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The automotive industry is one of the largest industries in the world and is subject to influence by socio-political and economic factors. The economic downfall of 2008 has affected the American auto industry significantly, thus, the Italian- America automobile joint venture that involved Fiat and Chrysler was justifiable given the competitive nature of the industry. Moreover, looking back into the history of the automotive sector, socio-political factors and regulations have always been an instigator that forced companies to move from one structure to another, therefore, automakers are fast to adapt to change by moving operations overseas, or engaging in Merger & Acquisition discussions with other auto-firms.
Various alliances and collaborations have taken place in the last few decades between automakers from various countries, where technical and industrial know-how is shared between two firms to create a competitive global automaker. Although synergies tend to face tremendous cultural issues, the upside is often too auspicious for firms to pass on the opportunity for a collaboration, and the Fiat-Chrysler Alliance is no different.
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FCA implemented a global geographic structure, which allowed the company to expand in both Europe and North America.
The Michelin study case sheds light on the topic on organizational behavior in the workplace. The questionable leadership under Mr. Olivier Chalon was proven to be inadequate with the American cultural workplace. Chalon implemented a french leadership style where hierarchy and centralization are prioritized, thus, he came out as arrogant to most of his employees. In American leadership style, managers and leaders are often involved and in touch with their employees through consultation.
Fiat-Chrysler and Michelin are both very different types of companies in regards to their markets and what they sell.
On one side, there is one of the top global auto industry manufacturers, and with Michelin, the second biggest tire selling manufacturer in the world. One reason they are both opposite in these cases are their leadership qualities between their business managers overseas and in America. Chrysler’s Chief Executive Officer, Sergio Marchionne had a very different approach compared to Olivier Chalon, the President of a large business unit with Michelin. Sergio came aboard as CEO of Chrysler in 2009, and under his leadership, the alliance worked well with Chrysler and Fiat when the two merged. He systematically restructured Fiat by concentrating on new technologies and models, and Fiat finally saw a profit margin with the emergence of Chrysler. Sergio’s management style was called controversial - he had an outspoken and blunt approach to being a top manager. In an interview with Forbes, an analyst with Mediobanca described him with '...a lot of American in his management style.
The only thing that matters to him is results. If you don't deliver, you are out. He is quite ruthless. When Marchionne took over [Fiat], he was literally firing one manager a day but there was a leadership problem and nobody wanted to take hard decisions. The communication from bottom to top in management was slow and wrong. He also changed that. He reduced the layers of management and gave his role a more direct view of what the business was doing.” This approach looked wrong from the outside, but he changed the company substantially. Olivier Charon, the President of a large business unit with Michelin in France, had a different approach with outsourcing his company overseas to North America. He expected the transition to be quite simple to move business into the United States. Chalon stated that “[he] felt [he] knew the US well and figured othe move to be easy, [his] sister-in-law is American, and with [his] fluent English, [he] felt prepared to work in an American environment.” Chalon’s management style considered him stern but fair manager, in resemblance to Sergio, but his management style didn’t work as well in the United States. This cross-cultural difference looked so simple to Sergio’s style but, Chalon had difficulties with this task, he took initiative to learn United States value systems to turn things around in his division of business.
According to Kimberly Amadeo from theBalance.com, the Fiat & Chrysler synergy has offered Chrysler the opportunity to get off debt by repaying their government loans 6 years ahead of schedule. Chrysler was able to repay the government an amount of 11.2$ B off the total outstanding balance of 12.5$ B thanks to their merger with Fiat.
The synergy of the two automobile firms may not have been as smooth and prosperous as expected, especially in the early days of the merger, but it did offer both companies access to other markets which resulted in solid financial numbers in recent years. Moreover, the Italian American auto alliance has bolstered the company’s financial status to the point where they are now seeking to break into the Asian market. An article from the Detroit Free Press mentioned last July that there are speculations of a FCA merger/acquisition not only with the South Korean auto manufacturer Hyundai, but also various Chinese automakers. The author of the article adds that a “Hyundai and FCA merger would offer some intriguing possibilities”.
Being involved in the Asian market would allow the Fiat-Chrysler Alliance to offset some of their electric vehicle-related costs, by outsourcing some tasks offshore to their potential Asian destination. The piece from the Detroit Free Press also quotes the views of Michelle Krebs, who is an auto trader executive analyst on the possible merger scenario and its potential implications for both firms: 'I have long thought – on paper – that an FCA and Hyundai-Kia alliance makes some sense. Hyundai and Kia are strong in cars and Asia. FCA is strong in utilities – far more so than HK – and strong in trucks, which Hyundai doesn’t have at all,”
In conclusion, the cases discussed present two styles of expanding into different territories. The alliance of Fiat and Chrysler seemed to be the better strategy to go about expanding internationally, since it allowed both firms to gain exposure into each other's markets without facing any significant cultural constraints. While Michelin is still a strong competitor in the North American tire market, it is undeniable that the differences in management culture were a constraint throughout their journey in the American domain.
Works Cited
Amadeo, K. (n.d.). Was the Big 3 Auto Bailout Worth It? Retrieved from https://www.thebalance.com/auto-industry-bailout-gm-ford-chrysler-3305670
Chrysler files for bankruptcy. (2009, May 01). Retrieved from https://money.cnn.com/2009/04/30/news/companies/chrysler_bankruptcy/index.htm
Espinoza, J. (2012, July 11). Can Sergio Marchionne Save Chrysler? Retrieved from https://www.forbes.com/2009/04/14/fiat-chrysler-marchionne-markets-equity-auto.html#57efce1464e5
Lawrence, E. D. (2018, July 02). How likely is a Fiat Chrysler/Hyundai merger? Retrieved from https://www.freep.com/story/money/cars/chrysler/2018/07/02/fiat-chrysler-hyundai/751490002/ Janel, Preston, Lily, Amine, and Audriahna
Team Case Analysis and Comparison: Fiat-Chrysler Alliance (FCA) and Michelin. (2022, Jun 25). Retrieved from https://studymoose.com/team-case-analysis-and-comparison-fiat-chrysler-alliance-fca-and-michelin-essay
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