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Fiat Chrysler Essay

1. According to a major economics consulting firms, Fiat`s ¨South American operations are the jewel in the Italian company`s global operations¨. Fiat has plants in Brazil and Argentina, and Brazil is the biggest market, well ahead of its home-country market. In 2011, with the Chrysler venture taking up more and more of the firm`s attention – and as European sales suffered a steep decline – rumors began to circulate that Marchionne might move Fiat headquarters from Italy to the United States. Discuss Fiat´s takeover of Chrysler as part of strategy to transform itself from international business into a multinational or global business

2. What benefit does fiat hope to gain from its arrangement with Chrysler what potential drawback does it face? Judging from your analysis of benefits and drawbacks, explain why the Fiat-Chrysler arrangement might be characterized as strategic alliance? In what sense is it best characterized as a direct investment? 3. What challenges in the US cultural environment do you expect Fiat to face as it uses its Chrysler connection to compete in the American car market? What management challenges will Marchionne face in the areas of planning and decision making, organizing and leading?

Before their merger, Fiat and Chrysler were two comparatively small regional companies overly reliant on just three auto markets—the U.S., Italy and Brazil. Through the first nine months of 2013, nearly 85% of the Fiat’s automotive revenue came from North America, Latin America and Europe. About two-third of its profit before interest and taxes came from North America, according to data on the company’s website.

In the U.S., Chrysler, though profitable, still suffers from the drought of research and development spending in recent years—a gap acutely visible in midsize sedans. Chrysler faces significant investments to keep pace with rising U.S. government fuel efficiency standards. Chrysler-Fiat ranked last among 11 auto makers in a U.S. government scorecard of average fuel efficiency published in October. In Europe, Fiat faces some of the biggest challenges of any mass-market manufacturer. “Fiat’s European business is the most structurally challenged in the region,” said George Galliers, an analyst at London-based broker International Strategy & Investment Group Fiat’s European market share has dwindled to 6.2% in the first 11 months of 2013 from 8.8% in 2009, according to the latest data.

In November, Fiat sold fewer cars in Europe than it did in Brazil, and that South America market is now vulnerable amid worries over the sustainability of its economic growth. Fiat and Chrysler also are working on new vehicle architectures, aiming to produce more models from fewer underlying sets of platforms. Analysts say it will be important for the vehicles to suit different markets without substantial and costly revisions. Another part of the Fiat-Chrysler strategy is to use Chrysler’s U.S. factories to build Fiat models and vice versa, helping to better distribute production and help fill Fiat’s half empty Italian factories.

The first fruits of the integration are on display here, and promise to help Mr. Marchionne achieve his long-term goal of increasing global sales of the two companies to six million vehicles by 2014. Together, Fiat and Chrysler sold about 4.2 million cars and trucks last year. The marriage of an all-American Jeep with the Italian luxury heritage of a Maserati is the best evidence yet that Chrysler and Fiat can create products together that they could not afford to make independently, Ever since Fiat took control of Chrysler, Mr. Marchionne has said he planned to leverage the strengths of both companies and operate them as co-equals. “Daimler could never figure out what to do with Chrysler because they had no interest in integrating it into their business,” Mr. Hall said.

“But Fiat actually believes it needs Chrysler for mass purchasing of parts.” The strategies used by the multinational enterprises are extremely diverse. Our purpose in this paper is not to explore their multitude, but to have a better picture of the most successful strategies employed by large multinationals, analyze their strengths and weaknesses and derive the main factors that create a difference. We found innovation, cost reduction and market conditions as key elements supporting a successful internal strategy and strategic alliance and diversification to be among the most widely applied strategies for a foreign market penetration and development, while fusions and licenses were the least preferred.


Lots and lots of question marks. It all depends on how it goes. If Fiat can pacify Chrysler, if the integration of Fiat-Chrysler works, if Americans really buy smaller-engine cars, if the new platforms prove successful, if they keep their position in Brazil and manage to break into Russia and China, if Europe recovers. However, there are good, solid reasons for hope of a better future. Dark clouds abound, but here and there, there are rays of sunshine. They are well-positioned in some key markets. They’ve established a foothold in North America.

They have a big presence and are a player in markets all over the world (except Asia). The cars are more reliable than ever before, yet still manage to be engaging and more fun than some of the competition and most owners are satisfied. Their new engines are renowned and studied and copied by other makers as they really do point a way into an ever more frugal future. However, do they have the capacity to overcome the difficulties? You can be an optimist or a pessimist, but the reality is… Only time will tell.

What Does Chrysler Get?

Fiat will share with Chrysler its platforms and powertrain technology, including engines, transmissions, and fuel-saving tech. Today’s announcement specifically mentions city and compact vehicles, products Chrysler will need should American consumers actually decide to buy the small, fuel-efficient cars U.S. lawmakers claim they want. Chrysler will also get better distribution of its products, certainly in Europe, but also in places such as India—Fiat has a partnership with Tata Motors—and Brazil. Fiat also has a deal with Chery, the Chinese automaker with which Chrysler had been trying to partner. Both Chrysler and Fiat will also be able to better leverage their global supplier ties and therefore see cost savings in larger volume.

