Fiat 500 will go to Mexico

Posted by: David Welch on August 17, 2009

fiat_500.jpg

Critics of Detroit’s carmakers could play a real game of gotcha with Chrysler. News reports today say the company will build the Fiat 500 subcompact at Chrysler’s plant in Toluca, Mexico, which builds the Chrysler PT Cruiser and Dodge Journey. Since Fiat owns 20% of Chrysler, the Italians can call the shots. Critics of the auto industry bailout and the government’s 8% ownership stake in Chrysler might say that we spent a few billion dollars to save Chrysler and guarantee Mexican jobs. But build that car here and the same critics could say that the government and the United Auto Workers, which owns 55% of Chrysler, swayed management to keep the jobs in the U.S.

Forget all of that. Building the 500 in Mexico makes good business sense. First of all, it’s tough to make a buck on compacts and tiny cars like the 500. With the exception of BMW’s Mini brand, those cars just don’t fetch fat sticker prices. So margins are usually thin. Mexican wages can help.

There’s another good reason to build in Mexico, especially a car that has international appeal like the 500. Mexico has some nice trade agreements with the European Union, Brazil and Asian countries like Thailand that keep import taxes low for cars, says Michael Robinet, vice president of CSM Worldwide. If you want to build cars in one plant and have access to the U.S., Mexico, Brazil and some Asian markets, going south of the border is sensible. Fiat-Chrysler can sell more of those cars globally and stand a better chance of making money if they can max out the plant with sales around the globe.

Reader Comments

DJC.

August 17, 2009 4:26 PM

It's not any surprise that Businessweek article goes to bat for multi-national corporations to downsize the American middle class and outsource industrial production to Mexico and China. It won't be any surprise when the global economy led by the United States collapses into a depression. As Henry Ford stated, workers need to be paid enough to buy your products. There won't be any purchasing power left of the formerly American middle class as software technology development is outsourced to India, semiconductors outsourced to Korea, aircraft production outsourced to China, and automobile production is outsourced to Mexico. Perhaps when we outsource Businessweek magazine editors will the pro-outsourcing trend be questioned.

kuei

August 17, 2009 4:59 PM

Who cares? I'm only buying Ford products.

Dar

August 17, 2009 5:09 PM

Wait, the UAW owns 55%, The United States owns 8% (63%, almost 2/3) and Fiat owns 20% and Fiat calls the shots? Perhaps BW could elaborate how that works?

Joseph

August 17, 2009 5:12 PM

Our demand for goods at a cheap price is another reason that many products are made in countries that have a much lower wage than in the United States. One could say that to keep jobs in the US we would have to be willing to pay higher prices to keep jobs here, but we are not all willing to do so.

Joseph

August 17, 2009 5:12 PM

Our demand for goods at a cheap price is another reason that many products are made in countries that have a much lower wage than in the United States. One could say that to keep jobs in the US we would have to be willing to pay higher prices to keep jobs here, but we are not all willing to do so.

Lawrence

August 17, 2009 5:24 PM

David:

Your reasoning in regards to pricing and profit makes no sense...simply build the 500 in the US and ship to Mexico!!!!

The US Tax payer bail-out of Chrysler should factor heavily in the decision as to where to build Fiat-Chrysler cars, irrespective of the percentage invested.

The reality is that Chrysler needed that bail-out in order to look attractive for Fiat to make its investment.

wowlfie

August 17, 2009 6:19 PM

Yeah but your ignoring the facts of your story and putting all the emphasis in 'making a buck' and not making jobs. You can count me as one American who will never purchase another chrysler product especially if it has the FIAT brand on it.

Jerdawge

August 17, 2009 6:57 PM

The question to ask is: What are the factors driving companies to manufacture outside the USA? Is it merely labor costs or is it the labyrinth of government regulation? Could it be that our wacky Congress has created a situation where it makes no sense to do business in the USA? It certainly makes no sense to do business in California. That's why Nissan and Toyota moved plants to Tennessee.

Jerdawge

August 17, 2009 6:58 PM

I also will buy Ford if I buy.

James Mason

August 17, 2009 7:52 PM

Dar, it is simple! Without Fiat and its vehicles and technology, Chrysler would be DEAD right now. If you hold the power of life or death over someone or something, it is easy to call the shots.

Jim Donahue

August 17, 2009 8:14 PM

If after all the UAW concessions and jettisoning almost all their debt Chrysler cannot produce a vehicle in the US competitively then we wasted our tax dollars on bailing them out.

