So Chrysler is going to bed with Fiat. These are among the most promiscuous companies in the industry, and right now they both have ‘desperate’ tattooed across their foreheads. Can they turn this into a successful long-term relationship?
You don’t need me to tell you how deep Chrysler is in the cack. It was cast aside by Mercedes because it couldn’t make money even when the US market was OK. Now the market has collapsed and their entire car lineup is either bad (Caliber, Sebring), or old (300) or profoundly out of step with the times (the big SUVs). Or all three. It needs new economy cars and it doesn’t have the money to develop them alone.
Fiat, on the face of it, is better off. It majors on cheaply-produced small cars, which is very apposite these days. But as far back as December the Fiat boss Sergio Marchionne was saying the global landscape was changing so fast the Fiat/Alfa/Lancia group could be too small to survive alone. Besides, Fiat has failed to revive Alfa or Lancia, and failed to get Alfa into America.
So the provisional deal, announced this morning, is that Fiat would get 35 percent of Chrysler, in return for supplying small-car platforms and engines, also for helping distribute Chryslers and Jeeps in Europe. Presumably Fiat-Alfa dealers would get them to sell.
Chrysler has been looking for a small car to rebody for years – it looked at building its Hornet show car on Nissan and Chinese Chery platforms.
And I suppose at a pinch, when the recession ends, Fiat could get some benefit from building some kind of crossover SUV. Even if the Jeep Compass is a pretty unpromising place to start.
Meanwhile, Alfa would have its much-delayed re-entry to the US eased by such a deal. And Fiat could modify and sell the Abarth cars against the Mini Cooper.
No doubt the so-called ‘enthusiast’ websites will be jumping up and down and speculating Alfa could now make use of the 300/Challenger platform to do a big RWD car. But this is irrelvant tosh. Alfa has bigger problems – dealers, quality, distribution, resale value etc etc. I mean, it ain’t the FWD that’s holding Alfa back – the Audi A4 outsells the 159 by 10 to one globally, and last time I looked the A4 didn’t have RWD.
But all this is in the far distance. Chrysler’s problems are colossal and immediate. One benefit of the deal for Chrysler is that it will get Fiat specialists – who turned around their own company just a few years ago – onto the restructuring case. Chrysler has to submit a viability plan to congress by mid-February, and the plan has to be under way by the end of March. Otherwise the Federal loans get called in and then it’s hard to see any outcome except Chrysler’s going bankrupt.
They’ve got a mountain to climb, and only weeks to climb it.
From Fiat’s point of view, the most important thing is that it gets this share in Chrysler for free. After all, who would put actual money in?
Oh dear. Chrysler are going to pull Fiat down with them…
Desperate measures for desperate times. Still this is a good deal for both companies… well if chrysler can resist more then a month
Doesn’t sound bad for Fiat. At worst they lose a bit of time and a few engines. At best they save some money and get a bigger distribution network.
Doesn’t sound bad for Chrysler either. Although right now, it wouldn’t sound bad for Chrysler whatever the deal was!
Does fiat own ferrari?
it sounds like one big muscular, atlethic man would shug another
not muscilar in ANY way
not Atletic in ANY way
… man
what the heck are you on about? Fiat is actually in a better financial shape than most of the industry, and saying that Marchionne has failed to revitalise the Alfa brand is just plain wrong: Britain is NOT the world – and the same goes for those “dealer problems” you Brits seem to have a fixation for…
Then, there is the not-so-marginal fact that by becoming a quasi-controlling shareholder in Chrysler, Fiat gets not only access to the american market and some technology it lacks, but also to a big chunk of Uncle Sam’s money…
This shag does not seem so desperate to me, really…
that would be ok if chrysler pull out of the uk market, there cars are naff, lets face it!
Alfaman (6). Sadly, Alfa has consistently under-performed its targets pretty much everywhere. Marchionne admits it. And Luca de Meo, the talented energetic guy who was running the place, has just left to become marketing chief for VW. And Fiat won’t ‘get a chunk of uncle Sam’s money’. The Federal funds are carefully ring-fenced so they don’t go to foreign associates or divisions. Opel/Vauxhall isn’t allowed any of the GM Federal loans, either.
Yes, Fiat owns both Ferrari and Maserati…
@ No.5, Er… well put.
One should read the press release before commenting: http://www.fiatgroup.com/ en-us/mediacentre/press/D ocuments/2009/Fiat%20Chry sler%20Cerberus%20english .pdf
The alliance is between the Fiat Group (not Fiat Auto) and Chrysler.
