According to Automotive News, Chrysler plans to sell up to seven Fiat/Alfa Romeo-designed models in America. Under this scheme, Chrysler dealers would flog the Fiat 500, Alfa MiTo, and Alfa 147 replacement. There’ll also be up to four Fiat-based cars in the A, B, C, and D segments. Some American car fans are thrilled at the idea of inexpensive, fuel efficient, fun-to-drive Italian cars — even if the machines in question end up as Dodges built in Mexico to Italian blueprints. But that’s exactly what it is: an idea. And a bad one at that.
The Chrysler – Fiat deal is a lot less than meets the eye. Most importantly, Fiat isn’t putting a dime on the table. All the costs of converting any given Fiat/Alfa to a Chyrsler and/or Dodge product would be borne — again, in theory– by Chrysler. Given Chrysler’s cash position (i.e. none), given the complexity and expense of creating even ONE car for the U.S. market, given the cultural and corporate communications hurdles involved, Chrysler’s promise to deliver the fruits of this alliance in two years is as optimistic as their electric car “program.”
But let’s say Chrysler and Fiat could wave a magic wand and place these American-Italian cars into Chrysler/Dodge showrooms tomorrow. Would they sell?
The U.S. economy is in a deep recession. By many accounts, it’s going to be worse still. Any sort of recovery is at least 12 months away. With the rest of the world in a similar position, gas prices are likely to stay low. And that means sales of small cars and fuel misers will continue to sink– relative to a sinking market. If you look at the sales of Honda’s well-established Fit for example, it’s not a pretty picture.
Even if California’s new fuel economy standards suddenly arrived in the same fantastic manner to force consumers into smaller cars, the poster child for this new alliance– the Fiat 500– would be a modest flag-bearer at best.
Sure, the 500 could become a relatively inexpensive version of the iconic MINI. But to help Chrysler out of its deep hole, the 500 would have to sell over 100k units per year, at a significant profit.
Lest we forget the U.S. market is choked with new cars. Prices are down and going lower. Ford’s upcoming, less-expensive Fiesta faces an uphill battle for sales, and Ford doesn’t face the same problems of collaboration. And that’s without considering the long, slow process of resurrecting Chrysler’s brand. With a Fiat no less.
Even if Chrysler gets around to finishing design work on these new cars, what happens after the enthusiasm/sales from Italiaphiles and car fans dries up? I repeat: Italian cars have a terrible reputation for quality and reliability in the U.S., regardless of the present-day reality. Fiats may last for 250k miles in Brazil, but it won’t matter to American consumers that can only hear “Fix It Again Tony.”
It also is worth noting that even in Europe, Fiat and Alfa Romeo residual values are among the worst on the market. While the 500 and Panda have been solid, the bulk of Fiat’s cars’ resale values are absolutely atrocious. Poor residual cars in Chrysler dealers? Not exactly a new news story. But neither is it a road to redemption.
The worst part of all this: Chrysler expects the American taxpayer to pay for this so-called strategy. Since the moment Chrysler felt the need to hit-up the U.S. taxpayer for $7b, the company’s owners have refused to invest any additional money into the failed enterprise. So we can assume they’ll give this brilliant plan, this awesome alliance, a similar amount of financial backing. If it’s not good enough for them, it’s good enough for you? Fool me once…
The news coming out of New Orleans today: Chrysler promised dealers it’ll still be around in April. The only way that’s “good” news is if the presumption among Chrysler dealers is that the company actually has less than three months to live. Is Chrysler-on-federal-IV-fluids going to be around to produce Fiat-designed cars that, well, haven’t yet been designed? I’m thinking no.
The Chrysler – Fiat deal only makes sense on a superficial, 24-hour-news level of analysis. Chrysler is in bad shape, Fiat has been touted (prematurely) as a European success story. Chrysler has no small cars, Fiat does. Fuel economy regulations are set to increase, and President Obama has just scared the heck out of car manufacturers by, ironically, applying a States’ Rights approach to future fuel and emissions policies.
From a product standpoint, media pundits can be forgiven for thinking that the pieces fit together. Unfortunately, they don’t. Since so many of these collaborative automotive projects end before or when the first product hits the showroom floor, it’s unlikely to matter.
[TTAC's reviews of the Fiat Panda 4x4, Alfa 147 and Fiat Grande Punto]
74 Comments on “Chrysler Suicide Watch 43: Reality Check on the Fiat Deal...”
Back to TopLeave a Reply
You must be logged in to post a comment.
You can also login using Facebook Connect.
Consider for a moment Chrysler Corporation’s thrilling interpretation of the Simca Horizon.
Today’s Chrysler can only do with FIAT what Chef Boy-ar-dee did with Italian cuisine.
Yes, there would be many hurdles to jump. But that just would make all the more beautiful, wouldn’t it?