Ramon

August 17, 2009 8:28 PM

I think the key point the previous commentators are missing is that the car is a Fiat branded car. Fiat is having Chrysler build it in one of their plants. Fiat is giving work to a Mexican Chrysler plant which will generate profits for Chrysler.

Greg

August 17, 2009 10:51 PM

Obama has wasted our money. He should have allowed Chrysler to go bankrupt in the private sector. Instead, he spent billions to keep Chrysler out of bankruptcy, billions to pay off the UAW, then billions to get Chrysler into a "quick" bankruptcy, and still more billions to guarantee the warranties of existing Chrysler products. Now he will spend billions again to pay for out-of-work Chrysler workers in America, and keep on paying billions to guarantee the shoddy workmanship of non-American Chrysler and Fiat employees, all for the sake of keeping Chrysler alive for a couple more years before Fiat drops it like a hot potato and we end up paying billions more to finally liquidate Chrysler. Meanwhile the Mexican autoworkers pay no IRS taxes and when they get sick after losing their jobs they'll come to America for free food stamps and free medical care.

BCR

August 17, 2009 11:05 PM

I'd buy a Smart Car before I'd buy this piece of junk.

Wowsers

August 17, 2009 11:18 PM

@ DJC --> Who cares. If you don't like what's going on, buy FORD!

KJK

August 18, 2009 2:29 AM

Who cares! The day I can get a Fiat 500 Abath in the states I will be overjoyed.

Michael Schumacher drives one for the love of God!

Richard Dickerson

August 18, 2009 7:51 AM

Here we go again! You're right Ramon. In any case, I 'll be curious to see who buys these cars. Let's see if profits do materialize. Fiat's and Chrysler's history in the US isn't stellar! I am not the least bit interested in ANY product this partnership builds.

Richard Dickerson

August 18, 2009 7:51 AM

Here we go again! You're right Ramon. In any case, I 'll be curious to see who buys these cars. Let's see if profits do materialize. Fiat's and Chrysler's history in the US isn't stellar! I am not the least bit interested in ANY product this partnership builds.

Daniel Steele

August 18, 2009 9:06 AM

I ditto Jerdawge's comment. The goverment has made it where it makes no sence to do buisness in the USA.

Michele Marini

August 18, 2009 10:22 AM

I actually think it is a value for Chrysler. Chrysler factory in Mexico will build FIAT branded cars, and so take a small step towards profitability.

Howard Stollery

August 18, 2009 10:55 AM

The Fiat 500 will do very well in North America...using the Chrysler dealerships Fiat can sell products that are very different from the relatively bland US designed vehicles. Of course, Fiat's history of producing rust prone cars with mechanical problems (think Lada) does not augur well, particularly here in Canada where we like to start our cars in the depth of winter and use a lot of salt. So, from the start, Fiat is going to have to turn out a quality product in its Mexican plant(s). If it does, without a doubt, the 500 will do well. It's going to be in short supply, just like the iPhone 3G S.

Carlos L.D.

August 18, 2009 12:06 PM

To "DJC".. Henry Ford's labor politics never contemplated the globalized world we live in and the competitive markets we confront nowadays, I dont think that statement applies to global companies anymore Chrysler cant afford to produce this kind of car concept at US wages... and you are right, BusinessWeek might end up outsourced to another country because jobs will go to those who offer the best quality at the lowest cost.

TK

August 18, 2009 12:29 PM

Wait a minute. People had no problem buying things like PT Cruisers and Camaros, etc that were made in Mexico. Lets see and HOPE that Fiat can keep MANY Chrysler employees alive.
I'm ready to buy one of these new Fiats. It's about time that us Americans will have the opportunity to buy a safe, sporty, reliable car that gets better gas mileage than a Prius hybrid without the hybrid crap.

TS

August 18, 2009 12:36 PM

One point David Welch forgot to mention in regards to the decision to move the Fiat 500 to Chrysler's Toluca plant -- Quality. In addition to all the other points he made, the fact that Toluca is one of Chrysler's highest quality assembly plants simply seals the deal for Fiat.