…and as such, the group seems quite well:
“Performance (2007 vs. 2006):
- Revenues +12.9%
- Trading Profit +65.7%
- Net Profit +78.5%
Fiat Group eliminated its net industrial debt in 2007, closing the year with a net cash position of €0.4 billion.”
…like Alfaman said… “Britain is NOT the world”…
So will we be seeing a Hemi fiat 500?
35% Chrysler is surely just a 35% share of the blame and, more importantly, the debt. I would have thought that FIAT was better placed to weather this storm alone but there must be some real incentives for them to get into bed with the ramshackle crap-fest that is Chrysler. FIAT seems to have cut a lot of the rubbish out of its ranges whilst upping quality throughout, Chrysler needs to undergo the same kind of purge before it becomes an attractive investment to all but the most desperate out there. Well, that’s my thinking anyhow, there’s every chance I’m talking out of my bum.
To JP: While the alliance is between Fiat Group and Chrysler and not Fiat Auto (which isn’t actually called Fiat Auto any more but Fiat Group Automobiles) and Chrysler, it is an automotive alliance so we need to consider it on an automotive basis.
After all, Fiat Group will hardly be getting big synergies between its farm equipment division, or its heavy trucks division, or its robotics division, or its newspaper division, and Chrysler.
Fiat Group Automobiles is good for the Fiat Group some years, not good other years, and in those bad years the autos division is lucky to have the bigger Fiat Group to prop it up. The rest of the Group is more consistently profitable, which is why every so often Fiat Group management feel obliged by the financial community to consider putting Fiat Group Automobiles up for sale or entering an alliance. This move is basically a part of that thinking. I personally don’t think they’ll ever sell the cars division – too much history and family pride.
Oh dear… the thought of the offspring of a Alfa/Chrysler relationship has given me nasty images…
http://i199.photobucket.c om/albums/aa113/The_STIG_ album/Alfchy-romeler.jpg <– like that one.
To J. Stevens: A shareholder of a company does not hold any debt. It holds a percentage share of the company. The value of this share is determined by the assets minus the debt (bank loans, payables, bonds etc),; times the percentage of the shares. If the value assets does not cover the value of the debt anymore. The company will in theory go bust.
What Chrysler, in essence, did is buy external advise and access the distribution channels from Fiat. But, since Chrysler has no liquid cash left, they paid Fiat in shares, which are basically the rights to a percentage of the net profit. 35% is quite a lot, so that shows that Fiat doesn’t rate the profitability of Chrysler very high, but they made the deal because they think they can get extra revenue through the Chrysler network. Besides that, if they manage to make Chrysler profitable again (which will take some time) they’ll get a share of the profit as well.
I think this was a last resort for Chrysler, I don’t think there are many companies left interested in a deal with Chrysler. Almost all the carmakers who still have some money left don’t need Chrysler to sell in the US market. Think about Merc, BMW, VW, Toyota, Nissan, they don’t need distribution channels in the US. Fiat is the only major carmaker that isn’t selling in the US. With this deal they’re getting a complete distribution system for free. If you look at the cars they make (500, Punto, Bravo), I think they’ll have fair change of having some success in the US. Even in the current situation.
I think this might be one of the best moments to step into the US market. In the old days everyone in the US was buying large SUV’s, nobody was interested in small cars. Now though, people can’t afford the big, thirsty, expensive SUV’s anymore, but they still want a car to drive around in. For Fiat the best moment to start the sale of their small(er) cars.
Reason why the Fiat/Alfa’s failing in Japan is that they only sell Selespeed here.
They used to sell manual shift until 2007 but for some twisted reason the gorgeous Brera and Spider were available only in left hand drive. (Japan is a RHD market)
Apart from money… what Chrysler needs is small, appealing cars and European penetration. These will be easily provided by Fiat.
What Fiat needs is a USA penetration (and maybe a bit of 4WD platforms). This be easily provided by Chrysler.
Surely Fiat doesn’t need Chrysler technology in road cars.
The major threats are:
- immediate cash problems for Chrysler
- being tempted of producing Fiat/Alfa/Lancia medium or big cars with bits of Chrysler tech (God save us!)
Correct me if I’m wrong, but I remember seeing from somewhere (Clarkson’s Motorworld on Dave?) that driving a LHD car in Japan (which is RHD) is seen as a status symbol.
