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Fiat (Fix it again, Tony) – Chrysler merger: what do they get out of this?

By Amarendra Bhushan for CEOWORLD Magazine Updated:June 16, 2009

Fiat no longer means ‘Fix it again, Tony’

Fiat SpA entered the U.S. market in the late 1970s, and was forced to exit the U.S. market in the early 1980s, dogged by the nasty acronym “Fix It Again, Tony.”

Chrysler merger with Italy’s Fiat SpA has won court approval, Chrysler Group LLC announced that former Chrysler vice chairman and president Jim Press will remain with the company as Deputy CEO.

Jim Press, who also served as vice chairman of the old Chrysler LLC, will be a special adviser to Sergio Marchionne, the new company’s CEO.

Chrysler also announced that Scott Kunselman has been named senior vice president of product engineering across all of the company’s product lines. Kunselman recently served as vice president of the company’s truck product team. He replaces Frank Klegon, who will retire.

Chrysler’s new CEO Sergio Marchionne is handing responsibility to four executives as he launches the company out of bankruptcy.

The combined efforts of Fiat and Chrysler could produce some interesting new vehicles in coming years.

Fiat received an initial 20% stake in the company, which will have the opportunity to go up to 35% when certain conditions were met, by the middle of the year. It will make in retooling a Chrysler plant to produce Fiat models for the US market.

The merger is actually a big help to both companies, which are both small compared to global giants such as GM, Toyota and Nissan.

Fiat and Chrysler combined last year sold between 4 and 5 million vehicles. Toyota alone sold almost 9 million and GM slightly less, but remember that they no longer have Opel, Saab, Hummer or Saturn..

Their goal of bringing the Alfa Romeo brand back to the US which needs to be produced in the U.S. to be profitable. It will create jobs and it will save jobs, it might well bring some interesting new cars to the US markets.

Forming a “new” Chrysler that has the resources, technology and worldwide distribution network required to compete effectively on a global scale.

Fiat will contribute to Chrysler its world-class technology, platforms and powertrains for small- and medium-sized cars, allowing the company to offer an expanded product line including environmentally friendly vehicles increasingly in demand by consumers.

Chrysler will also benefit from Fiat’s management expertise in business turnaround and access to Fiat’s international distribution network with particular focus on Latin America and Russia.

United Auto Workers’ Retiree Medical Benefits Trust, a voluntary employees’ beneficiary association trust (VEBA) has been issued an equity interest in Chrysler Group equal to 55 percent on a fully diluted basis. The U.S. Treasury and the Canadian Government have been issued an equity interest equal to 8 percent and 2 percent on a fully diluted basis, respectively. These interests reflect the anticipated share dilution as a result of Fiat’s incremental equity assumption once the milestones outlined in the strategic alliance agreement are achieved.

Fiat hopes to introduce the 500 in the U.S. by 2011, after it meets U.S. regulatory standards for crash-worthiness and emissions. It will be smallest cars available in the U.S., larger than Daimler AG’s Smart car, but tinier than BMW AG’s Mini Cooper.

If Fiat brings its products back to the US, you may be surprised at the quality of construction since the “bad days” of the 1970s. Fiat acquired Ferrari and Alfa Romeo and used the technology bump to improve A LOT. In the 1990s, Fiat and SAAB shared a lot of tecnology, and developed common platforms (SAAB 9000 and Alfa 164 for example.)

Of course… the company has to get over the bad taste left by their actions in the 1970s: poor service and support. (Hopefully Chrysler can provide this.)

Do Americans remember that the last time Fiats were sold here they had a reputation for stinky quality?

Since Chrysler’s quality and reliability reputation tends to be a little shabby right now, selling Fiat vehicles with a Dodge or Chrysler badge could immediately improve the image of those brands.

Apparently most Americans have forgotten the old joke that the letters in Fiat stand for “Fix it again, Tony.”

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