Fiat To Acquire Part of Chrysler: What it Means to You

500 Fresh off a multibillion dollar bailout, Chrysler has announced a partnership with Italian automaker Fiat. Just hours after rumors hit the media about such a deal, Chrysler released an official statement explaining the pact. Fiat will share its small-car platforms and fuel-efficient engines — which are popular in Europe — with Chrysler in exchange for 35% stake of the American automaker. No cash will change hands, just a stake in Chrysler.

The plan will likely send Fiat products — like the 500 shown here — to be built in the U.S. as Chrysler and Dodge products. There likely aren’t any Jeep-esque vehicles in the Fiat portfolio. 

There are many questions left about the deal. Mainly it doesn’t seem like Fiat is getting enough in return for its contribution. Over the past few years, Fiat has contemplated a return of the Alfa Romeo brand to the U.S., but distribution was a main concern. Chrysler’s statement mentions distribution in vague terms. Perhaps when the economy recovers the gorgeous slate of modern Alfas will go on sale in the U.S. That would certainly give Chrysler a true luxury brand to sell.

What does this mean to you?

Brera

Simply, Chrysler should stay in business a bit longer. Don’t expect to see Chrysler 500s anytime soon. Even a straightforward badging job could take over a year to go on sale, especially if Chrysler is intent on building the cars in the U.S. Their partnership with Nissan quickly produced a Dodge version of the Versa in South America, but it was not built in a new plant, which would take months to prepare for a new car. Still, Fiat has a number of small and efficient cars that could become new Neons or replace the Caliber. They’d also likely have far superior interior quality to anything Chrysler currently produces. And speaking of rebadging, the Chrysler wings would look pretty fitting on a Fiat grille.

Chrysler can now kill development of small-car platforms and even a replacement for the ailing Sebring with this new partnership. That will save them a lot of money. There’s no word on how the executive suite will change at Chrysler, if at all.  

The sting of a bailout will certainly resonate today after a foreign automaker has taken advantage of U.S. government loans that saved Chrysler's very existence just weeks ago. With most of the country focused on events in Washington, D.C., there’s no doubt that the timing of this announcement might have been planned to deflect attention from it. The move itself may make sense to industry insiders, but the public may not be happy with it.  

By David Thomas | January 20, 2009 | Comments (32)

Comments 

WestPhillyForever

Ooooooooooo, they cut me off at the knees. My first thought was a Fiat 500 on US shores. I'm still gonna hold out hope.

replace the Sebring with the next generation Alfa 159!

AladdinSane

I'm READY for the 500...I hope this machine reaches U.S. shores soon, and that Chrysler doesn't blow its chance of gaining ground, so to speak, with this Fiat alliance!

BRING FIAT'S 500, Chrysler...Are you listening?
Don't blow it, as you have dozens of times in the past!!!

Peace!<-AladdinSane-

Just because Chrysler has formed a partnership with a foreign company doesn't change the terms of the loan (yes it is a loan, not a gift) they've received. They are still obligated to the terms and conditions that were set forth so no advantage is being taken. And many leaders encouraged, rather begged for Chrysler to find a partner or merge.

UK Diesel Driver

You are not a true petrolhead unless you have owned an Alfa Romeo. I feel positively aroused when I see a 159 drive past. Eventhough I know full well that the 159 (like most other Alfa and Fiat products) is technologically linked to GM products.

GM used to own a large chunk of Fiat which they bought when Fiat (including Alfa Romeo, Lancia, Maseratti, Ferrari) were doing really bad. When Fiat was on the up again GM needed cash and had to sell up.

The Alfa 159 4-door saloon and the gorgeous 2-door Brera shown on the 2nd picture are based on the Opel Vectra / Saab 9-3 / Caddilac BLS (not for sale in US I think) platform. Just like the Fiat Chroma. The engines are also shared between these cars. Petrol engines mostly from GM and diesels from Fiat (they invented common rail injection but had to sell the patents to Bosch for money reason if I am not mistaken).

I want a 159. Badly. Unfortunately it is not on my company car list. And even more annoyingly the new Alfa Mi.To and Fiat 500 are just to small as a 2nd vehicle for our family. Should not have listenend to her harping on about body clocks etc.

One day I will buy an Alfa... (if she lets me)

Original sheth

Why would Americans be mad about this? This does exactly what Chrysler needed. It allows them to stay in business and keep Americans employed and it keeps Chrysler factories open. How is this a negative for taxpayers? If Chrysler's management sat back and let the company go under without making a bold move taxpayers would be far more upset.

This is the 2nd place I have read "Fiat gets little" which I suppose is based on the theory that Fiats are great cars and Chryslers are crap. Fiat does get something, it gets access to the US market, economies of scale, US production capacity and Chrysler's new V6 engine which sounds promising. I think Fiat looked at what Chrysler had to offer before getting into this deal. Do you know how many billions Fiat would need to get up and running in the US market from scratch?

