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Chrysler Allies With Fiat

hpmctorquehpmctorque Posts: 4,227
This is an interesting and exciting development, but it will also be controversial, as two less-than-major players with less-than-stellar reputations must prove that, together, they can compete in this tough market.

The following is from today's Detroit Free Press...

"Fiat and Chrysler sign alliance plan
ROME
1/20/2009 4:48:11 AM
By ARIEL DAVID

Fiat and Chrysler said Tuesday they have signed a nonbinding agreement for a strategic alliance that would give the Italian auto empire a 35-percent stake in the troubled U.S. carmaker.

The two companies said in a joint statement they would share technologies and vehicle platforms. Under the proposed alliance, Fiat would not invest cash in Chrysler but would provide access to its successful small-car platforms, as well as to its more environmentally friendly and fuel-efficient engines.

The statement said Fiat would take an 'initial' 35-percent stake, suggesting the deal may be broadened. It stressed that under the agreement the company is not committing to funding Chrysler in the future.

For Chrysler, based in Auburn Hills, Michigan, the deal would mean breaking out of the North American market and gaining access to more competitive products.

'A Chrysler-Fiat partnership is a great fit as it creates the potential for a powerful, new global competitor, offering Chrysler a number of strategic benefits, including access to products that complement our current portfolio (and) a distribution network outside North America,' said Bob Nardelli, Chairman and CEO of Chrysler LLC.

Fiat Group SpA, which makes Fiat, Lancia and Alfa Romeo vehicles, is trying to re-enter the United States market. The company has expressed interest in bringing its Fiat 500 compact car and the Alfa Romeo brand to the U.S.

The alliance is subject to a review of company finances and regulatory approvals, including by the U.S. Treasury Department, which last week announced an emergency bridge loan for Chrysler, which analysts say will have difficulty surviving as an independent company.

'This initiative represents a key milestone in the rapidly changing landscape of the automotive sector,' said Fiat CEO Sergio Marchionne.

'The agreement will offer both companies opportunities to gain access to most relevant automotive markets with innovative and environmentally friendly product offering, a field in which Fiat is a recognized world leader, while benefiting from additional cost synergies,' he said.

Chrysler, which is 80.1 percent owned by Cerberus Capital Management LLP, has been hurt by its reliance upon slow-selling trucks and sport utility vehicles and analysts have said it may not survive the year as an independent company despite receiving the $4 billion government loan.

The Treasury Department said Friday it will provide a $1.5 billion loan to Chrysler's financing arm, Chrysler Financial, and the automaker plans to offer zero-percent financing on several models and expand lending to car buyers with less than ideal credit.

Nardelli said the partnership would provide a return for taxpayers on the loan, 'securing long-term viability of Chrysler brands,' boosting consumer confidence and "preserving American jobs.' "
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Comments

  • hpmctorquehpmctorque Posts: 4,227
    I think this is a very significant development for the auto industry, and that this alliance has a decent chance of succeeding. Most would agree that Chrysler could not turn around on its own. Fiat's CEO Sergio Marchionne has proven himself to be a very capable manager, as evidenced by Fiat's (still-in-progress) turnaround.

    I think this alliance will benefit American motorists by providing new fuel and space efficient, yet fun-to-drive choices.

    I also think this deal make more business sense than a GM-Chrysler merger.
  • steverstever Viva Las CrucesPosts: 41,252
    I like it.

    Here's some more links from Edmunds.

    It's Official: Chrysler gets hitched to Fiat

    Chrysler, Fiat Sign Global Strategic Alliance Deal

    There's no news yet as to possible management changes at the companies.

    Moderator
    Minivan fan. Feel free to message or email me - stever@edmunds.com.