I mean, if the deal doesn’t work out, if Chrysler goes down, what good does it do to the consumers? More is better most of the time. More choices, more styles, more brands, more competition. All better for the consumers. Or let’s just give up, become lemmings and all drive Toyondas. That would be sastifying now wouldn’t it?
FromBrazil:
The problem here is that Chrysler is using my tax money. If they weren’t, I wouldn’t care what they built.
FromBrazil :
Yes, there would be many hurdles to jump. But that just would make all the more beautiful, wouldn’t it?
I mean, if the deal doesn’t work out, if Chrysler goes down, what good does it do to the consumers? More is better most of the time. More choices, more styles, more brands, more competition. All better for the consumers. Or let’s just give up, become lemmings and all drive Toyondas. That would be sastifying now wouldn’t it?
The problem is twofold here. First, I agree with Robert – they’re playing with public funds.
Second, I agree with you: It would be boring if everyone drove Hondas and Toyotas. Just because you and I might like it doesn’t mean it’s the right business decision for a company trying to sell based on volume, which is the case for both Chrysler and Fiat.
The problem is that part of what’s appealing to me — and I assume others — about weird cars is that they’re frequently sales failures.
But let’s say Chrysler and Fiat could wave a magic wand and place these Ameri-Italian cars into Chrysler/Dodge showrooms tomorrow. Would they sell?
Yes, they would! FIAT’s small cars are good looking, quity nippy, OK fuel economy (the diesels are better, but I doubt they’ll go over there) and not-too shabby reliability. They also, will have a good demographic of people who will buy them:
1. The American-Italians who like anything Italian. In fact, with the right marketing spin, the whole “American-Italian/Chrysler-FIAT” could appeal to this demographic.
2. The “European chic” factor. All the people who buy Minis, Toyota Yarises and other small cars will look to these cars. The only problem with this theory is that the “Chrysler” badge may turn people off. I’m not saying they hate Chrysler, but Chryslers are a stalwart American brand, it’d kind of take away from the “European chic” factor.
Another factor as to whether they’d sell in NA is whether Chrysler would import the cars from Europe or take the designs and build them in NA. The Euro-US Dollar exchange rate is crucial here.
The Chrysler-FIAT alliance can work, provided management are on the same page and know where they want to take this relationship. As long as Sergio Marchionne and Robert Nardelli have a vision of where it will go, then the sky is the limit for Chrysler and FIAT.
It’s very easy to say “it’ll fail”, after all, that’s what people said about Renault and Nissan…..
P.S. With regards to the “Fix It Again, Tony” mentality, recently FIAT have issued a 5 year bumper to bumper warranty on the Bravo. Hmmm, sound familiar….?
FromBrazil:
Yes, but it’s that “more competition” thing you mention that is so troubling.
You see, competition has driven Chrysler to despair. They’ll not likely live to be despair-free: casualty of competition, I’d say.
Further, http://www.timesonline.co.uk/tol/driving/jeremy_clarkson/article5574385.ece wherein Jezza explains that the Fiat 500 is garbage (page 2).
I think they should concentrate on the Alfa 159 and Fiat Bravo, maybe the Fiat Grande Punto. The 500 and Alfa 8C are too much gimmicks for Chrysler.
Mr. Farago:
Ok, got your point. Love the site. And I respect both your opinion and your site. But unfortunately or not, apparently it isn’t what’s gonna happen. The government is always doing stupid things. I used to worry very much about that. Alas, there’s nothing one can do really (except run for office and whatnot). So, and I’m not saying this would be good for you or anything (it just works for me), I learned to protest, yes, fight, yes, but once it’s unavoidable try to make the best of it or just let it go. Life’s too short.
….at least the use of taxpayer (my) funds is temporary – these are loans remember, and this is a mechanism to assist with that repayment. Unlike what my bank is doing to me and all of us !!
Wouldn’t the world be a far better place if we just adopted the same safety & emissions rules & regs as a common market? If Euro/North America/Japan/Aus-NZ all were the same, in terms of crash safety & emissions then all this hand-wringing about what will and won’t work in this market or that would be left to the market itself.
And I could buy an Alfa Romeo.
–chuck
KatiePuckrik :
I don’t mean to be a jerk, but your claim that this is a great idea is flat out false. Look at Fiat’s sales in the UK for heaven’s sake. It’s a disaster among disasters.
Yes, they would! FIAT’s small cars are good looking, quity nippy, OK fuel economy (the diesels are better, but I doubt they’ll go over
there) and not-too shabby reliability.
But Fiat’s cars objectively being good has absolutely nothing to do with how they’d sell.
1. The American-Italians who like anything Italian. In fact, with the right marketing spin, the whole “American-Italian/Chrysler-FIAT” could appeal to this demographic.
This isn’t a real shopping demographic anymore.
2. The “European chic” factor. All the people who buy Minis, Toyota Yarises and other small cars will look to these cars.
