Fiat And Chrysler

When the cost of vehicle design and development began to skyrocket with the rise in safety and emissions regulations in the 1970s, only those automakers who had either the size and volume or the skill to adapt to changing circumstances survived.

When the cost of vehicle design and development began to skyrocket with the rise in safety and emissions regulations in the 1970s, only those automakers who had either the size and volume or the skill to adapt to changing circumstances survived. Those who chose to save their way to prosperity (e.g. every British high-volume automaker) rather than plan for the future could not keep up. And combining smaller companies to create a “big” company didn’t work, as the British discovered. Success meant modern product built using modern methods, and sold at a competitive price.

Now it is Fiat’s turn with Chrysler, and the Italian company has decided to eliminate as many of the underperforming vehicles and platforms as possible from the Chrysler and Dodge stables. In their place will come new models based on Fiat platforms and powertrains, and produced in a very Toyota-like variety of shapes and sizes. Much of the hard engineering work is done. All that is necessary is to adapt these platforms and drivetrains to U.S. regulations, and clothe them in “American” bodywork. This way, Fiat can build vehicles in America in volumes approaching the magic capacity utilization number, and add brands like Alfa Romeo (or Lancia) without breaking the bank.

In the short term, this should work, and Fiat will get closer to the magic number of vehicles it says successful automakers will need to produce in order to survive. But, as shown earlier, the British proved that alone isn’t enough. The fun will come when Fiat and Chrysler have to develop new platforms. Which side will “win”? Will Fiat blindly pursue volume, or will it give each platform enough adjustability to meet the needs and desires of buyers on both sides of the Atlantic? Will it do what Daimler would not—share equally its plans, platforms, engineering and resources—to create a single high-volume car maker out of two very different companies?

Personally, I think Marchionne is on the right track in some areas. The companies are working together. Italy is, according to some reports, not dominating, but cooperating. The next generation of vehicles are being planned together. However, the establishment of a separate Fiat franchise to sell the 500 suggests more Fiat-badged cars will follow, and that may dilute the overall effort by introducing a “new” brand and set of vehicles that must be promoted with limited marketing funds. Also, slapping a Chrysler badge on a five-door Lancia may be expedient, but it ignores the prejudices of the American car buyer. He likes trunks. Reskinning a Chrysler 300 without putting it through a thorough weight reduction program and revamping its interior, suspension and engines to the point that no one could tell they were related, devalues the Italian brand. Separating Ram from Dodge without adequately explaining the rationale behind it satisfactorily suggests an exit strategy whereby Fiat rides off with Ram and Jeep, not a plan for the future.

Much of the problem can be laid at Marchionne’s feet. He has enforced silence on both Chrysler and Fiat, and refused to explain his reasoning. I can understand his feelings. A vocal subset of the automotive press is looking for a reason that the Fiat-Chrysler combo will fail, and he doesn’t want to waste his breath explaining things that should be obvious. He’d rather stun us all with a full-fledged plan as a fait accompli, rendering any objections moot. It’s bold… and arrogant… and dangerous. I wish him well.