As usual I believe I state that Fiat gets access to the market which is a big deal. However, Smart has shown you can start a small dealership network for very little investment and sell a fair amount of cars, or car as the case may be.

I think after the angst the common man had over the govt loans (not this site, the public) that this will not sit well either, even if it is the right move by Chrysler.

The other question is if Chrysler can last long enough until the new products get here. I assume all the engineers and white collar folks in the small car and midsize car depts may be looking for new jobs as well.

Original sheth

I read that Sen. Corker visited the Det. Show and said he wanted Chrysler to find a partner because that was the only way they could survive. Most experts have said something similar so this is what critics have demanded for a while. Taxpayers (if they are smart) shouldn't be worried about anything but getting paid back. Chrysler needs to stay in business to pay the money back and having a partner will help them stay in business. I'm not clear what good choices were available outide of partnership.

This is the line I was referencing: "There are many questions left about the deal. Mainly it doesn’t seem like Fiat is getting enough in return for its contribution."

Fiat isnt doing much at all. How much is 35% of Chrysler worth in 2009? Not much I suspect. Smart is a niche brand with a few outlets in major metro areas. If Fiat really wanted a piece of the US market I would assume they would want to sell more than a few thousand units a year. US production was also mentioned and setting up a new factory takes a few years and costs at least $1B. This gives them instant access to existing plants and workers.

Original sheth

PS: I think Chrysler will still need design and engineering staff in the US. I dont believe they are going to simply throw a Chrysler badge on Fiat models and roll them down the line. You still need people to infuse Chryser design cues onto the vehicles, come up with interiors, help the vehicles meet US crash standards and add US specific features. I think this is about platform sharing, not simply rebadging.

Smart sold a lot of cars, 25000, considering it had such a small distribution network, 72 dealers, and didn't have a full 12 months of sales. That's about as many cars as Jeep sold of its Compass. Along with Scion and Mini it is a prime example of a successful launch.

If Fiat started with the 500 which is similar to a Smart why wouldn't it look to that model? Honestly it seems you only comment to make an argument for which there is none. I haven't banned anyone from this blog in nearly 3 years but I'm getting close.

Original sheth

DT,

I would hope you wouldnt ban anyone who does not call anyone names or violate any rules. It appears you are saying disagreeing with one of your assements is grounds for being kicked off. I hope that's not the case.

Simple point: If what you are saying is true Fiat wouldnt be doing this. I think that explains everything. I clearly stated that I read that Fiat was interested in US production and thus the SMART analogy is silly. SMART cars are imported and the vehicle is a niche vehicle from a niche brand. Its not representative of what Fiat would be trying to do if it wants to lauch a lineup of small and midsize cars in the US. If Fiat wants US production Chrysler can help them. Does that not make sense? I have no idea how mentioning that fact would be grounds for explusion.

Original sheth

PS. All the vehicles you named are imported into the US which partially explains how they could get up and running quickly. If I'm not mistaken Minis are sold at BMW dealerships so there was no need to set up a new network. Correct me if I'm wrong. Scions are sold at Toytoa dealerships so that was not a concern for Scion. Fiat has no connection to any manufacturers here and thus would have had to start from scratch. Must more expensive proposition.

cxv

Can I go now and put my down payment for my 500?

And exactly why would you ban Sheth from posting? He has his opinion and may be overly argumentative but he never insults or is malicious or is derogatory unlike other people who post on here. Do you know how many times people have insulted me on this site? Plenty.

BTW your article is full of conjecture and so what's wrong with a little debate?

Original Sheth

DT, sorry I don't mean to say it like I know something. I am just wondering that is all. I mean I can see why Americans would like Fiat buying out what is seen as a core American brand, but I just like to sit and think about things and you know pull some stuff out of you know where. Sorry.

sheth

"DT, sorry I don't mean to say it like I know something. I am just wondering that is all. I mean I can see why Americans would like Fiat buying out what is seen as a core American brand, but I just like to sit and think about things and you know pull some stuff out of you know where. Sorry."

Pathetic. Use your own name if you want to show your ignorance. If you actually know something show us instead of pretending to be me.

There's nothing wrong with debate. But every single comment made is argumentative and rarely constructive. Often it is exactly a point already raised in the story. His comments are often inaccurate and require too much time to respond to in order to clarify for other readers.

But if the commenters want him he can stay. BTW We have everyone's ISP so we know who is who and who to ban.

johnnyt

good move for chrysler. fiat makes great cars. first euro partnership didn't work so well, but this one will fare better i think.

dodge, please add a little bit of masculinity to the 500 before putting it on the lot. remember the dodge hornet concept? we do too.