Yaris isn’t seen as a European chic car here, it’s seen as a car you buy because you can’t afford anything nicer. As for the MINI, the BMW association has been a critical component in their sales success here, as well as good timing with a strong economy initially. The 500 is the only car that could make a case for itself as a chic car in the U.S. But 100,000 cars a year? Not going to happen.
Another factor as to whether they’d sell in NA is whether Chrysler would import the cars from Europe or take the designs and build them in NA. The Euro-US Dollar exchange rate is crucial here.
Again, don’t mean to be a jerk, but (1) this is addressed in the editorial and (2) has been discussed in the news as part of the deal. They’d build the cars in Mexico.
The Chrysler-FIAT alliance can work, provided management are on the same page and know where they want to take this relationship. As long as Sergio Marchionne and Robert Nardelli have a vision of where it will go, then the sky is the limit for Chrysler and FIAT.
In that case, it’s a 100% guaranteed failure.
P.S. With regards to the “Fix It Again, Tony” mentality, recently FIAT have issued a 5 year bumper to bumper warranty on the Bravo. Hmmm, sound familiar….?
Again, you’re missing the point. As I said above, it’s not about actual quality. It’s about perceived quality. No warranty is going to make Americans think that Italian cars are anything but the worst quality.
A low quality Fiat with a Fiat badge has “personality” a low quality Fiat with a Chrysler badge is a piece of garbage.
Even if the some of the European built Fiats have ok quality now it does not mean this will work. This deal envisions many of the “Fiats” being built in the US or Mexico. Ford could not keep the build quality and interior quality consistent between the supposedly identical first generation US and European Focuses. Everyone knows that the Mexican built VWs are even worse than the German ones.
So, I’ll repeat what I said a little while ago.
This is the point of bankruptcy liquidation:
-Fiat can buy distribution, and put up real Fiat signs at the dealerships.
-Nissan can buy the Ram.
-VW or Magna can buy the minivan plant.
GM is a going concern (although a horribly structured one), Chrysler is not.
Killing Chrysler should not require any more tax money.
This is all I have to say to Fiat wanting $3 Billion just for us to give them Chrysler.
The government is not dead set on giving Chrysler money. The previous administration just propped it up to pass the buck. I remain optimistic that, come March, this administration will see the difference between GM and Chrysler and let Chrysler liquidate.
Spending money to give Chrysler to the Italians so they can build cars in Mexico, to save the ass of a private equity firm with Bush ties will hopefully not be an administration priority.
Justin Berkowitz
The problem is that part of what’s appealing to me — and I assume others — about weird cars is that they’re frequently sales failures.
Yeah, so sad, so true.
Just because you and I might like it doesn’t mean it’s the right business decision for a company trying to sell based on volume, which is the case for both Chrysler and Fiat.
But since apparently the government is dead-set on giving them the money (yes I agree, problem) I’m just hoping it works. Better product, more sales, soon, who knows, you get the volume you need to even grow (like Fiat has been able to do in Europe recently).
dgduris:
Yes, but it’s that “more competition” thing you mention that is so troubling.
You see, competition has driven Chrysler to despair. They’ll not likely live to be despair-free: casualty of competition, I’d say.
Further, http://www.timesonline.co.uk/tol/driving/jeremy_clarkson/article5574385.ece wherein Jezza explains that the Fiat 500 is garbage (page 2).
Could be but I’m hoping for a ressurection. :)
And Clarkson’s crazy. We all know that. When the car was 1st launched he liked it. Now he hates it. **shrugs shoulders** If I remember correctly he did like the Bravo and the Punto though.
Having a rebadged Lancia Thesis as a Chrysler in US soil can be done within months, it is a decent competitor to existing popular cars. Fortunately americans have been getting used to world standards for a long time, so the so-called “adaptation to the US” does not mean a totally new car, it’s more about complying with multiple and conflicting standards. Fiat has a chance with its existing line.
But the abiliy to sell in 2009 is a different problem, with no customer credit very few people can afford a car, no matter how much they need or want it.
And this is not a problem Chrysler can fix, with or without Fiat.
That’s roughly 30 new cars Chrysler has talked about in the last few months. So much so the ripe, heady aroma of fresh bovine excrement is contributing to global warming!
Are the seven new Fiat and Alfa Romeo models additional to the previously announced electric cars, minivans and off-road vehicles? How about the Nissan small car and truck co-productions, the assorted replacements for moribund Chrysler domestic brands, and whatever? Nearly forgot about the Chery Chinese cars. Oops, those have already been flushed down the poop chute!
Get a grip. The announcements are bullshit baffles brains public relations tactics to fan the illusion of corporate vitality. The guardians of our tax money must not be distracted from autographing the next bailout check. They might wonder why U.S. and Canadian taxpayers are subsidizing a European majority owned company, or why Cerberus investors are not ponying up their own cash.