Many of the Yakuzas travel around in LHD Mercedes, or at least used to when the TV program was made.
All Fiat has to do now is wait until Chrysler goes bust & it’s got an entire North American dealership for nothing.
Smart move IMO.
Merc will be in trouble though when Chrysler goes, they still own 20% of it.
I think that’s a good deal. Or better, this deal has an enormous potential, but need steel balls and guts (and luck) to not be useless or catastrophic.
The main problem of Chrysler is that they have old technology or no technology at all. The main problem of fiat is that they’re considered rubbish in almost all the world except Italy and some other smaller market. The good thing is that, actually, is not true because in the last years the primary goal in fiat was rise quality of everything (and has done it) and has made also some really nice models (for ex. the 500 would have sold more but the bad name of fiat and the good one of vw has saved the mini. And in germany the 500 sold were way less than expected also thanks to press support)
The good things are that fiat have a lot of good technology, multijets, chassis (don’t forget that many cars around have big pieces of fiat project\products inside, the best designers in the world (ikea apart;-)) and some big marketing issues like Italy-fashion, Ferrari-motorsport), and can be a towing for Italian factory (many automotive leader are italian as brembo and sparco and others)in the us market. It has contents AND marketing magic sparkles (and those helps a lot). Fiat Have also big experience in many south market. More than this fiat have Marchionne that is the man to call when you had a completely burst car factory and you want make profit just few month later.
I think that what Fiat need are, a good objective press support\revaluation, more share in big market (and chysler can do this), fine tune their brands (fiat=people, alfa=sporty sedan, Lancia=rallyng (I know that mitsu tech is everest but in better moment… this luxury mistake they’ve done with lancia has to be erased cause nobody likes it too much)maserati=luxury high end sedan and can share platform with alfas and crysler ferrari = fezza can do what she want) and a bit of stability. An important market is italy and actually nobody has half euro to spend in a car so the parked cars can easily fullfill american demand.
The mito looks like a crashed bulldog but i’ve seen one today in black and it was way nicer than in photo. Not perfect but nicer.
Iveco and commerciali. A full range of working vehicles, affordable, economic, ecofriendly (more than pick up or enormous u.s. town truck)
Crysler also have good things to give to fiat besides dealers.
4×4 technology, as jeremy said jeep are very good offroaders but they lack completely in style and comfort. Robust simple and efficient 4×4 chassis can be very useful. And also many icons from jeep and dodge.
Yes the federal money won’t exit from the us, but they are not supposed or needed to exit, because they will all spent in paying debt. One big point is that (and i’m not very informed on this, so i can be wrong) u.s. car workers have higher then average wages. This is not possible in that situation, the only way to save jobs and factory is to reduce wages to standard level. Fiat also (and italians car worker aren’t paid more than average) cut some jobs.
As I said there’s a lot of potential. I wish that all will go in the right way.
Sorry for the looooooooong comment but today i had entire hours of waiting in tail to think about it
Paul, you sure have a point, but “disappointing” is still better than “nil”, and I’m sure you’ll agree that very few corporate sales projections will have gone as intended over the past few years.
That said, and as Marchionne explained it to the italian press, I still think it makes sense: Fiat holds a helluva lot of technology patents in some areas but severely lags behind in other fields (big car platforms, SUVs, big petrol engines) in which Chrysler is relatively strong.
If they really manage to keep out of the pension-obligations and debt quagmires, they will have acquired a lot of that tech (to further develop which Uncle Sam’s dosh CAN be used) and cheap access to the american market at practically zero cost. In return the Yanks get some pretty neat low-emission engines and chassis, which they lack the funding to develop on their own otherwise.
Still makes some serious sense to me…
Another thing (sorry) about alfas.
As said quality is no more a problem.
Alfas probably had lower finiture level but not lower quality, and this is correct because if many journal says, “oh alfa, you’ll never sell it back because it’s value fall down faster than it’s pieces ah ah ah” people will go strait to bmw and audi (and old audis weren’t so good)and to be competitive you have to lower prices and consequentially trim level. Luckily Alfa has always been so fascinating and correctly styled (and projected if you mind the “artificial” racing sensation)and make owners falling in love with them.
Imho, the mito isn’t good looking (but i discovered that is nicer in metal), the spider weights 100000000 ton more than rational and the new models struggle to go out because market is going bad, but i will never, ever, ever,…ever choose an A4 instead of a 159. Tell me, if the press were more sensible about word choosing and they said two good cars, same quality, the audi have better aluminium polished trims and a fantastic all grey freezing cold teutonic interiors, the alfa is a lot nicer with fantastic warm lovable interiors which will be most sold?
