Fiat is taking a 35 percent stake in struggling automaker Chrysler LLC, with an option to increase its ownership to a controlling 55 percent. In return for its initial stake, Fiat will retool a Chrysler plant to make one or more Fiat models that would then be sold in the U.S.; it will also share its small-car engine and transmission technology with Chrysler. (The Wall Street Journal)
What the commentators said
What is Fiat thinking? said Douglas A. McIntyre in 24/7 Wall St. “Buying part of Chrysler would be suicide.” The U.S. car market is shrinking, and Chrysler’s market share is shrinking even faster. And in Fiat’s area of expertise—small cars—the U.S. market is already dominated by Toyota, Honda, and certain GM and Ford models.
But the small-car segment grew last year even though overall U.S. car sales dropped, said Julie MacIntosh and Bernard Simon in Financial Times. So now might be a good time for Fiat, which pulled out of the U.S. in the 1970s and '80s, to get back into the North American market with locally made cars. And Chrysler? It needs to push past the gas-guzzler and outside the U.S. market.
What it needs the most, though, is cash, said David Welch in BusinessWeek online, and Fiat doesn’t have enough. Chrysler’s current owner, Cerberus, and its previous one, Daimler, never gave it “the cash, technology, and hardware to turn loose the creativity that made Chrysler the loveable underdog.” When it had money, Chrysler won over buyers. It “invented the minivan. Jeep created the SUV market.” Fiat can’t revive Chrysler with synergies alone.
Maybe, but there are enough to make it worth a try, said Noah Joseph in Autoblog. Chrysler wants two things Fiat excels at: selling cars in Latin America and making small cars. Fiat, meanwhile, can make its 500 and its Alfa Romeo brand in the U.S. and sell them through Chrysler’s established dealer network. Compared with other rumored auto mergers, “this looks like a match made in heaven.”
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