“Fiats may last for 250k miles in Brazil,,,” We rented a Fiat in Brazil last year and it did fail. Hertz’s replacement, a VW Polo, seemed to us luxurious and well-made in contrast to the Fiat. Both would be unacceptable in the USA except to the most cost-conscious buyers. You get what you pay for, but only up to a point, of course.
no_slushbox:
I think you are 100% correct on the liquidation issue.
Fiat shows up empty-pockets and sets the car world atwitter (is that copyright protected, yet).
ChryCo liquidates and – presto – Fiat has a dealer network in America.
But Fiat’s cars objectively being good has absolutely nothing to do with how they’d sell.
So what you’re saying is “doesn’t matter whether a car is good or not” in which case, why review cars? This statement would benefit a little clarification. I think that whether a car is good or not would have a great deal whether people would buy it or not.
This isn’t a real shopping demographic anymore.
Erm…again, I need more than that. Just making a statement isn’t enough.
Yaris isn’t seen as a European chic car here, it’s seen as a car you buy because you can’t afford anything nicer. As for the MINI, the BMW association has been a critical component in their sales success here, as well as good timing with a strong economy initially. The 500 is the only car that could make a case for itself as a chic car in the U.S. But 100,000 cars a year? Not going to happen.
My fault on this one, I should have clarified the point. I meant to say “European chic AND people in the market for small cars”.
In that case, it’s a 100% guaranteed failure.
This is an opinion, not a fact. Only time will tell on this one. But a few things need to be pointed out here:
1. FIAT will own a stake in Chrysler, not the other way round. Which Sergio Marchionne will tell Robert Nardelli what to do. Remember, FIAT’s survival is just as entwined in this partnership as Chrysler’s. Why else did they enter into it? For fun…? Also, if he can convince Cerberus that what he is doing is for the good of Chrysler, then Cerberus will back him up. After all, they want to make money…..
2. People thought Sergio Marchionne was 100% guaranteed to fail when he announced he was going to save FIAT and that he WOULDN’T close any factories or make any blue collar workers redundant (he cut management, instead). Mr Marchionne proved them all wrong.
Again, you’re missing the point. As I said above, it’s not about actual quality. It’s about perceived quality. No warranty is going to make Americans think that Italian cars are anything but the worst quality.
I can’t believe you said this! “No warranty is going to make Americans think that Italian cars are anything but the worst quality”. What about Hyundai? Their reputation was down and out, look where they are now….
It’s like I said in my original post. It’s very easy to say “it’ll fail”, but there is quite a lot going for this alliance. I’d say it’s 50-50.
I was really into this agreement until I read your article, which makes some great points.
Maybe the Chrysler/Fiat deal will be stillborn after all, just as the Chevy Volt will be (my prediction). And please don’t let the UAW build Fiats, or they will be doomed already.
However, on the issue of perceived quality: Hyundai fought this battle by actually producing cars with good quality and backing it with great warranties, eventually achieving Motor Trend’s “Car of the Year” status with the Genesis recently (for whatever that’s worth). Even still, I’m still amazed at how every article about Hyundai begins with “how far Hyundai quality has come over the last 20 years”. OK, old news, let’s move on.
It would be nice, if/when Fiats begin showing up in the US, for similar articles to be written to prove or disprove the perceived quality gap. My 1974 Fiat 128SL was like an Italian lover – temperamental, unreliable, good-looking, and fun to drive, but not worth keeping for the long term.
Let’s hope Fiat’s current offerings are different, or else they will fail here again, and take Chrysler down with them.
The prospect of being able to buy an Alfa here in Toronto got me mildly excited for a moment. Then it got me thinking: do I prefer a Fiat with Fiat quality, or a Fiat with Chrysler quality? If that didn’t cool my engines, the thought of a Caliber grille on an Alfa 147 certainly did.
Wouldn’t the world be a far better place if we just adopted the same safety & emissions rules & regs as a common market?
So we’d have California emissions, Canadian bumpers, Japanese displacement and European hood heights?
Heh..
Actually, I agree with you. The problems aren’t so much that any one country has very strict regulations, it’s the patchwork of particular regulations and an utter lack of planning on the part of the manufacturers. If the Toyota-freakin’-Yaris can pass California emissions, meet Canadian bumper-bash standards (sniff, sniff, I’m so proud!) and European pedestrian NCAP, there’s no excuse for any high-buck European car, excepting “We don’t want to spend the money”
I’d love to own an Alfa, but not a Chrysler-built Alfa with a fugly Dodge nose on it.
If they try to pull that crap, it’ll be the final nail for Chrysler to me. I already have no interest in their products, but that’d ensure that I stay away from them forever.
JB-”But Fiat’s cars objectively being good has absolutely nothing to do with how they’d sell.”
Never know until you try
JB- “Yaris isn’t seen as a European chic car here, it’s seen as a car you buy because you can’t afford anything nicer.”