Points made by others regarding whether or not Obama has wasted money are perfectly valid, but it is unreasonable for Obama (or anyone else for that matter) to expect Fiat to make a business decision on anything other than business reasons. Saving American jobs is not a valid business reason, particularly for an Italian company.

ps

August 18, 2009 1:20 PM

I'm sure Chrysler/FIAT would build the 500 here (as in USA) if they could do it outside of the UAW's grasp. If they had a choice of the South or Michigan as opposed to Mexico or Michigan, those jobs would be here, but south of the Mason Dixon line. No one in their right mind is going to open a new auto or parts plant in UAW country.

olivier

August 18, 2009 4:27 PM

I don't understand why you americans are complaining? Fiat will build the 500 in Mexico and not in the US? But in the same time fiat just purchased Bertone for 400 million euros, with a capacity of 70k unit per year that will be used for the production of chrysler model in Europe. Fiat is also shutting down plant in Italy and workers don't understand why the company spend almost half a billion for new capacity when they are already too much: Fiat does it to help its partner Chrysler, in order to have chrysler producing cars ASAP in europe. Fiat will offer for its huge retailers net in Europe, South America and perhaps India where Chrysler in a dwarf and Fiat a key player. Fiat produces today engines that go 65 mpg and will launch in september a new Multiair engine that will increase this mileage by 10%...it took 10 years to develop this technology and it will provide it to chrysler.... Do you think this is for free? No!!!! Then stop complaining, the world is not revolving around the american workers...it's a global economy. Chrysler is not being fooled in that deal, it's a win-win deal!!!!

Squeezebox

August 18, 2009 5:59 PM

Greg dear, the reason the factory's in Mexico is to keep the Mexicans on their side of the border where they belong! If they're working in Mexico, they don't get our healthcare, they don't need our food stamps, and they don't get our citizenship. Simple.

Nicholas A DiMarzio

August 19, 2009 1:53 AM

The fiat 500 is a useful second car, I have a chevy blazer that I love but 15 mpg shopping I travel 5 Mi to buy bread and milk for the cost of $5 and I spent $2 on gas.
With 65% of profit for the US let the mexicans work at home we sell the all kinds of product American made. and the life goes on for all of us. I believe this is great move.

Alex F.

August 19, 2009 11:39 AM

I remember autos that got 50mpgs back in the time of KizerFrazer,it was the Henry J,misspelled for reason,and call me a nut job,but we had a chance.We the buyers let GM&Crysler feed us sameold,sameold for years.

Manu

August 19, 2009 1:36 PM

Hey don't forget Fiat produce speed train, truck ,tractor, and small efficent diesel engine which is something that we need in the u.s. ....Drive a V8 5.7 it's not possible anymore ...We can drive 2.0 engine With the same performance and less consumes ...Fiat grande punto multijet turbodiesel consume 1 gal 50 miles which is great ....We need rebuild Chrysler and start to buy american car ...that's an important step ...

Manu

August 19, 2009 1:36 PM

Hey don't forget Fiat produce speed train, truck ,tractor, and small efficent diesel engine which is something that we need in the u.s. ....Drive a V8 5.7 it's not possible anymore ...We can drive 2.0 engine With the same performance and less consumes ...Fiat grande punto multijet turbodiesel consume 1 gal 50 miles which is great ....We need rebuild Chrysler and start to buy american car ...that's an important step ...

Tom

August 19, 2009 7:35 PM

I think building the Fiat 500 in Mexico is just great idea. It gives Mexico more incentative to clean up their act with good trade with the US. Drugs headed to the US along with all of their crime. The only business we do with them is to supply the criminals with weapons. Their dope and drugs are coming in here by the ton. And that just makes Americans a little more ignorant by using drugs here every day.

Snoz

August 20, 2009 2:26 AM

Uncle Sam gave $10billion to Chrysler not just as a bailout, but also as a bribe or bait to get Fiat to bite. After giving away $10billion, the American taxpayer as the proxy equity holder don't even get the benefit of manufacturing a Fiat econo-box anywhere in the Union. The Benedict Arnold of America could not have conceived a better plan to screw Americans out of their money and jobs. Even though the American taxpayer has bailed out Wall St banks, GM, AIG, and other private business with about $2trillion, little did he realize that the "Buy American" slogan is a deception played upon the naive American consumer. When Chrysler's executives, including its "Butcher," ask Americans to buy PT cruiser and Journey, they said nothing about their vehicles being made in Mexico. While foreign corporations such as BMW, Toyota, Honda, Nissan and Subaru are manufacturing cars in the heartland of America as well as employing American workers through out the Union, the so called “American” corporations are betraying America and stabbing the American worker in the dark as soon as he cough up the bail out money. When these “American” corporations are asked why they do not invest more in America during this recession, they would respond like a parrot “Globalization! Globalization! Globalization!” There is something terribly wrong in Wall St and Pennsylvania Avenue when America's 15% unemployment rate are ignored but Mexico's are not. As Fiat manufactures the Fiat-500 in Mexico and ships them into the Union as a Chrysler product, BW readers must ask, "Are we really better off?" to borrow a popular phrase from Ronald Reagen.