  • berriberri Posts: 4,234
    Let's see, Mopar has consistently low quality ratings and now they get a new name - is it "Fix It Again Tony" or "Fix It All The Time"?
  • andre1969andre1969 Posts: 22,050
    With any luck, it might not be so bad. Wasn't Renault able to help get Nissan straightened out a few years back?
  • nippononlynippononly SF Bay AreaPosts: 12,693
    about using Fiat's network in Europe to increase Chrysler's global sales, but I am raising my BS flag on that one.

    As for domestic Chrysler sales, Chrysler will get several smaller and more fuel-efficient models out of the deal. Will they be called Chryslers or will they be Fiats sold at Chrysler dealers? Or some new brand name?

    This will ultimately prove to be very similar to the Daimler deal for Chrysler, in only worsening its future prospects I'm sure. But I'm not totally against it if it provides Fiat with a means of getting back into the American market, at least with Alfa.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • hpmctorquehpmctorque Posts: 4,227
    There's a market for certain Jeep models in Europe, especially when equipped with diesel engines. Fiat is recognized in Europe for having excellent diesel technology. This could benefit Chrysler.

    I could also envision a diesel version of the Chrysler 300 for the European and U.S. market.
  • hpmctorquehpmctorque Posts: 4,227
    The Chrysler-Fiat (or Fiat-Chrysler?) alliance isn't quite a done deal, since it's not binding yet. However, it makes strategic sense for both companies, Chrysler dealers, and American workers.

    There's little product overlap, Chrysler would get much needed new product, while Fiat would gain a ready made distribution network that would be grateful for the opportunity to remain alive. Additionally, Chrysler would get expanded distribution for its Jeep models, minivans, and rear wheel Drive cars in Europe. Further, as mentioned in my previous message, Fiat's diesel engines and technology could be very useful to Chrysler.

    A good strategic fit is hardly a guarantee that Chrysler will survive, or Fiat, for that matter. However, this deal offers a "YES, WE CAN!" type of hope just when Chrysler was given up for dead by many, and at a time when hope is scarce in the auto industry.

    Another consideration is that this alliance, if it comes to pass and works well, could eventually be expanded to include one or more other automakers. I'm sure Peugeot-Citroen, just to name one possibility, is taking note of this deal.
  • This whole story would be better set in "news of the weird". There doesn't seem to be much of an upside for Chrysler except access to a small car platform. Does anyone remember the Strada? I hope Fiats have come a long way since then!
  • Would be nice if they would come out with something that won't stall when you go somewhere or do away with their secuity systems I have read a whole lot of bad review on the Town and Country and i have to agree I have one that won't start because you can't reset the security alarm.
  • lokkilokki Posts: 1,200
    The upside for Chrysler is easy to see. It will be a year or two before Fiat has products that can be sold in the U.S. market (at least). In the meantime, Chrysler has an excuse to ask congress for funds to continue operations until the Italian cavalry arrives.

    It's a plausible plan for viability that they don't otherwise possess... a promise of new product that they can't afford to design themselves.

    It may not WORK, but it will sell to congress, I think.
  • michaellnomichaellno Posts: 4,300
    ...Italian cavalry arrives.

    Oh, man, that is funny. Unintentional, perhaps, but still funny.

    However, I do agree with you on your first point. It's not like Fiat can start selling 500's and Bravo's in the next few months at your local Chrysler dealerships, and it will take even longer to update the factories here in the US to build Fiats locally.

    The other side of the coin, though, is that Jeeps and minivans were built in Europe at the old DC factories - does Chrysler still retain ownership, or did they go back to Daimler when the company was sold to Cerebus?

    I was looking at the Fiat UK website ... here's what they offer:

    500 - Halo car; would compete well with the Mini.

    Bravo - The "large" small car that Chrysler can't seem to get right. Spicy alternative to the Golf or Mazda 3.

    Grande Punto - Seems to slot between the Panda and the Bravo in size, but marketed as more of a sporty alternative to either.

    Panda - A worthy competitor to the Fit or Yaris.

    Sedici - Twin to the Suzuki SX4 crossover - makes me wonder if the partnership with Suzuki will continue.