Something wrong with that? Poor people need new cars as well. Sounds like you’re insulting people who can’t afford “nicer” cars. The Yaris does have a bit of “nerdy chic” to it. It’s inexpensive, simple and comes in a hatchback that’s good for art supplies and musical instruments.
Maybe Chrysler can sell the Fiats as the cars for “geeks” and “nerds” because Saturn has abandoned us.
“Again, you’re missing the point. As I said above, it’s not about actual quality. It’s about perceived quality. No warranty is going to make Americans think that Italian cars are anything but the worst quality.”
It couldn’t hurt plus it works for Hyundai. Maybe Chrysler could sell the Fiats to people under the age of 30 who don’t remember the ones that were sold in the US back in the 70s.
Chrysler’s perceived quality isn’t any better than Fiat’s.
The Dodge-branded Mexican-built Fiats will have to appeal to everybody in America if Chrysler is to survive. They’ll have to compete against Honda, Toyota and Hyundai. They’ll have to compete against Ford for both quality and patriotic factors.
Of course the car enthusiast crowd is excited. But all the car enthusiasts in the country won’t buy sporty Dodgiats. Some will. And even then, Dodgiat will have to compete against sporty offerings from Mini, VW, Mazda and others.
So let’s revisit Dodge/Chrysler’s success rate at selling imports in the past.
- Eagle Monaco. That would be a Renault made in Wisconsin, acquired by Chrysler when they acquired the remnants of AMC. Did not sell.
- Dodge Challenger & Colt. Plymouth Arrow. Boy, that was so successful, wasn’t it? No.
- Chrysler Cricket … comin’ through! Nope.
- Alfa-Romeo. Yes, that’s right, in the early 1990s, your local Chrysler dealer experimented in selling Alfa-Romeos. How’d that work out?
Dodge/Chrysler are not alone. Neither GM nor Ford has successfully sold “captive” imports.
This plan, if Chrysler lasts long enough, is doomed. With today’s proclamation from the President about EPA mileage, it may force the extension of bailout payments to Chrysler and GM. But it still doesn’t assure their survival in the marketplace.
Let’s be honest with ourselves guys … how many of you are thoroughly happy with your Mexican-made cars now? Why would a Mexican-made Fiat sold at a Dodge dealership be any better?
Mr. Berkowitz,
Let me ask you this:
Which would cost more, 1) developing a stable of small cars completely from scratch, or 2) adopting an existing stable of small cars for use in the US market.
I know it won’t be cheap to adopt these cars to US crash standards, etc., but come on… doing so is *way* cheaper than having to design/develop these cars from square one.
That said, I think it’s a fairly decent move, even if it is the automotive equivalent of a crocodile’s death roll. (Hey – sometimes crocodile’s death rolls are effective.)
I have always wanted a little Fiat or Alfa, and if the only way I can get one is to buy it with a Dodge or Chrysler badge, then I might just have to bite, provided they don’t dilute the living *&$# out of it when they carry it over.
Since Chrysler and Fiat just decided this week what products they wanted to import and build in the US, they obviously have not come up with detailed and considered cost estimates for doing this stuff. The numbers they feed the government will just be WAGs (wild ass guesses).
Maybe we do need an auto czar to look at their production plans, to see if they’ve actually done the industrial engineering, the budgeting, the critical path studies, regarding building these new car lines. I think we all know what the answer is.
# Robert Farago :
The problem here is that Chrysler is using my tax money. If they weren’t, I wouldn’t care what they built.
(Chrysler: damned if they do, damned if they don’t)
Robert, While I sorta understand your ire, I’m not sure I see the connection. On the surface, there is no taxpayer money going towards filling FIAT’s coffers. They (appear) to be trading existing platforms and manufacturing capacity for a percentage of Chrysler’s future profits. Chrysler, meanwhile, continues to use the loan money to maintain daily operations.
I would love to see the actual verbiage of the FIAT/Chrysler tie-up… OK, I would not have a chance in hell at understanding the legalese, but I would hope that one of the Best-n-Brightest would provide a cliffnotes version. Until then, there are many questions unanswered about the deal as it stands, such as: Is the 35% voting or non-voting, Are there quality/warranty goals and/or gates, Whose design studio is finalizing the rebadge, What is the timeline for the delivery of salable vehicles, Also is the 35% guaranteed or is there a sales volume attached, etc, etc???
For all the love that the 3-headed dog gets, (ok, that line made me laugh a little), I doubt they would bait a hook that had no barbs…
Someone hinted at this earlier, the key here is the dealer network. Isn’t one of the biggest problems for these struggling American car companies, the huge sluggish dealer network that they have to work with?
Bring in Fiats (or whatever European cars that suit the bill) for a trial period and then give dealers and option to spin off 100% into that brand after a period of time. That gives Fiat (or whoever) an inroad into North America without huge setup costs and it absolves Crisisler from their clogged network. Some of those dealers will snap at the chance to market something new and fresh instead of old and stale bankruptcy paperwork.