country cuz

August 21, 2009 7:02 AM

If I buy another new car or truck,
It will be a toyota,honda or suburu .

herault

August 25, 2009 8:14 AM

Americans wont buy the 500...its not a serious car like the MINI.
Pity that FIAT dont make ALFA-ROMEOs in US Chrysler auto plants.
The new MITO is a better car..also the GT and the Brera.
The 159 needs some work on it...its no match for BMW 3 Series.
The Italians are capable up to a point but North America is a frightening place to sell or make cars.
VW still has no US based mfg plants.

Bob Brooks

August 26, 2009 9:37 PM

If making the 500 and its remarkable fuel saving "MultiAir" engine in Mexico speeds fuel saving in the U.S., lets go for it.

Bob Brooks

August 26, 2009 9:37 PM

If making the 500 and its remarkable fuel saving "MultiAir" engine in Mexico speeds fuel saving in the U.S., lets go for it.

Aldo

August 31, 2009 3:07 PM

I want one !!!!!!(Abarth)

dude one

September 2, 2009 9:38 PM

alot of fords are built in mexico, including the new fiesta coming

Dutch Thinks Green

September 12, 2009 5:51 PM

To start with the US has the average per country of paying the lowest per gallon for there gas. Start paying like the rest of this world $$$ for use of gas! That is why European manufactures are so successful in producing quality cars that people want and drive. Great diesel engines in the broad spectrum on cars such as: Renault Peugot Seat VW Audi MB BMW Fiat and even Skoda Where is the US in all this. Diesle CAR ?? US needs to learn that all USA car manufactures are brook. And that SUV do not WORK. Yes great for your tax credit but bad for this environment.
Small is smart and green and this is HIP get it!
USA don't be so wasteful. Think like the rest of this planet GREEN.

Dutch Thinks Green

September 12, 2009 5:51 PM

To start with the US has the average per country of paying the lowest per gallon for there gas. Start paying like the rest of this world $$$ for use of gas! That is why European manufactures are so successful in producing quality cars that people want and drive. Great diesel engines in the broad spectrum on cars such as: Renault Peugot Seat VW Audi MB BMW Fiat and even Skoda Where is the US in all this. Diesle CAR ?? US needs to learn that all USA car manufactures are brook. And that SUV do not WORK. Yes great for your tax credit but bad for this environment.
Small is smart and green and this is HIP get it!
USA don't be so wasteful. Think like the rest of this planet GREEN.

David

September 15, 2009 12:11 AM

I would like to purchase a nice Fiat 500.........the Abath.....nothing will catch it!!!! Perhaps I will get a GM for 60 days while I'm on the wait list...........and then give it back.........(stupid idea....another nail in the coffin of the new OBama GM).......perhaps the Fiat 500 can help keep Chrysler afloat for a cople of years until Fiat decide to pull out of their 20% when they find out what a crap shoot Obama has landed everyone in.

Mine's Nice

September 15, 2009 4:25 PM


I had to wait 14 weeks to get it but it was worth it. It is SO much better than the new Mini and that was designed by BMW. 500s are made in Poland by people who care about their quality of work. US auto manufacturers are too weighed down by their pension fund commitments and 70's style unionization. If I wanted to sell a car in the US, I'd go to Mexico too. Didn't do VW beetle sales any harm!

Love USA

September 15, 2009 8:36 PM

Oh boy, everybody knows about cars in here and about Fiat.You blabbers..blab away..Olivier put some sens in this matter and a very few others.The rest of you continue on buying Ford..sure, like Ford is any better then GM or Chrysler. Just because they avoided going under means little.. too little too late. Ford is as crappy as GM or the one debated here..
I drive a Ford. Thank you.
Best Regards.