    Multipla - Segment buster when it was first introduced, but now would compete with the Mazda 5 and the Kia Rondo. Ugly as sin, but I believe that the small minivan market could use something like this.

    Doblo - A slightly larger people carrier; if Chrysler decided to drop the GC, this might serve well.

    Qubo - A small van, used as both a commercial vehicle and a Honda Element-like funky people carrier. If Ford is federalizing the Transit for the US, it makes sense for Fiat/Chrysler to offer this as well.

    What's interesting about the whole deal is that no money is changing hands -- did Cerebus just give Fiat 35% of the company? Tells you how much Cerebus thinks it's worth.
  • berriberri Posts: 4,234
    Downside is Chrylser doesn't get any money from Fiat. That may also complicate congressional stuff.
  • kernickkernick Posts: 4,072
    :surprise: The upside for Chrysler is easy to see. It will be a year or two before Fiat has products that can be sold in the U.S. market (at least). It may not WORK, but it will sell to congress, I think.

    Uuugggghhhhhhh! Do you know how much money Chrysler could lose, that the taxpayer will have to cover, during that time?!! And for what? What benefit would a Chrysler-Fiat be to anyone except those who own or work at Chrysler-Fiat? The U.S. already has Priuses, Insight, Smart, and Ford has the new Fiesta, amongst others.

    I don't want to shovel $30B into Chrysler to keep it afloat, so that 50K people can buy a Fiat a few years from now!!! :mad:

    Also the European market is severely declining due to the recession, and I doubt it would be good for anyone to introduce new brands in Europe.

    The only answer to the current global vehicle market - meaning too many brands and too much production, is for several to go out of business. I don't see it as very logical for each government to prop up their companies, to pay for workers and vehicles no one wants.
  • dtownfbdtownfb Posts: 2,915
    Not sure Nissan is exactly straightened out.

    Owner of a 2004 Quest
  • fezofezo Posts: 9,383
    Does anyone remember the Strada?

    Yeah. Kind of like the VW Rabbit but without the legendary Volkswagen reliability. :sick:
  • berriberri Posts: 4,234
    Fiat made some nice looking sports cars in the 60/70's like the 124 and 128, but you needed a good mechanic. The Strada - now you've got a good memory!
  • fezofezo Posts: 9,383
    Fiats back the did look good. Mechanically, well you wanted to make sure you had a mechanic who understood Italian cars.

    I was racking my brain for the name Strada until zoomzoom brought it up but the car itself was stuck in my head. I looked at one when they were new. The dealer sold Fiats, Mazda and I think Mercedes at the time. Later he added Buicks.

    The good news is i didn't buy the Strada. The bad news is I bought the Rabbit.
  • nippononlynippononly SF Bay AreaPosts: 12,693
    Chrysler LLC and Fiat S.p.A. have little in the way of engine and transmission technology that can be transplanted into each other’s vehicles, analysts say--at least not right away.

    They are talking about two years before any fruit of this alliance would show up. Two years is an awful long time for Chrysler in its present condition. Can you say BILLIONS more in American taxpayer life support by 2011?

    Because of the Dodge Ram pickup and Jeep SUVs, Chrysler relies mostly on beefy Hemi V8 engines and large-displacement V6s to power its high-volume vehicles. That dependence cost Chrysler in 2008....

    ......For now, Fiat probably would shun Chrysler’s pushrod Hemi V8s, said Andrew Close, senior technical research analyst at Global Insight in London. Fiat likely would turn to its Maserati unit for a lightweight, more technologically sophisticated overhead-cam V8 for Alfa Romeo sports cars and sedans, Close said.

    ......Fiat also has invested in technologies that save fuel and reduce emissions. One such technology is the dual-clutch transmission, which retains the fuel economy of a manual transmission while providing the convenience of an automatic.

    Another is the stop-start system, which automatically turns off the engine when the vehicle stops and quickly restarts it when the driver is ready to accelerate.