Yes it would create more competition but that could stimulate the marketplace. If the cars are crap, then choosing American instead will suddenly be a brilliant choice (until they realize it’s still crap).
GM and Ford could follow the same model with other European brands to scale back on their respective dealer networks.
Katie and Justin, sittin’ in a tree…
Whether or not it would work, I kind of hope it does. If Fiat wants it to work, maybe they’ll kick in some Lira on a date to be determined. The worst thing that could happen? Chrysler fails, and the remaining 1500 dealers are stuck with selling Fiats made in Mexico. I’m not an italophile (my Moto Guzzi notwithstanding), but to me everything except the 500 makes sense. Another 7 year warranty could get me into one, or at least have me considering it. I’ll admit to being a Sinophobe—I’d rather have a Fiat than a Chery.
As for federal funds going to support this, that train has already left.
1960 Hi-Fi; 1990 WiFi; 2009 Chry-Fi
I think Chrysler will import Fiat AND I think GM will import Chinese brands.
Their excess dealers will be given the imports to sell on condition they give up moving Detroit iron.
Only imports which directly compete with Toyondissan products will be brought in. They will be sold with similar spec levels and guarantees but at a lower price. Detroit’s goal is to destroy their Toyondissan competition in a weak market while being themselves kept on govt. life support.
US safety and emissions regulations will be waived provided the imports meet their national regulations. (After all, they value their lives and their air as much as Americans do.)
@ Sutures :
“On the surface, there is no taxpayer money going towards filling FIAT’s coffers. They (appear) to be trading existing platforms and manufacturing capacity for a percentage of Chrysler’s future profits. Chrysler, meanwhile, continues to use the loan money to maintain daily operations.”
Ok, I agree, on the surface that seems to be the case. However, FIAT demanding the $3B in extra bailout money as a condition of the deal made me think there is more to the story. I mean, are they just giving Chrysler the license to build their products? My guess is that they are charging Chrysler for the use of them and have their eyes on a chunk of that $3B.
In any case, Chrysler certainly can not develop its own cars, so a partnership is its only path to get saleable replacements for their current lineup in the next 5 years. However, they need at least $3B to make that work and will face an uncertain market for said vehicles, at best. Why not spend the $3B helping the supply base cope with the collapse of Chrysler?
Way up toward the beginning of this thread, Chuck Goolsbee wondered: “Wouldn’t the world be a far better place if we just adopted the same safety & emissions rules & regs as a common market? If Euro/North America/Japan/Aus-NZ all were the same, in terms of crash safety & emissions then all this hand-wringing about what will and won’t work in this market or that would be left to the market itself.”
Probably for similar reasons that we can’t even figure out that it’s a good idea for all the cars in the United States to be built to the same air-pollution standard. Or that it would be a good idea not to have boutique blends of gasoline for each little air-pollution district in the country.
@ Justin Berkowitz:
I have to disagree with your disagreement with regard to Katie’s first point.
That shopping demographic absolutely exists here in the northeastern part of the United States.
One more vote here for “if they weren’t using MY money I wouldn’t give a damn..”
But as to the real question – IF they are going to do it, HOW do they they do it at least well enough that there is a chance of paying back taxpayers money?
Well, the best option for sales success is to sell Fiats as Fiats. There is at least a shred of legitimacy in buying a funky little Italian car that’s still got an Italian name. As a former Fiat owner I can personally attest that I would not have bought it had been called a Dodge!
Longer term, I can see Chrysler re-bodying a common platform. If it is a thorough job, like the Mazda 6 / Ford Fusion, each car can have a distinct identity and the good aspects of the platform can remain in both. Re-BADGING Fiats as Dodges would be an unmitigated disaster – you alienate both the few people who’d buy a Dodge, and the few who’d buy a Fiat.
Something tells be the brain trust will pick that last option. There goes my tax money…
I appreciate the mental exercise many of the commentators make, but we all know that Chrysler is dead. Done. Finito.
I hope the feds can find a couple of synapses to rub together and refuse to loan Chrysler the money. Chrysler goes Ch. 7, Fiat buys a chunk of their distro channel and plants at bargain basement pricing and plans on manufacturing some really cool products here.
None of this stealing from taxpayers bullshit, though. If that happens, I’ll do without the 159 Sportwagon I want.
On the surface, this doesn’t seem to warrant an instant “fail”.
Of all the mergers as of late, I think this one makes the most sense. Chryco needs small cars and Fiat needs to get in the NA market with NA production. Chryco has capacity & distribution to spare. Fiat has the platforms and tooling already done. All it’s going to cost is to order same tooling for the soon-to-be empty factories vs. developing new cars.
