Posted by: David Welch on January 19, 2009
The last time Chrysler and Fiat talked about some kind of engagement, GM Vice Chairman Bob Lutz—then Chrysler’s President—called the Italian carmaker “a bride…lying on her deathbed.” Well, there is talk of a marriage between the two again, almost 20 years later. Reports say Fiat and Chrysler may cut deals for joint product development with Fiat taking a stake in the Detroit carmaker.
Fiat isn’t quite as bad as it was in the early ‘90s. Improvements in quality and productivity led by CEO Sergio Marchionne have made it into a decent carmaker. But a savior for Chrysler? No. What Chrysler needs is a parent company with technological prowess and a lot of cash. Renault-Nissan comes to mind. Fiat has neither, really. It does have a good set of diesel engines. That was what General Motors wanted when it took 20% interest back in 2001. But Fiat isn’t exactly fighting it out with Toyota for hybrid and electric drive technology. And cash? Not enough to save Chrysler.
At the Detroit auto show, Chrysler CFO Ron Kolka said the company had between $2 billion and $2.5 billion. That’s the bare minimum Chrysler needs to meet payroll, buy parts and keep the plants going. Fiat has excess capacity in Europe and will need cash to fix some of its own problems.
Chrysler needs what owner Cerberus Capital Management and, before that, Germany’s Daimler AG never gave it. The cash, technology and hardware to turn loose the creativity that made Chrysler the loveable underdog. With money to spend, Chrysler always found a way to win over consumers. Chrysler invented the minivan. Jeep created the suv market. The 300 was a breakthrough design. But even styling costs money. So does revamping a whole product line.
Sure, the two companies have some synergies. Fiat is strong in Europe and South America and it’s a passenger car company. The company has rediscovered the flair of Italian design. Chrysler is a North American producer of minivans, pickups and suvs. Clearly they could fill in gaps for one another. But the money isn’t there to fix the problems. And neither has enough scale, technology or cash to make the other thrive. This seems like more a move of desperation than a winning formula.