    Because of those investments, Fiat likely would not use Chrysler’s front-wheel-drive, Two Mode hybrid technology.

    ....Chrysler couldn’t profitably transplant Fiat’s new generation of four-cylinder diesel engines into its small vehicles because of high European production costs and the expense of getting the engines to meet stricter U.S. emissions standards, said Jim Hall, an analyst with 2953 Analytics in suburban Detroit.

    Chrysler also couldn’t profitably import two small four-cylinder gasoline engines--a 1.4-liter and a 1.8-liter--because of the high production costs stemming from building the engines in Europe.


    Yet despite all this there is supposedly some benefit to Chrysler in this "alliance"?? The article goes on to say that maybe in some distant future Chrysler could build Fiat-designed engines in the U.S., and use Fiat platforms as the basis for new models. How many years out is that? 5? 10?

    It alternates between "2011 is a realistic timeframe" and "someday this could provide benefit". Absurd. The truth is this alliance has less potential than the proposed one earlier between it and GM. And I wouldn't have thought that was possible. :sick:

    http://www.autoweek.com/article/20090121/FREE/901219987

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • hpmctorquehpmctorque Posts: 4,227
    From today's Detroit free Press...

    "Italian automaker Fiat, which is set to take an initial 35% stake in Chrysler, reported a 69.8% drop in fourth-quarter profit, to $232.38 million, blamed on a slump in demand in western Europe and the economic slowdown in South America. Full-year profit was down 16.2%, to about $2.24 billion."

    Profits were down, but, unlike our domestic automakers and others, including Toyota if I'm not mistaken, Fiat was profitable. I'm sure the margins are very fragile, but that's the state of the industry today.
  • hpmctorquehpmctorque Posts: 4,227
    ...the Fiat 500 could arrive in the U.S. in 2010.
  • nippononlynippononly SF Bay AreaPosts: 12,693
    Has Motor Trend EVER been right about a motor trend? I have yet to discover an example of it.

    I would love it if they were right on this one though.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • hpmctorquehpmctorque Posts: 4,227
    "EVER" is probably exaggerated, but I know what you mean about Motor Trend.

    Since you've indicated you like small, nimble, economical cars, does the Fiat 500 appeal to you?
  • nippononlynippononly SF Bay AreaPosts: 12,693
    Absolutely! But I have little faith it will arive in the United States as a result of these latest developments. If it does, I am sure it will be 5 years out at least.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • hpmctorquehpmctorque Posts: 4,227
    After pondering the details of the Chrysler-Fiat alliance, I've concluded that the old saying "the devil's in the details" applies to this situation. My emotional mind wants to hope that this will turn out to be a "little engine that could" story, and that this deal will beat the odds, but my rational mind thinks that the odds for success are considerably less than 50-50. Why? Money and time, time and money.

    Let's talk about money first. The consummation of the deal requires the U.S. government to kick in another $3 billion in bailout aid to Chrysler. That'll be a really tough sell in Washington. Second, lets look at the time factor. Even if Chrysler were given $3 billion, it's unlikely to tide the company over for the time it will take to get federalized Fiats or Fiat-badged Dodges and Chryslers into U.S. showrooms.

    A third, though less serious hurdle than the first two, is Fiat's legacy of unreliability in this country. I think this is surmountable, and that perception lags reality on this issue, since, like Volkswagen, Fiat has been competing with the leading Asian and European brands in Europe and around the world for many years now. Competition has forced Fiat to improve its quality and reliability significantly. Fiats may not yet be as reliable as Toyotas and Hondas, but they've got compensating attributes. They're economical, feisty, fun-to-drive cars, with interesting styling. I predict that competition will continue to exert pressure on Fiat to focus on improving quality and reliability, until these will cease to be significant issues.
  • kernickkernick Posts: 4,072
    http://www.usatoday.com/money/autos/2009-01-22-chrysler-fiat-merger-deal_N.htm

    I'll also petition my Congressmen to have Chrysler and/or Cerberus to return 35% or all of the loan $ ! :mad:
  • gogogodzillagogogodzilla MarylandPosts: 701
    Most car buyers in America are young enough that they have no real memory of ever seeing a Fiat. So I really doubt that the reliability issue will have much traction.

