Fiat gets 35% stake in Chrysler for no cash

Hmm... Chrysler 500 would be interesting to see 479ccm of pure power

 

Maybe this is the future Chrysler 500:

Fiat 500 | Auto Express News | News | Auto Express

 

Maybe we will see an actual Fiat 500 (with a 1.4L engine, not 500cc)in North America:

"Under the deal, Chrysler will be able to manufacture and market in the United States new models based on Fiat platforms as well as the Italian company's own products."

Fiat, Chrysler form alliance | Autonet.ca

 

I expect Fiat will sell their own cars under the Fiat and Alpha names through Chrysler's dealership network. These gives Fiat the network they require to reenter the US market. They will also have access to Chrysler manufacturing assets to build the cars here and avoid currency issues.

I don't see what Chrysler gets out of this deal. The number one thing Chrysler needs is money. This deal doesn't provide any. They will have access to Fiat's dealership network in Europe but I doubt they will sell to many Dodge Rams in Europe. In fact I don't see anything in Chryslers line-up that would be a hit with Europeans.

On the other hand, Cerebus has managed to get rid of 35% of Chrysler which leaves them with only 45%. This deal may be as simple as Cerebus unloading Chrysler stock to anyone that will take it.

 

Chrysler's gain is to rebadge the FIATs as Chrysler and have small & FE cars to sell in about a year instead of designing their own which they don't have the money and the time to spare.

Second their stock is not worth anything, so they give away nothing.

 

I don't see Fiat letting Chrysler just rebadge one of their cars and sell it the US. Fiat can't sell an Alpha under their own name and as a Chrysler at the same dealership. For this to work the "Chrysler" Fiats would need to have an exterior that matches Chrysler design language and would fit in with the rest of the lineup. For example if they market one of these as a Dodge it will need to have the Dodge Ram grill that they put on everything. They will also need to do some design work to make the Fiats pass US regulations. That requires time and money that Chrysler doesn't have.

It will take 18 to 24 months for one of these to hit showrooms and by then Chrysler will only be a memory.

 

If they don't have 24 months to spare, will the Chrysler/Dodge look really matter? Desperate time needs desperate measures.

 

I don't think Chrysler would mind just selling rebadged Fiats. However, I think that Fiat will mind. How will Fiat relaunch their brand in the US if another company is selling the same vehicle under a different name? Fiat needs the Alpha design language to resonate with the public and have that shape say Alpha Romeo, not Chrysler.

If Fiat lets Chrysler sell unchanged vehicles in the US they will absolutely kill any chance of reentering the US market with their own brands.

 

Fiat is taking a gamble too. With no cash up front, the risk is low.
AS you said, Chrysler may not last more than 24 months, but with the help with Fiats's small cars, the bet is to help Chrysler to sustain till the economy picks back up before Fiat re-enter the US market. There is no point to re-enter the market now when it is down.

 

I think Fiat is interested in manufacturing capacity and a dealership network. A market downturn is the best time to acquire these especially with the huge amount of unused capacity in the US.

As I said before, it will take time to redesign vehicles to meet US regulations, both safety and emissions. In two years time we should be out the downturn and on a rebound. Fiat could be timing this just right.

What is unknown is what type of debt obligation, if any, Fiat is taking on to acquire a 35% stake in Chrysler.

 

Fiat sells cars in the EU market and must meet the EU safety and emission standards which is not that different from the US. The re-design is minimum.

Fiat is not known for their reliability. If they want to be successful, they need to be as good as the Japanese.

 

US and EU standards are similar but still different enough to require a redesign. I've described in great length the difference between a EU and US Mercedes SUV interior in other threads. EU requirements are written based on restrained occupants while US standards are written based on a unrestrained adult male.

I agree about reliability, Fiat will need to establish a reputation for quality when they reenter the US market. The goods thing is that Fiat has been out of the US market for so long that a large number of people have no experience with their reliability problems.

 

We are talking passenger cars here, I believe all occupants are restrained in both standards.

My family had owned Fiats back in the 70's. They needed a lot of maintenance and rust a lot.

 

The US still uses unrestrained occupants. This is an excerpt from the NHTSA's Latest ruling on Occupant Crash Protection:

Replacing the Unbelted Sled Test with the Unbelted Rigid Barrier Crash Test​

The agency has decided to delete the sled test option and retain the unbelted rigid barrier crash test provision for the reasons explained in the NPRM and SNPRM. Among those reasons is that a crash test replicates how vehicle structures and air bag systems work together in real world crashes. A sled test cannot do that because while the vehicle is quickly decelerated in such a test, it never crashes into anything. As a result, the sled test cannot take into account the ability of a motor vehicle’s structure to manage crash energy. Further, the sled test uses a generic crash pulse instead of the individual crash pulse of the particular vehicle being tested, and deploys all air bags at a fixed time during the event rather than having that decision made by the crash sensing system of the vehicle.

NHTSA website: Air Bags | National Highway Traffic Safety Administration(NHTSA) | U.S. Department of Transportation
Ruling: http://www.nhtsa.gov/staticfiles/DOT/NHTSA/Rulemaking/Rules/Associated Files/AdvAbRul.pdf

 

I see in early posts a reference to the Fiat 500, please don't be fooled into thinking the new Fiat 500 is the tiny car of the past, like the Mini the Fiat 500 has considerable middle age spread having gained quite a few inches and pounds.
Yes, it is still a small car but put the old and new cars side by side and the new car dwarfs the old by a big margin.

 

These are for the air bag testing. The vehicle crash worthiness testing is belted.


T

 

Airbag testing is one of the many tests that a vehicle must pass. If a manufacturer can't pass airbag testing they can't sell the vehicle in the US. Notice that the new regulation requires the actual vehicle to be crashed and the vehicles sensors to trip the airbags. In sled testing the airbags were triggered remotely.

The difference between restrained and unrestrained occupants makes a big difference in interior design. For example that is why the US version of the M-Class has a knee airbag while the EU version doesn't. I see that Toyota has added a knee airbag to the 3rd generation Prius. A knee airbag fires before the main airbag and is used to keep a unrestrained occupant in place until the main airbag fires.

 

Knee airbag is only used to prevent knee damage. Many cars, which are overall quite safe, fail in knee injury area. To much hard plastics and similar things causing damage to knee area.

Toyota used knee airbag first in Yaris sold in EU, to gain 5 star crash rating. Without one, it would have 4 star rating. Same problem had Mazda 3 years ago. It was unable to get 5 star rating only due to knee injuries on test dummy. If they would build a model with knee airbag, they would get full 5 star rating.
Prius managed to get 5 star EuroNCAP rating without knee airbag.

Euro NCAP - For safer cars | Toyota Prius

 

If history is any indication this deal has an uphill battle. Chrysler tried to market another Italian car in the late 80's, Maserati, it was a complete disaster. I sold cars at a Chrysler Plymouth Dadge dealership then and you couldn't give them away LOL. Nobody would pay, then, over 30k for what basically looked like a gussied up Lebaron convertible. I remember we had 3 of them and we got rid of 2 of them doing dealer swaps and the last one I think sold for cost, my boss had a party when it sold LOL.