1. According to a major economics consulting firm, 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 its 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 a strategy to transform itself from an international business into a multinational or global business.
2. What benefts does Fiat hope to gain from its arrange- ment with Chrysler?
What potential drawbacks does it face? Judging from your analysis of benefts and draw- backs, explain why the Fiat–Chrysler arrangement might best characterized as a strategic alliance? In what sense is it best characterized as a direct investment?
3. What challenges in the U.S. cultural environment do you expect
Fiat to face as it uses its Chrysler connec- tion to compete in the American car market? What management challenges will Marchionne face in the areas of planning and decision making, organizing, and leading? 1. Fiat has established it self as quality product. Bringing their reputation and business skill will attract American consumers. Having their attention and possibly blending the product they can conquer the America market for cars as well as Italy, Europe and other country markets. Being based in the US they can now claim Fiat as a US product and use all the tax cuts. Making it more affordable, now it has exotic looks without the exotic prices! If manufacturing is domestic with the Fiat cars as well as Chrysler I think it will be good for the US economy, providing more jobs on a middle class level.
2. The tax breaks as a US company for Fiat will be very beneficial as far as marketing/advertisement but a major draw back will be the high cost in labor as opposed to the labor cost in countries such as Mexico. Fiat will also have a situation of dealing with new labor laws. American labor laws are more stringent than other companies. This is also power tolerance country. Employees are not as submissive as those of other countries. Americans are considered lazy. Fiat bringing their CEO (Marchionne) to America to directly handle the merger will make the transition a lot soother for the company. When first appointed to Fiat CEO he laid off 10% of white collard employees and 20,000 labor employees, restructuring with fresh new talent, he will follow do the same plan with Chrysler. But bringing in his own people proven to be valuable.
3.This merger can be characterized as a direct investment because Fiat is take a chance a moving there location to the US. Fiat is dealing with this merger on a first hand basis. They are not operating business threw a third party. Americans are use to large cars. The idea of driving a smaller car, to a lot of Americans will socially awkward. They may need to find a social common ground with the American people make their car appear attractive as well as economical. As I said previously management American are considered lazy. Management may have difficulties with the competency of the American employees. They may have to find new way of encouragement to employees.
Research: Fiat and Chrysler Fiat is now waiting for court verdict from the Delaware court before purchasing the remaining 41.5%. Fiat has a difference in value with VEBA ( U.S. healthcare trust) of the $2 billion. VEBA values the remaining 41.5% at $4 billion. Fiat wants to purchase the remaining 41.5%, merger the 2 companies then list them on the New York Stock Exchange by 2014. That will make them the 7th largest car manufactures in the world. Verdict is expected to continue until the end of July, 90 days from the last hearing on April 25. Until then Chrysler is at a stand still while Fiat must continue to sell car to buy the remainder of Chrysler.
Source: Fiat awaits court verdict ahead of Chrysler merger http://www.reuters.com/article/2013/05/30/us-fiat-chrysler-elkann-idUSBRE94T0GA20130530