Do the seagulls know something we dont? - Fiat and Chrysler (Chrysler owns Jeep - above) seems like an unlikely union
Fiat Auto Group’s deal to create a strategic alliance, and eventually take a 35% stake in ailing Chrysler, has been met with a mixture of despair and rejoicing by the wider automotive industry and its league of commentators.
MPG-omatic on twitter summed up the American mood, saying: “Fiat/Chrysler: USA wins with small cars/high-MPG diesels…Alfa = cherry on the top.” And in response to me suggesting the deal seemed not too clever, labovandbeyond responded “if it involves Fiat bringing the 500 stateside in any way, then we’re all for it.”
One of the best looking cars in white paint, Fiat 500 is already ubiquitous on roads of Europe
But what might it really mean? Unsurprisingly, America seems much more excited at the thought of affordable Italian metal than any European is at the thought of more Sebrings and Avengers. In essence, this is about Chrysler getting its hands on some efficient, small diesel (and probably petrol) engines (both a Fiat strong point), and on current, proven, (along with future) small car platforms. In part, this is so it can show congress it has a case for bail out money, and is viable as a company, come April. With both Ford and GM making big noises about bringing Fiestas and Sparks stateside very soon, Chrysler clearly thinks it needs to compete – but has nothing to offer – and one doubts it has either the cash, or the time to design anything from scratch itself. Fiat’s proven; successful small car platforms (once tweaked to pass US crash regs) could provide the answer.
Clearly, the deal has potential synergies. Chrysler makes big sedans, SUVs and pickups – Fiat doesn’t. Fiat makes fun, stylish small cars – Chrysler doesn’t. Fiat leads the world in turbo-diesel technology and is fairly hot on the future turbo-charged, advanced petrol engine stuff too. Additionally, in Alfa, it has a brand that attracts some of the greatest automotive love going – but currently lays largely untapped.
Gt1300 Junior (above) made it to the US...
...more recent group offering such as Alfa 166 and Lancia Delta (below - HPE concept form), haven't
So with obvious potential wins, why did the deal feel wrong to me on first viewing? Of all the automotive alliances, very few have worked well. Renault-Nissan springs to mind as a success, but a cursory glance over its current balance sheet hints otherwise. The VW group has had the greatest level of success with platform sharing out of any group, but until fairly recently, only really had Audi making reasonable money, and clearly still hasn’t a clue what to do with the likes of Seat.
Most troubling, is that technologically, Fiat and Chrysler have little to offer on the future drivetrain front, right now. If one buys into the idea that the automotive industry will be revolutionised in the next five-to-ten years, led by a movement away from the internal combustion engine, towards battery power – then this could present challenges.
Chrysler has been badly beaten up, under Daimler, then Cerberus, by the press – and in the minds of consumers. Few believe its electric car story is viable. And its way off the Japanese levels of quality and reliability Ford and GM have begun to hit. Most of its existing platforms are dated. Much about the company has a whiff of corpse about it.
Dodge EV concept had its third outing at NAIAS - still judged as little more than thinly veiled Lotus Europa with some "electric vehicle" stickers...
So what the hell is Fiat playing at? One answer could be that it has become so desperate for a global partner, so convinced that any auto group making less than 5.5M units a year will collapse in the present climate, that it has jumped into bed with Chrysler - turning a blind eye to the last three month’s worth of news. And yet… history suggests that we shouldn’t underestimate the Italians.
Sergio Marhcionne, Fiat group’s head, rescued the company from the brink before. Largely, he managed this thanks to some clever business dealings with another US based automotive firm, and by building products people wanted, and co-developing - or selling on - Fiat’s vehicle platforms. The only really plausible theory, therefore, is that Fiat is playing a canny game with this deal. As far as we know, it hasn’t paid Cerberus any money for 35% of Chrysler. In return it donates platforms it has already developed and paid for. Stunningly, one of those platforms – sitting underneath both the Fiat Panda and 500 - has already had part of its development paid for by another American firm - Ford – who use it underneath the European Ford Ka. Fiat therefore stand to get two different American car firms to pay for one car platform. Smart business, no?
In return for not spending any money, Fiat group gets access to some (old Merc) rear-wheel drive sedan platforms, a confusing line-up of Jeep SUVs, and the potential to share future development costs, and utilise economies of scale that come with doubling in size. So far, so-so.
Lancia Delta Integrale one of the company's all time great cars (not to mention icon of world rallying)... could the US market give Lancia a new raison-d'etre?
What’s far more important is that Chrysler gives Fiat a shortcut back into the US market. Long known to covet a return to the US, particularly for its Alfa Romeo brand, Chrysler gives Fiat access to over 3000 dealers, (which would be almost impossible for Fiat to build from scratch), and – potentially – some currently underused factories, in which to build cars. I suspect the US market could give Fiat a decent reason to keep its Lancia brand alive, too.
Of course, it’s not that simple – nothing in the car industry ever is, but if it sounds strange, delve deeper into Fiat’s GM story. Fiat teamed with The General – donating the diesel engines and providing European synergies, in return for the co-development of two of the platforms that might head America’s (and Chrysler’s?) way – the Grande Punto (which also sits under the Opel Corsa) and the Alfa 159/Brera (originally intended to sit under some SAABs). This latter platform is renowned in the industry as being over-engineered, over-weight and uncompetitive with the premium German brands due to its front wheel drive nature. Yet it’s also so tough and safe, that it would likely pass US crash regs with little, if any adjustment, and – to many people – underpins one of the best looking cars on the road today.
Alfa Brera - overweight, and sadly front wheel drive - but a 'looker' for sure.
Crucially, Fiat was clever enough to write-in such a smart get out clause, that when GM wanted (and needed) out, the money it had to pay Fiat to disentangle itself, allowed the Italians to head-off the bailiffs from the doors of Mirafiori. One might muse that the real irony of this story, is that if Chrysler ends up using the Grande Punto platform under a future small car, then it would be using a vehicle developed by GM. Not that this makes it a bad platform… I speak with authority here, as a Grande Punto driver myself!
Grande Punto still one of best looking cars in the B-segment, even with daft sill extensions (right). Simpson's own car (left) looks much purer...
And perhaps that’s the reason this deal could work. Americans seem - for the most part – to be rejoicing at the idea of being able to buy cool, cheap, small and efficient Italian metal. If that really happens (and if it doesn’t then little here does make sense) then the US is in for a treat, and Fiat might just have pulled off the deal of the century – and have the last laugh, once again.
Photos: Joseph Simpson, except Dodge EV - Robb.Hunter (Robb Hunter) on flickr, Lanica Integrale - Charmermrk (Mark Charmer) on flickr, Lancia Delta HPE oriOn on flickr and blue grande punto, alfa 166, white 500 and Gt1300 Junior - all iwoaf (Nick Simpson) on flickr
Posted by Joseph Simpson on 22nd January 2009
I think the US dealership network must be the key element from Fiat's point of view, an especially good platform from which to finally launch Alfa? And there appears to be little risk for Fiat. Chrysler must be over the moon too. So everyone wins? Unlikely. I still can't see Chrysler surviving.
Posted by: Robin Brown | January 23, 2009 at 09:56 AM