Chrysler may survive by FIAT

By J.S. Smith

01.19.2009

 

Based on reports from Reuters and The Wall Street Journal, FIAT and Chrysler are in talks to form an alliance. In fact, the WSJ used the words “likely alliance” to describe the talks.

Thus far, reports have not used the term merger—and certainly not “merger of equals.” These days, FIAT, once enfeebled and towered over by the colossal American pentastar, is clearly more equal than others, to steal a phrase from Eric Blair. Reuters used the term “strategic partnership.” According to the Canadian Press, FIAT is interested in “creating a partnership that would allow the Italian auto company to build and sell its small cars in the United States.”

Although early, this certainly seems like a good partnership. FIAT makes some of the best small cars in the world and has a global presence—except in the USA. It also makes great sporty executive cars—Alfa Romeo and Lancia are in its stable. It lacks full size cars, trucks and SUVs. And it lacks dealers in North America.

Chrysler, on the other hand, lacks small cars and has no competitive small or mid-size vehicles. Only its rear-drive cars are competitive, and even the hallowed 300/Charger are getting a bit hoary. What it has is a fine stable of trucks and SUVs, among the best in the world. And it has excess plant capacity that FIAT could use to build stuff in the NAFTA zone, insulating it from exchange-rate worries—a problem that may not affect its Maseratis, but which could make selling 500s at a profit quite problematic. Chrysler also has dealers—too many, to be certain—that are in desperate need of good small cars.

As an enthusiast, I am tentatively excited about this prospect. I like FIAT’s small cars and cut-rate Pandas, and cutesy 500s would be very welcome. As a Michigander, I would love to be able to buy a made-in-Michigan Panda-clone or 500. Furthermore, Chrysler could either make Lancias and Alfas, or use their designs as the basis for good compact and mid-size models.

Aside from financing, I am curious as to how the partnership would work in terms of branding. Some models have to be FIATs—the 500, for instance. But what about the Panda? If it’s sold here, it would have to be built here. Otherwise, the Euro exchange rate would make it too costly, even factoring in cheap Polish labor. But would it be a FIAT?

Perhaps it would be best to use the FIAT name for the superminis and sub-compacts, which are what FIAT specializes in. Although the FIAT brand means nothing to most Americans—and those for whom it has meaning remember it as a “Fix it again, Tony” quality-control nightmare—Dodge and Chrysler don’t have any cache at marketing truly small cars. FIAT may, like the Koreans, find initial acceptance with small, affordable cars.

But what about Lancia and Alfa-Romeo? Outside of a small number of gearheads, Lancia and Alfa-Romeo mean nothing to American buyers. Their offerings, if built here, could be used to rejuvenate the moribund Mopar car line-up. Dodge could be used for compacts and low-trim mid-size cars, Chrysler for upscale mid-size cars. It may make sense to market Alfa’s sports cars—which have a good reputation among the enthusiasts who would comprise their main market—under their own name and their sedans under American names. This is particularly true for Lancia, which hasn’t been sold in the US for 27 years, and was never sole in other than miniscule numbers.

At this point, little is known. What we do know is that it seems like a good fit in terms of product. We also know that Chrysler cannot survive long without a foreign benefactor. I hope this works out.

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Author: J.S. Smith

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6 Comments

  1. As both a Chrysler and a Fiat enthusiast, this prospect is exciting. I’ve owned three Fiats over the years and never found any of them to be the maintenance nightmares they were rumored to be. With proper upkeep, they were reliable and fun-to-drive cars. I was quite sad to see them withdrawn from the U.S. market. I’ve also owned five Chrysler products and have found them all to be extremely dependable. Without knowing the financial details, this sounds like a great marriage. Hope it pans out.

  2. An irony, is Alan Mullaly recently mentionned then he wanted to bring the Ford Ka which the 2nd-gen is made in joint-venture with….Fiat, by using the 500 platform. If that possibility came to fruition, we could have a 500 based car at both Dodge and Ford dealers!

    Also the Suzuki SX4 was done in a joint-venture with Fiat who sold there in Europe as the Fiat Sedici, will Dodge could have its own version? http://en.wikipedia.org/wiki/Suzuki_SX4

    Also, could we imagine Alfa-Romeo using the upcoming Chrysler “Phoenix” V6 engines to replace the current V6 they buy currently from GM-Holden? (who replaced the Alfa V6 due to the costly modifications they have to do to face the current European emissions standards.)

    We often expected Carlos Ghosn to get a step in Chrysler, but now will he go to a biding war against Fiat or check an eye on someone else…mainly GM? (We could imagine another scenario but it’s a very little and slim chance to happen is a Chrysler-Fiat-Renault-Nissan “alliance”)

  3. Autoblog (sorry!) showed a gallery of the current Fiat product lineup (save Alfa, Lancia and of course Ferrari and Maserati) that might find its way here. To my eye, there were only two or three candidates that might attract American buyers, as the lineup was heavily skewed to the small, hatchback side of the vehicle spectrum. Anyway, whichever models Fiat chooses to sell here will require redesigns to meet US regulations, and that takes time. Will Chrysler be able to limp along in the interim?

    Even if you include niche players Alfa Romeo and Lancia, there aren’t enough mainstream models to support this alliance, much less 1000s of dealers. Obviously, Chrysler has epicly failed here (I’m looking at you, Sebring), though if it can bring the gorgeous 200C to life –LIKE RIGHT NOW!– that might make a difference. It needs to seriously clean up its end of the showroom. It also needs to weed out dealers. That also takes money that Chrysler doesn’t have.

    Bottom line: Cerberus either will have to increase its cash investment in Chrysler (it can; it just doesn’t want to) or Nardelli will be finding himself in front of the US Senate again, asking for for money. They need time to make this work and time costs money.

  4. So now Fiats will have crappy interiors?

    Fiat can sell more Jeeps outside the US than Chrysler so that’s a huge plus. They could follow Cerberus’ lead and just let the rest of Chrysler die an ugly death.

  5. I had a Fiat 128 sedan that I loved even though the electrical system kept going bad. If I could have a car that I loved that much and was also reliable, then sign me up!

  6. This is a turnaround plan? Now that the details have been released (Fiat gets a 35% stake in Chrysler in exchange for technology and access to overseas markets — absolutely no cash), it’s pretty clear that Chrysler’s strategy is to count on the US government to keep them afloat indefinitely, using this “alliance” and the cars it’ll bring (which are probably at least a couple years away) as justification for further loans. And now, even if they succeed, it will likely be as a majority Italian-owned company. Amazing. I’m not even clear what we’re supposed to be saving here anymore.

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