It still seems risky to me, 35% of nothing is nothing. If Chrysler do go bust then FIAT wont get the dealer network, it will be sold off by administrators to try and recoup money for outstanding debts. I’m not entirely sure what FIAT stands to gain that’s really worthwhile these days. They have very competent 4wd technology at iveco, maserati use big V8′s that are years ahead of Chryslers Hemi technology and they’ve got small soft roader 4wd technology too. Yes they could get some bigger platforms, but they’re not groundbreaking or class leading and I doubt FIAT want to borrow technology for a big bling mobile SUV, it’s tat like that which left Chrysler on it’s knees. The dealer network is all I can see in it, and the hope that FIAT products might be viewed with a rosy glow in the US if they become part of and save one of the big three. It might have been a match made in heaven if Chrysler weren’t being forced into the deal by financial obligations and an unsympathetic government. Shotgun marriages are rarely happy affairs…
Y’know, here in the states Chrysler isn’t exactly known for big SUVs, either. Personally I believe the Jeep lineup is all that’s been keeping them afloat for the last several years. That and the minivan platform, which has been consistently losing ground to everyone else since the early 90′s.
Even if Fiat were to pull off some sort of scheme that got them into Chrysler dealers, I am not sure they would sell well.
Most of the Big 3′s dealer network is in middle America, like where I live. The people here still want ‘big and thirsty’ even if they can’t afford it anymore. In a rural setting you’re still likely to find people who’d rather walk than drive any foreign car!
Fiat is an unknown here. Well, outside us foreign car nuts.
To put things in perspective, consider this: my nearest VW dealer is over 100 miles away. I own the only Golf in the entire region, and get teasted for driving “such a small car”!
Fiat would do well in LA, San Francisco and New York. But in Liberal, Kansas or Itta Bena, Mississippi? It would be like a Smart car: nothing more than a curiosity that tree hugging greenies drive.
There maybe a chance for Chrysler yet! All they have to do is have Alfa not to listen to them with design concepts, marketing and the lot and let them just use their name on the US market then maybe a turn around will happen.
It reminds to me of the Fiat-Tata deal: the two groups nearly merged in order to create an industrial sinergy and not very much to share platforms or engines or gearboxes. They don’t even use the same factories. Remember Tata owns Jaguar too, and no one has ever heard of a Fiat-Jaguar platform or what.
That time the deal was signed by Fiat Group. Now Marchionne used the word ‘automotive’ (during a speech in Italian!) but we’re not authorized to imagine RWD Alfas or 6.1 V8 HEMI Cromas or a Ferrari Challenger whatsoever. That would be very good, but won’t happen.
In the current situation, I think Fiat is aiming at Chrysler dealership all round the USA, in order to place at least a couple of Alfas (Brera and Spyder, I reckon) and possibly the 500. In the meantime I expect nothing special will happen in Europe. Maybe the Caliber will get orange plastics from the Punto rather than its grey plastics from the ’80s. Paul, what do you expect?
GO,CAPTAIN SLOW !!!!!!!!!!!!!!!!!!!!1
FOR LIFE…
Tom´s right, fiats, alfas and lancias will never sell well in the US for the same reasons US manufacturers, except for ford and chrysler.., don´t sell well in europe either. Chances are fiat are looking to cut themselves a bigger piece of the market from chryslers european sales. After all fiat is the only major euro player without an SUV or 4WD range. Imagine the new Alfa school run mobil on a Jeep platform and there you go and if it works over here it might just work for them over there as well. Chrysler can only benefit from the deal so what is so hard to understand ?
btw great thinking Alex, luved your piece
I just thought… the Fiat group doesn’t make many big cars, do they? Chrysler don’t make many small cars. What Fiat is doing, cleverly (and Chrysler has to go along with because they’re too poor), is going into other markets (both large cars and the US market) by mixing it up with Chrysler. Sharing platforms etc. means that Fiat can afford to move in new directions, towards larger cars, while Chrysler has some financial stability and backing…
Good news for all, this deal. And when people are saying only 6-10 companies are going to survive, that means they’re all going to merge into larger companies. I can imagine many mergers soon: VW Group/Porsche, possibly PSA (Peugeot-Citroen) with a Japanese company, Subaru perhaps, and maybe some more in Japan – Toyota-Mitsubishi, for example, but Toyota would probably be taking them over. Many companies futures may lie in the balance at the moment – PSA and Subaru most definately.