In the Middle

September 16, 2009 12:36 PM

Long story short, Grew up in a ford family and work at Chrysler. Detroit is a small town these days and every one depends on the "Big 3" if one falls they will all fall. Ford is only one step better then GM and Chrysler right now and the Imports are not far behind. All auto companies use the same supplier base and these companies are holding on but if one company falls if will start wave effect of small suppliers that will cause the larger ones to fall and then " all the auto companies" in the US will struggle and in the end there will be alot fewer jobs in the US and not just talking auto jobs. With the PT cruiser program at its end it makes scene to move the 500 there. There are more fiat products coming to the US. Wait and see in November what Chryslers plans is. Note as i stated I have work for Chrysler for 15 years and a number of different regimes. Fiat is forcing change to the core.... At the facility i work at we have never been more focused at making good vehicle and doing it right......

Barce

October 5, 2009 5:52 PM

Why Mexicans go to us? it could be because you robbed them California Texas Arizona and of course New Mexico,
and because you need a poor and weak neighbor to supply cheap labor force, For sure Mexico could have been a
wealthy country without that greedy neighbor called usa.

US-T

October 8, 2009 7:50 PM

Actually Mexico is doing better than US Media lets out. The real beef is that US tax payer money was given to Chrysler and thus US jobs are OWED. Even the foolish writer of this article most-likely paid taxes in the US, thus the writer wants to toss their taxes out the window which = waste, which is something right-wing business people say they hate.

ObamaSucks

November 17, 2009 5:41 PM

I can't believe this crap I'm reading. What kind of jackass defends a company that took taxpayer money in order to "save American jobs" only to ship those jobs overseas? No. This "critic" would NOT have complained about the 500 being manufactured in America. I complained about the bailout itself, but now that it's done we should get our money's worth.

steve

December 25, 2009 11:27 PM

All right guys... so what? Mexicans manufacture cars for Italians to sell everywhere except in the US. It's not like any American is even invited to this party! To me it just sounds like Americans can't cut it any more. Sorry guys, if you can't compete... it's not the sport's fault. It's the player that's not in shape!

JAMES

January 20, 2010 6:44 PM

CARLOS LDS IS RIGHT!!!! THE PROBLEM WITH THE CAR SALES PROFIT AND OUTSOURCE IS THAT THE AMERICAN PEROPLE DEMAND HIGH WAGES OR SIT ON UNEMPLOYMENT, HAGGLE THE DEALER TO A LOSS OF MONEY IN A SALE. AMERICANS ONLY WANT TO BE LAZY AND CHEAP. THEY WONDER WHY WE OUTSOURCE FOR A BETTER PRODUCT AT A CHEAPER PRICE. CHRYSLER WOULD NOT BE IN THIS SHAPE IF IT WAS NOT FOR DIAMLER USING THERE LIQUID CASH AND PUTTING ALL THEIR ASSETS FOR MONATARY FUNDS THEN TO SELL THEM AS A POOR CORRUPT COMPANY.

Mark

April 18, 2010 9:03 AM

In a world where there is way too much capacity for building cars and too few people who need them, only the best will survive. Chrysler / Fiat is going to go the way of the Edsel. It's only a matter of time. They can't compete.

John

July 31, 2010 1:40 PM

The more UAW jobs we kill the better! $70 an hour and job banks! That is why we, the taxpayer had to bail out the UAW. That's what we did! Send those jobs to mexico.....Kill the UAW!

Gerard

September 19, 2010 6:53 PM

Its a global economy: Toyota, Honda, Hyundai, Nissan, etc., etc., build cars in America. GM, Ford and Chrysler build cars in parts of the the world other than America, such as China, Mexico, India and Europe, etc. Its the way it is in most industries now-a-days, and any large corporation that does not do this, could not possibly compete. Its the way of a world at (relative) peace. No more world wars, so everyone must eat, and find meaningfull employment. Since Chrysler is an American company, the profits come back here, and this is ultimately good for the American worker and consumer. As it is good for the Japanese when they build cars here. Finding the right balance in this new and still emerging global economy is the struggle right now, but making it fair for all is better than the alternative of the past, as anyone who has even a passing knowledge of history should be able to understand.

None the less, putting all that aside for now, I would like to suggest that many of you naysayers should perhaps try to educate yourself before going off halve cocked with your opinions. Or at the very least, enroll at a local community college for some remedial writing courses. In that way those of us with even a half ounce of intelligence will only be confronted with one aspect of your ignorance when reading these posts.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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