THE CHRYSLER-FIAT ALLIANCE

Chrysler Group Reborn

by David Zatz,
Organizational Change Consultant

Chrysler Group LLC now exists, 55% owned by a pension fund, 20% by Fiat, the rest by the U.S. Treasury and Canadian government. Contrary to published reports, Fiat will not own more than 20% of Chrysler at first, and will receive a maximum of 35% of equity unless they choose to buy more on the open market. The pension fund, which has no voting rights, plans to sell their equity as soon as it is economically feasible. These facts must be emphasized due to unreliable pundits’ hysteria over “union to control Chrysler” and “tax dollars spent to give Chrysler to Fiat.”

Fiat’s deal is highly favorable; they are getting, at long last, a full-sized Alfa Romeo design and one third of Chrysler Group, as well as serious access to one of the world’s largest auto markets. Chrysler’s deal is also highly favorable; they are getting the small cars which, thanks to nine years under Daimler, they could no longer create on their own, and access to worldwide markets. Together, the two companies will be in a much stronger position because their technologies, markets, and products are almost completely different, but both are mass-production manufacturers. This is a very different deal than the one with Daimler, partly because the Fiat people appear to have a high regard for Chrysler.
Several people have pointed out that Fiat’s Case/New Holland and Latin American production show that Fiat is very much unlike Daimler in its handling of subsidiaries; they prefer mutual profitability to ego and domination. Sergio Marchionne is trying to build a global enterprise, not just preserve Fiat’s past glory.

Most of the leadership positions are still held by Americans. Fiat’s past bodes well for the future; we expect that Chrysler’s weak areas will be replaced or supplemented with Fiat technologies small cars and compact cars, while current truck, large car, minivan, and crossover operations will continue. Factories are likely to be reworked somewhat to take advantage of Fiat technologies, but Fiat executives were impressed with the plants they toured; and unlike some, they reportedly got off the tour and snooped around on their own.

The Chrysler brand will continue at least for the moment, but we expect it to be replaced or joined eventually by Alfa Romeo, while the Fiat brand may be used for small cars. Chrysler will have little, if any, engineering responsibility for the A/B (small) cars, as far as we can tell. The new C/D (compact and midsized) cars are likely to be built off a common platform, the platform created by Fiat and the vehicle itself possibly engineered by Chrysler using a mix of Chrysler and Fiat technologies — we suspect the Pentastar V6 and Fiat’s four-cylinders will both be available.

Sergio Marchionne is CEO of both Chrysler and Fiat. He has shaken up the management structure, giving the brands independent leadership once again.

A nine-member Board of Directors will include three directors appointed by Fiat, four directors appointed by the U.S., one director appointed by Canada, and one director appointed by the Retiree Medical Benefits Trust (VEBA). The Board is expected to name C. Robert Kidder as Chairman.

Automotive News learned that Chrysler plans to use six Fiat models. One is the Fiat Panda Cross, a diesel off-road vehicle that gets nearly 40 mpg and would likely be sold as a Jeep in 2011 with a 1.2 or 1.4 liter gasoline engine.

The Fiat 500 may be the first new arrival, and it is likely to be badged either as a Fiat or simply as its own vehicle (á la Mini). Other vehicles, all of which would be built in the United States, would likely include:

* Fiat Grande Punto: a hatchback due in 2011; 38 mpg is expected with a 1.2 or 1.4 liter engine.

* Fiat Linea: a four-door sedan, possibly replacing the Caliber, based on the Grande Punto.

* Fiat Compass replacement: a new compact SUV based on the C-Evo platform (along with the Grande Punto and Linea), arriving around 2012, with front wheel drive and all wheel drive versions.

* Alfa Romeo 159: a four-door sedan due in 2012, possibly replacing the Sebring and Avenger. This is based on a stretched version of the C-Evo platform which is the basis for the Grande Punto and Linea.

* Other vehicles might be made and sold under the Fiat and Alfa labels.

The magazine also suggested that the Fiat 500 and four Alfa Romeos (MiTo, Milano, Giulia, and a compact SUV might be sold under their own names, but built in North America. We understand that Fiat is interested in buying Sterling Heights outright, in which case they might be assembled in a former Chrysler factory by Fiat.

Chrysler could also import Fiat full-sized vans to replace the Mercedes-Freightliner Sprinter. However, with Ford and possibly GM bringing over their own European vans, Chrysler may simply choose to continue using Sprinters, which would not require any capital.

The Alfa Romeo version of the Dodge Charger and Chrysler 200C.

Dan Minick wrote:
The successor to the big Alfa 166 (large executive sized 4door), is the 2012 Alfa 169. It was suppossed to have been launched in 2009. For several years, Alfa has been poking around looking for a suitable platform' on which to base it. They want a return to rear wheel drive. The Maserati Q platform has been deemed too expensive. Talks were held with Daimler several years ago, and a plan was underway to base it off of an E-class platform, but in 2007 agreements broke off with Daimler due to difference of opinions and plans. So, the search fora suitable platform was under way again.If you are familiar with the relationship between the Mercedes E, the new Mercedes CLS, and the Chrysler LX, we can probably draw some dotted lines as to another reason the Fiat/Chrysler alliance keeps moving forward.

The Fiat-Chrysler deal: why Fiat?

by David Zatz

Outside of Jeep, the company has never had a serious presence outside North America, Australia, and some parts of South America (at some times), and has not had a real minicar lineup since selling SIMCA and Rootes Group to Peugeot. What's more, the Australian business was sold to Mitsubishi nearly 30 years ago.

Daimler left Chrysler with a severe shortage of cash, engineers, and time. Cerberus saw that Chrysler has been left without competitive entries below the 200C (assuming there’s a production-ready vehicle behind that); many people like the Patriot and Caliber, but the volume isn't there.

The company has been saying for years that it will only get into this space with a collaborator. That goes for the mid-sized market, too - the ever-popular area where Chrysler used to dominate with the Valiant, Duster, and Dart.

Fiat is one of the very few companies that does not compete against Chrysler in any meaningful way. The two have barely any geographical overlap and even less product overlap.

Today's Fiats are not the awful (but weight-balanced!) junk of the 1970s. Driving a modern Fiat is a revelation after those awful, plywood-dashboard, unreliable, but fun-when-they-worked cars so long ago. Yes, they were so bad that their reputation lingered long past Fiat's exit.

The new]cars will be made in the U.S., Mexico, and perhaps Canada, not by Fiat. The engines can be used in existing vehicles. The array of technologies gained by this is impressive to say the least, and includes diesels. There will be no need to link up with Chinese companies that will soon become competitors.

In short, Chrysler will get small and mid-sized cars, small engines, lightweight transmissions, new fuel saving technologies, long-awaited distribution channels in Europe and Latin America, and an equity owner that can easily outvote Daimler-Benz - and has a vested interest in Chrysler's success, with no emotional need to destroy the company. What's more, Cerberus will still be pushing for Chrysler's success, since they own the loan company - which will thrive if Chrysler the car company does.

The guts of all this is that the sale is actually to the a new company that will be known as 'chrysler group' which will be partly owned by Fiat 20% UAW 55% the US government 8% the Canadian government 2%. The bottom line is Fiat won't own a majority stake unless it pays the US government's loan off first.

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