Frankly, I don’t see a downside for Chrysler, and Fiat is the one taking risks here. If they were smart they’d really take advantage of the Jeep nameplate and distibute all trucks, SUVs, CUV’s under that brand to developing markets better than Chryco could.
I guess it’s all up to how the final agreement is worded, etc., but to say it’s an epic failure might be a bit premature. I give it a 50-50 chance, and frankly that’s a LOT better than the chances of Chryco making it on their own. If it takes bailout monies to work, then so be it.
The whole idea behind the bailout was for the company to survive and save some jobs. And,
I also remember from the hearings that they were almost encouraging same companies to form joint ventures to ensure they’d survive. I think it makes more sense to at least increase your odds of having Chryco survive, and possibly pay back the loans rather than basically writing off the billions you’ve already given them.
Whether or not the loan is paid back in Dollars or Euros shouldn’t matter, should it?? I’ve probably not tracked the bailout stuff as closely as the editors here, so my humble opinion may not be well-informed, but on the surface, this seems like a better deal for saving jobs and quickly getting cars to market to meet the new administration’s lofty goals than a tie-up with any domestic mfg.
rochskier :
I have to disagree with your disagreement with regard to Katie’s first point.
That shopping demographic absolutely exists here in the northeastern part of the United States.
I think the people are there but their potential devotion to Italian products is not. I live on Long Island myself and have to say, plenty of BMW 3-Series coupes with tinted windows. Not sure those same folks would be willing to buy a 147 or Fiat 500.
the economist had a good take on this deal. to paraphrase: basically, fiat is too small to survive so this is a fairly cheap way of expanding. if they manage to save chrysler, they’re heroes. if chrysler dies its deserved death, they have first dibs on the corpse. either way, fiat’s looking reasonably clever on this one.
that it’s my tax dollars that are being pissed away on this …
@Justin Berkowitz
I don’t disagree with you disagreeing with rochskier’s disagreement with your disagreeing with Katie’s disagreement.
Mr Farago,
I don’t disagree with Mr Berkowitz disagreeing with my initial disagreement.
But I’m normally right, so it saves time if everyone just says “You’re right, Katie.” and then, I can say “Right, everyone, I’m let’s move on, all right….?”
CopyRIGHT Katie Puckrik.
:O)
Yikes.
I won’t enter the debate on whether A) the Chrysler-Fiat plan is a good one, B) whether Fiat makes good cars or not (cuz I’ve never driven one and don’t know), C) whether one could market their way into a Fiat success in the U.S., or D) discuss the tax ramifications.
(By the way, I think Clarkson hated the 500 cuz May had just purchased one.)
No, my post is to bring up something I think I heard long ago on this website and others…
Nardelli and team quite possibly have a plan to take Chysler completely out of the car making business and use it as a sales channel for others.
First, it was Nissans. Then, it was the Chinese.
Now, it’s Fiats. (And didn’t Congress tell Chrysler they didn’t think they’d make it without a partner?)
If Cerberus’ plan has been since the gitgo to pull the plug on US manufacturing and rebadge the toil of other companies, isn’t this Fiat deal dead-nuts on-target?
Just askin’ cuz I don’t know.
KatiePuckrik :
So what you’re saying is “doesn’t matter whether a car is good or not” in which case, why review cars? This statement would benefit a little clarification. I think that whether a car is good or not would have a great deal whether people would buy it or not.
It does matter if a car is good or not. But there are other factors that are necessary for sales success. Think of it this way: you think Jaguar’s X-Type is a fantastic car. And yet, it was a disaster for Jaguar. On the other hand, the Toyota Camry sells extremely well in America.
Erm…again, I need more than that. Just making a statement isn’t enough.
Well I don’t have studies on the lack of nationalistic buying habits for Italian-Americans. But the plan of “Italians in America will surely buy Italian cars” is hugely specious.
1. FIAT will own a stake in Chrysler, not the other way round. Which Sergio Marchionne will tell Robert Nardelli what to do.
No. Fiat will have a minority stake in Chrysler. Marchionne won’t be telling Nardelli what to do. Odds are good in fact that Marchionne wants as little responsibility to Chrysler as possible.
Remember, FIAT’s survival is just as entwined in this partnership as Chrysler’s.
What? Why? They are taking a 35% stake in Chrysler. For free.
Why else did they enter into it? For fun…?
For access to an American dealer network, and because it is an opportunity for volume-driven Fiat to add volume. And because it’s free.
2. Mr Marchionne proved them all wrong.
Turning Fiat from a hugely sick company to a slightly sick one was indeed an enormous accomplishment. But Marchionne isn’t running Chrysler – not even close to that. In any case, miracles aren’t common; that’s why they are miracles.
I can’t believe you said this! “No warranty is going to make Americans think that Italian cars are anything but the worst quality”. What about Hyundai? Their reputation was down and out, look where they are now
Hyundai isn’t Italian. Seriously. You’re not getting the American buyer mindset.