Our tax dollar bought part of the company and it was partially sold to another company.

Idaho Guy

I would love to see Fiat come to America. Fine little cars come to America, and bonus, Fiat scores some of that uber cool German technology.

Frank

I've owned a 500 before, it was a great car. I needed some cash for college, so after 2 years, I sold it and made a $300 profit!
I think this is a good move for Chrysler they need a quality small car.
And not mention the possibility of buying the Alfa 159 here in the states!!! How sweet would that be???

Frank

Also please remember in the congressional debate the merger everyone was referring to was between Chrysler and GM.

Original sheth

"His comments are often inaccurate and require too much time to respond to in order to clarify for other readers. "

DT,

Now you are going too far. Inaccurate information? That is just untrue. What have I stated that was inaccurate that required "clarification" from you or anyone else? My comments are clear and my facts are straight. I said Fiat was interested in US based production and you responded by saying Smart is an example of how a new brand can be launched cheaply and quickly in the US. I dont call that a clarification when Smart cars are imported AND Smart is a division of Daimler so they had a presence to build on in the US market. Fiat has no such presence here and thus can benefit from an established partner to speed up their entry. Scion and Mini are expansion of EXISTING operations in the US. New dealers and infrastructure was not required in order to sell in this country.

The GM-Chrysler merger was discussed during the hearings but GM has since said they are not interested. Corker's comments were made recently at the NAIAS. He said Gm needs to reduce debt and Chrysler needs a partner going forward.

OS
I'm not referring to your comments in this post but everywhere else. You're just arguing. Again you're making the exact same points I made or slight additions and framing them in a way that is completely argumentative instead of helpful. Your tone is always argumentative and rarely helpful.

Belly

I think it is pretty clear why Americans would be upset by this, it is another American icon going the way of foreign investors. There is nothing in this partnership or takeover or whatever you want to call it that will guarantee re-payment of taxpayer money for the loans Chrysler was given. It might be even less likely because it gives Chrysler more of a reason to declare bankruptcy. And in no way is this going to increase jobs or investment in the US. The R&D will happen where Alfa wants it to, and while there will likely be construction of some Alfa models over here it will not be in the same number of vehicles if Chrysler were producing them from the start.

Also it doesn't look like the deal was fair for Fiat up front. Chrysler's stock is worthless, and Fiat's platform's are very popular, it saves Chrysler millions. The upfront equality is not there, but the investment may pay off later.

Dave, I say ban him.

can't wait 2 c the new gen. Alfa 159, current model is sexy but i've heard of reliability issues with Alfa. The next Sebring should be that car!!

Original sheth

Chrysler has limited options. I'm not hearing any alternatives proposed, just crticism. It may not work out and it may anger (some) politicians but many (including some politicians) have been calling for them to merge with another automaker for survival.

DT,

Unfortunately in the age of the internet it appears fact checking has decreased while unsupported editorializing has increased. When a site is open for comments it is inevitable that corrections or clarifications will be brought to light by readers, especially those who follow the industry. I don't qualify a correction as being "argumentative". I think those that agreed with my position about the Lacrosse would say the same thing. It may seem argumentative if the individual who was mistaken refuses to acknowledge a mistake and choses to argue an untenable position. To be honest, I don't see why making a correction or acknowledging a minor mistake is a huge deal.

OS,
As someone who pioneered consumer blogging I am always open to corrections. The collective intelligence of the group will always be greater than any one person or blog.

I believe every time an actual error is brought to our attention it is corrected and acknowledge with a word of thanks. If not let me know.

I've never said I'm always right, and there is editorial in a blog, that's why it is a blog.

However, I believe this blog does well because we do make sure everything we post is confirmed by a credible source before posting.

The bigger issue is this site is really for the car novice and car shopper and we try and explain things simply and to the point. So when a reader sees so much spewed forth against the site itself (while there isn't much reason for it) I think it is a big negative. The dissent isn't the problem, it is the repeated way in which you comment in such a heavy handed manner that I think is turning off other commenters and requires so much of my time to respond to in defense. None of it is actually constructive.

jack

The 500 is just like the Mini in the sense that it has a near cult like status and is available in a myriad of color and trim combos which make it highly appealing to the youth market.

If you happened to check on which car companies had increased sales in 08' there were just two. Mini and Subaru. So putting the 500 in the American market with the ability to manufacture locally and have an up and running distribution system is a significant incentive for Fiat to make this deal. There is little question in my mind that the 500 would be a sales success here. Throw in some of those gorgeous Alfas into the mix and this could be a win-win deal for Chrysler and Fiat.

Original sheth

explanation of what both sides would get from the deal:

http://detnews.com/apps/pbcs.dll/article?AID=/20090122/AUTO01/901220374

I don't like the 500, looks too 70's for me! I'd luv an Alfa MiTo!

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