    (Although, it will affect the attitudes of previous Fiat owners.)
  • hpmctorquehpmctorque Posts: 4,227
    Between one thing and another, Chrysler and Fiat will likely need a Plan B for an alliance.
  • gagricegagrice San DiegoPosts: 29,043
    Although, it will affect the attitudes of previous Fiat owners

    FIAT still means Found in A Toilet to me. I spent way too much money maintaining a Fiat Spyder for my son while he was in HS. He just had to have that POC. I don't think I would every look at another FIAT.
  • hpmctorquehpmctorque Posts: 4,227
    From today's Detroit Free Press...

    "Don't dismiss Fiat so quickly
    Recent products show it has plenty to offer its would-be U.S. partner
    BY MARK PHELAN • FREE PRESS COLUMNIST • January 25, 2009

    Boxy, rusty, antiquated and unreliable. To understand how Fiat engineers and designers feel when Americans talk about their cars this way in discussions of their proposed alliance with Chrysler, Detroiters should remember how they felt when members of Congress dismissed American vehicles as low-quality, unreliable gas guzzlers.

    The vehicles Fiat produces today bear as much resemblance to the lousy cars that sent it slinking out of the country in the 1980s as the excellent 2009 Chevrolet Malibu does to a 1986 Chevy Chevette, which, you may recall, was an ugly little rustbox.

    There's no telling yet if Fiat's alliance with Chrysler will pay off, but if you want to see what the Italian automaker has to offer, consider the Fiat 500, the award-winning little car that has become the company's poster child.

    The tiny 500 is a Mediterranean Mini Cooper, but 9.1 inches shorter. It offers charming style and advanced technology in a package that buyers across Europe have found irresistible since it debuted nearly two years ago.

    Like the Mini Cooper, the 500 trades on heritage. The stylishly rounded 500 harks back to two previous models that built Fiat's reputation. The prewar 500 or Topolino, was so beloved that its nickname means "little mouse," the same thing Italians called Mickey Mouse. The postwar 500 was a simple and inexpensive car that put Italy on wheels in the same way the VW Beetle helped restart the German economy. Fiat ended production of the 500 in 1975 before resurrecting it a couple of years ago.

    Today's 500 builds on their looks, but adds a beautifully trimmed interior and advanced features like Blue & Me.

    As Ford did developing its trailblazing Sync feature, Fiat worked with Microsoft to provide a system that seamlessly integrates hands-free phones and iPods into the car, providing voice control and minimizing driver distraction.

    Several small engines make the 500 one of Europe's most fuel-efficient cars.

    It sold out in weeks after debuting, and it costs thousands of dollars less than a Mini Cooper that starts at $18,500.

    The 500's platform is also the basis for Ford's new Ka city car. Fiat is to build the car for Ford at a plant in Poland.

    The 500 is high on the list of cars Fiat would like to build in North America, and it's one of the reasons Chrysler's potential partner is worth a second look."
  • gagricegagrice San DiegoPosts: 29,043
    While the Fiat 500 would probably be a winner in the USA, it will probably be sent in the gas guzzling version. With the gas engine it gets a combined 37.3 MPG US. Which is ok. If we got the diesel version which I am sure is more driveable on our freeways, you get a combined 56.5 MPG US. It has a higher EU5 emissions rating than the Prius with the diesel. The Prius is only EU4 rated. And the Prius is over twice the price in the UK. The Fiat gets over 10 MPG better economy on the highway. So if Chrysler could put the Fiat 500 diesel in their showrooms I think they would have something to bring in the people again. Oh, and the diesel and gas versions in the top trim are the same price.
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