Didn’t Saturn already try this strategy?
Astra anyone?
fromBrazil wrote, “And I respect both your opinion and your site. But unfortunately or not, apparently it isn’t what’s gonna happen. The government is always doing stupid things.”
Actually, here in the States, we’re hoping to upgrade from “always doing stupid things” to “always does foolish, ill-considered, counter-productive or needlessly expensive things.”
That’s “Change We Can Believe In” and a marked improvement from how things were going, if President Obama can pull it off.
@ Mr Berkowitz,
1. Using the Jaguar X-Type analogy. Yes, I love the car, but I can also appreciate that other people won’t (Hence, why it didn’t sell). But you’ve just made the conclusion that FIAT’s won’t sell on the basis that “being good has absolutely nothing to do with how they’d sell” (Then, in your last post you say “It DOES matter whether a car is good or not”). If everyone were to follow that logic, nothing would get made!
“Hey! This car is brilliant! Great handling, terrific build quality, the lot!”
“Hang on! It still might not sell…”
“You’re right, better shelve the idea….”
FIAT have to take the plunge at some point, they’ve been given an opportunity might as well take it.
2. My statement about “Italian americans buying FIAT’s” may be specious (even though Rochskier agrees), but you say “Well I don’t have studies on the lack of nationalistic buying habits for Italian-Americans.” so why make the statement? Many americans and american companies still buy american cars for themselves and their fleets. So someone wants them, what’s so illogical about a group of people who want a car which reflects the pride of their heritage? That’s why I buy stuff made in the UK (Hence, the Jaguar X-Type).
3. FIAT’s 35% is still significant. Ford only owned 33% in Mazda, but they still installed their own CEO and controlled the company. Also (as I said earlier), if Marchionne can convince Cerberus that what he wants to do is for the good of the company, then Cerberus will back him all the way. Cerberus want to make money of Chrysler, not foster a long term vision of Chrysler.
4. I know Hyundai isn’t Italian, but the prinicple is still the same. In fact it was worse for Hyundai, because when Hyundai came to the NA market, it was the NA first taste of Korean cars. They eventually found out it was rubbish and swore off them. Hyundai, then, won back those customer through sheer hardwork of making their cars better and changing how people perceived Korean cars. Likewise, what makes you think FIAT can’t do the same? To say “No warranty is going to make Americans think that Italian cars are anything but the worst quality.” is a bit of a sweeping statement, unless you have the evidence to back it up?
For record, I’m just optimistic that this could work (given correct management), if it fails, it fails, if it succeeds, it succeeds. That’s all. I’m not answering any more points on this topic.
That’s all. I’m not answering any more points on this topic.
We’ll see you next week on Prime Minister’s questions.
The trouble is, I think most of your arguments are why it’s possible that maybe, there’s a chance this might not be a total failure. Just because something slightly analogous worked out well before doesn’t mean it will happen now. For example, Fiat isn’t replacing the CEO of Chrysler any time soon. Seriously. Just because it happened at Mazda doesn’t mean it’s happening here.
Even if I concede that this isn’t a 100% recipe for a flop (and I don’t), I think it’s still a poor business decision.
1. Katie is on to something here.
2. I am an Italian-American. I love both countries. I’d consider a Mini Cooper as a commuter vehicle, and even though the Fiat 500 scores slightly lower than the Mini Cooper in most reviews, I’d take the Fiat 500 over it.
Why? It’s Italian. There’s your evidence.
Forza Italia, sempre!
@ Vorenus :
Fiat tried this last time and again with Alfa Romeo. Sell Italian cars to Italian Americans. It’s just not enough to make a business case for this country.
I do agree, however, that if Fiat/Alfa do return to the U.S., advertising their Italian character will be very important.
Personal opinion:
Any Fiats that are brought over here will probably be sold as Dodges. The Dodge brand has a giant gaping hole in the market segment that Fiat excels in, and even though many here may hate Dodge, I’m willing to bet the average consumer thinks better of Dodges than “Fix It Again Tony’s”
Alfa, on the other hand, has cache. They’re not going to rebadge Alfas as Dodges or Chryslers. I know most of you hate Chrysler with a passion, but they’re not that dumb.
The most exciting thing about this for Chrysler is they finally have access to I4’s that don’t suck. They made a huge mistake the GEMA World engines instead of upgrading their good-but-old “Neon” engines that were in the Neon, PT Cruiser, Cloud cars. The platforms that cars like the Caliber and Sebring ride on is not the problem with the cars, and it actually scores quite well in crash tests. It’s the powertrain, tuning, and design that’s the issue.
I think that an affordable Italian car in the U.S is overdue!
Give them a chance…
Lets see if they have overcome the problems of the past.
If a joint partnership with Chrysler allows that to happen,GREAT!
Its about time americanns have a choice other than the Asian Makers!Now we need to get some french cars available….