What’s in it for Fiat?

For Fiat, the reward is simple: distribution channels. Currently, Fiat only sells Maserati and Ferrari in the U.S., although Alfa’s gorgeous 8C has been sold here in extremely limited numbers, as well. If Fiat wants to become a truly global entity, a foothold in North America would be most helpful. Alfa Romeo has been promising a proper return to the U.S. market for some time, and Chrysler’s distribution network could ease that brand’s return to our
shores—perhaps even saving some Chrysler dealers from closing altogether—and could also serve as a point of sale for potential Fiat and Lancia imports, too.

Fiat will also likely be able to use excess global production capacity to assemble Chrysler-badged variants of its products. With worldwide auto sales slowing, that would help Fiat to continue manufacturing at pre-slowdown levels; Chrysler could potentially build Fiats in its plants, as well. A wrench in the works: Chrysler is still in a partnership with Nissan. One product of that hook-up is expected to be a Versa-based small car, possibly based on the Dodge Hornet concept. (That car was also rumored to have sprung from the potential Chrysler/Chery partnership.) We wonder how this new Italian-American deal might affect those already in place with Nissan, which include rebadging the new-for-2009 Dodge Ram as the replacement for the Titan.

It’s All About Synergies—and Other Buzzwords

Despite Fiat being on the financial ropes itself only a few years ago, Italy’s last remaining large car company has come fighting back like Rocky Balboa thanks in part to a $2-billion alimony payment from its annulled marriage with General Motors. Chrysler could do a lot worse when it comes to picking a dance partner for 21st century survival. Speculating further, here’s how a few Fiat products could make an impact. A caveat: most of Fiat’s vehicles weren’t designed with U.S. crash and emissions standards in mind (the 500 being an exception), so it’s possible that we’ll have to wait at least until the next generation of each of these cars arrives before they could be sold here. Fiat Grande Punto: It wouldn’t be much of an exaggeration to say that the Grande Punto is the car that saved Fiat. At the time of its introduction back in 2005, the Italian auto giant was staggering after years of neglecting the small-car market, a segment which had made it such a powerhouse from the 1950s through the ‘70s.

Handsome, well-built, and economical, the Grande Punto surprised the automotive world by being, well, so unlike the rust-prone wheezeboxes Fiat had peddled to European consumers for the previous two decades. Maybe it didn’t single-handedly save Fiat, but had the Grande Punto flopped, it could have destroyed the company. Sized to compete with cars like the new Ford Focus and Honda Civic, this small Fiat would look nice rebadged as a Chrysler. Its range of economical gasoline-fired engines (from a feeble but fuel-sipping 64-hp, 1.2-liter four-banger to the tire-smoking, 178-hp four found in the sporty Abarth SS model) could earn Chrysler green-car cred, props from the sport-compact crowd, and a valuable slice of the small-car market.

So far, Fiat’s efforts to sell its European models in the U.S. and Chrysler’s American-designed sedans and Jeeps in Europe have produced lackluster results. Before their merger, Fiat and Chrysler were two comparatively small regional companies overly reliant on just three auto markets—the U.S., Italy and Brazil.

Multinational, Global, International, and Transnational Companies Because international business is a relatively new discipline and is extremely dynamic, you will find that the definitions of a number of terms vary among users. For example, some people use the words world and global interchangeably with multinational to describe a business with widespread international operations, but others define a global firm as one that attempts to standardize operations in all functional areas but that responds to national market differences when necessary. According to this definition, a global firm’s management

1. Searches the world for (a) market opportunities, (b) threats from competitors, (c) sources of products, raw materials, and financing, and (d) personnel. In other words, it has global vision. 2. Seeks to maintain a presence in key markets.

3. Looks for similarities, not differences, among markets.
Those who use global in this manner are defining a multinational company as a kind of holding company with a number of overseas operations, each of which is left to adapt its products and marketing strategy to what local managers perceive to be unique aspects of their individual markets. Some academic writers suggest using terms such as multidomestic and multilocal as synonyms for this definition of multinational. You will also find those who consider multinational corporation to be synonymous with multinational enterprise and transnational corporation

Marchionne made it clear that if FIAT was to survive the global crisis, it had to become a global player, and more particularly one of the six world-class manufacturers capable of producing and selling six million vehicles per year. For this reason, a profound reorganization of internal governance and productive processes was needed, along with a strategic alliance with other car manufacturers around the world. The implication of this strategy was that FIAT could no longer tie its own interests with those of its home country, unless all the players involved (employees, trade unions, the Government and the employers’ association itself) were prepared to comply with the company’s requirements.

Thus, in the public discourse of the CEO, the exit option, i.e. the scenario of FIAT moving its plants to sites with lower labour costs in Eastern Europe or elsewhere, became feasible.3 The joint venture with the US manufacturer Chrysler in 2009, which, after the acquisition of a majority share by FIAT, should be considered to be a merger, marks the achievement of the status of global player by the company (hereinafter, FIAT-Chrysler, or the Group).

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