The Steal Of The Century

Fiat gets Chrysler for next to no money, and American taxpayers must throw in $7 billion to make it happen.
Desperate times invite desperate deals, and the proposed Chrysler alliance with Fiat is about as desperate as they come. Put simply: Fiat gets Chrysler and a factory to build its cars here in North America. Chrysler does not get a single dollar or a single share of Fiat stock in return. Yes, Chrysler will get technology assistance from Fiat, but it could be several years before that helps Chrysler sell any vehicles.

The Chrysler camp brags that the deal gives the Detroit company Fiat's technology--the secrets of its engines, platforms and transmissions that would be particularly useful to build small cars, like the little Fiat 500, Panda or Punto, but this does not mean Fiat will import cars from Italy or Poland (where it builds the Fiat 500). This deal is all about building Fiat-like models under the Chrysler brand in North American factories.

How long would it take before we see the first of these Chrysler-Fiats roll into U.S. showrooms? For reference, it took two years for Chrysler to drop a new body (the Challenger) atop a Chrysler platform already in production. Starting almost from scratch with Fiat mechanicals--managing the tooling, training the workers, dealers, etc.--will be much more complicated.

It is taking Ford Motor three years to get its Ford Fiesta small car into production in Mexico. Keep in mind that Ford owns all that technology, is already building the car in Europe, and that its engineering and manufacturing people all speak English. It is reasonable to figure it would take Chrysler three years to get Fiat-type cars in production in North America.

Note, too, that none of Fiat’s current cars meets U.S. regulations. This means Fiat and/or Chrysler must redesign and re-engineer these vehicles for the U.S. market.

In short, we are unlikely to see U.S.-produced Fiat-like Chrysler models until 2012 or 2013, and that's a long way off, especially given Chrysler’s current sales collapse. Chrysler people also talk of getting help from Fiat in sales abroad. Fiat is strong in Italy and Brazil, but has next to no business in China, the world’s fastest-growing market.

Chrysler is strong in pickup trucks and minivans, but the best market for those vehicles is right here in the U.S., not overseas. So it is a little hard for me to see how Fiat can be of much help selling existing Chrysler vehicles. As for Jeep, it's had a foreign presence for 50 years. If Chrysler needs Fiat to help sell Jeeps abroad, it is in real trouble.

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