

Fiat is engaging in what can only be described as the speed-dating version of automotive joint venture activity, as they are energetically and simultaneously talking with Ford, BMW, Tata and Chrysler about either manufacturing capacity and/or sales networks in the United States.

Fiat wants to sell all of their brands again in North America, as opposed to just their very successful high-end sports cars – Maserati and Ferrari. In order to make money selling their less-expensive brands, Fiat has decided it will soon (2011 is the preferred date) need to start producing those cars in the United States; specifically Alfa Romeos and Fiat 500 models.

Therefore, Fiat is looking like mad for a partner with some extra production capacity that could manufacture Alfa Romeo models and the single Fiat 500 model on Fiat’s behalf. Both Ford and Chrysler have unused production capacity in spades. BMW is not in the same position of having spare production capacity as the domestic makes, but conceivably might have enough extra capacity to squeeze out the small production runs Fiat would require in the short-term. So the dating game has begun.

How does Tata fit into this? Well, Tata owns Jaguar and Land Rover as of this morning, and Fiat is thinking about having Tata churn out some premium rear-wheel-drive cars for Alfa Romeo, as well as possibly piggy-backing on the Jaguar dealer network in the U.S. and Canada in order to retail the Alfa Romeo cars without having to go through the expense, time and bother of setting up their own dealer network.

“I think I would be more than pleased to collaborate with Tata in terms of Jaguar/ Range Rover, if in fact it ends up being owned by them,” Sergio Marchionne, Fiat’s chief executive, told the Financial Times when asked about this possibility.

Pretty heady stuff for Tata. Welcome to the big leagues, guys.

On the U.S. manufacturing front, it’s a pretty safe bet that Ford would be very interested in keeping some of their production capacity running and would be amenable to a deal. Chrysler would be just as interested in reducing idle production capacity, but may not be as interested in partnering with Fiat. BMW? Well, their current production ability is pretty much spoken for, but their interest in doing a deal with Fiat may still be considerable for more strategic reasons.

This should be well worth watching.
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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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12 Comments

  1. Fix It Again, Tony!

    Fiats are junk

  2. For the love of all that is holy, please let BMW make the Alfa Romeos.

  3. brendan, what do you mean when you say BMW would be interested in a deal with fiat for more strategic reasons?
    mark, melbourne.

  4. I’ve always found it intriguing that Americans will refer to a car from 20 or 30 years ago made by the same manufacturer when assessing the quality of a 2008 model that they have never driven. A new Fiat hasn’t been sold in the U.S. for a very long time, and yet Americans all seem to have an opinion about the current Fiat, and it’s an opinion based on a very old benchmark. As if things couldn’t have possibly changed in the intervening decades. It’s comical, really.

  5. Mark, the possibility about BMW is a article from Motor Authority my guess is they want to keep the BMW plant running at maximun capacity with the sales of BMW who could be more slow during the recession.

    I would prefer Ford instead,since the current joint-venture with the Fiat 500/Ford Ka seems to be promising

  6. yes, very true. but what’s in it for BMW strategically? as you said, for ford, it is a simple issue of excess capacity, but not for BMW.

    and BMW being BMW, wouldn’t be interested unless there was a long term strategic outcome for them.

  7. Fiat could bring Lancia back in America. I’d rather see Lancias than Fiats.

  8. BMW has no excess capacity, but then again, they have no idle capacity. Their production abilities are matched to their sales numbers at this time.

    It has been speculated that BMW would be probably be happy to add production capacity now as long as they had a contract in hand to build Fiats (FWD) or Alfa Romeos (RWD) for the next couple of years.

    In a few years, BMW expects greater demand for their vehicles because demand for BMWs and MINIs keeps growing. There is also the wild card of BMW introducing a new brand in the next couple of years, as has been strongly rumoured.

    After a few years of building cars for someone else in the United States, BMW could take that U.S. production capacity and start using it to build their own cars at that time, thereby matching production to the projected increase in demand a few years from now. The timing would be perfect, and somone else (Fiat Group) would have paid the mortgage on the place until BMW needed it for their own production. BMW gets the U.S. production it needs (almost like turning on a light switch) at the exact time it needs it, Fiat gets the production they needed short-term until they can get their own factory up (or bought from one of the domestics), and both parties are very happy.

    At least that’s the scenario being put forth by many…

  9. Interesting point Brendan, however in a more long-term for BMW with more and more BMW on the road, aren’t they afraid then BMW became common, perhaps even too common? To the point of diluting the image of exclusivity almost to the point where we see a BMW, we all see them all. I don’t turns the head of everyone like before.

    And in future in around 15-20 years, we could see some old used BMW located in trailers park replacing some Camaros or being recycled into “hot-rod” like this model in the movie Back to the Future II, I don’t think then the current BMW owners will like these possibilities of the future fate of these BMW.

  10. Now that would be nice, old rotting BMWs, tireless, rusting away alongside trailer homes in those trailer parks! Now that would be some real trailer trash!

  11. Ford would be a much better partner for Fiat IMHO. Lower production costs, good quality, plenty of excess capacity, better transportation network, etc., etc.

  12. I wish Alfa would go back to rear wheel drive for their cars as soon as possible.

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