Then again, I may be barking up the wrong tree completely…
the stig is JAMES ROSSITER u told us on 1 of ur programmes. i notices big mistakes mwah ha ha ha.
oi Paul, there’s some serious comment, give an opinion.
“The all new Chrysler Bravo, the Italian American small car” – Please tell me I’m not the only one who foresees a series of Mafioso ads for the Fiat models if there branded Chrysler.
Chrysler Panda… ..that could be… ..disturbing.
about alfa. the pedigree of an alfa badge is curently more of a burden to fiat, because they don’t spend enough money on ‘alfa only’ development, to live up to the name and to catch up with the competition.
alfas would start selling if they could make them really fast but with a bit of an underdog feel.
and a shame that they don’t use and improve the technologies like their Püch developed rally 4wd, because for pure speed and handling it’s one of the best designs out there. and now they are just ‘copycatting’ the germans, their design is cheap but a bit halfharted. I know many remember the delta integrale, Q4 alfas, but do you know that in 1992 the 164 q4 they were producing had and I quote: “electronically controlled viscous coupling with variable torque splitting” it could actually vary about 90% of torque front to back depending on grip(the wheels with the most grip got the most torque), with the same type of diffs at the front and at the back as the delta integrale.
That’s just drivers heaven.
why are they throwing away such great technology or at least not using it.
It was like the manly skyline GT-R with italian style an alfa V6 sound and tons of driver’s appeal. but less reliable.
If they would only build on that. not ‘fix’ what was never broken and ignore the things that realy need fixing.
This deal is largely weighted to access to an established US Dealer Network and distribution channel for Alfa Romeo from Fiat Group’s point of view. Previous negotiations with BMW to give access to MINI’s distribution channel for Alfa failed. There will be no technology swapping from Chrysler to AR. Much more likely (but still UNLIKELY) is a platform technology agreement with JLR).
Chrysler are in a no-lose situation. They are, along with the other two, up a certain creek without a certain implement and have to do something radical and long term to appease the US government and retain access to state funds. They will, no doubt, benefit from Fiat technology but the main thrust of positivity for Chrysler in this deal is the ability to say they have secured major backing from Europe’s most financially-healthy car manufacturer.
So, no Chrysler platformed RWD Alfas, no Fiat 500 HEMIs and no Chrysler based SUVs.
On the subject of Alfa in Europe (and more specificaly the UK), the picture is not so bad as certain people would have you think; Radically changed and improved Dealer Network is emerging, with more work in progress; Vastly improved quality (though more work to be done); Hugely improved Residual Values (look to Alfa MiTo predictions – Best In B Segment for MiTo 1.3 diesel, second best in class for MiTo range on the whole, just one percentage point behind the established MINI product, enabling very competitive finance and contract hire payments); Alfa 159 residuals far in excess of previous expectations, and consequently taking a not-insignificant chunk of upper D Segent corporate sales; Dealer Sales Satisfaction (administered by JD Power) up by 10% in 2008. And remember that Fiat Group has not geared Alfa Romeo to be anything more than a 1% share brand – it does not aspire to be a BMW or Audi just yet!
Wait and see
how can anyone claim alfas aren´t fast enough ? I suggest trying one ..any, before forming opinions. Alfa deficiency was never related to their speed but more build quality and aspiring to make things better, regardless what one might have heard isn´t necessarily a german concept…
btw, this is by far the best blog on this site though so I hope no one takes an offence in my defending alfa
People who don’t like Alfa’s must be in the minority on a website like this. They’re great on the days they work and their interiors are genuinely pleasant places to sit, which is lucky as you may be broken down a lot. I can’t see any good cross over models coming out of this merger though.
This will either end up in hell, or end up in heaven. Or something in the middle…
literally two birds one stone…..
and i love the flair of fiat and alfa, just need a bit of tweaking with the lancia range and that will be back in form. dammmit chrysler! always ruining everything!
Like the Hemi Smart that I hoped we might see in the US during the Chrysler-Mercedes days?
Long before the GM-Fiat fling, wasn’t there talk of a Chrysler-Fiat joint venture?
in fact, opel (gm) have a lot of fiat technology, like the diesel engines and probably some chassis.
also ford had some project with fiat, the new ka or fiesta (i can’t remember) have the 5oo chassis
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