Buongiorno! Fiat completes deal for 20% stake in Chrysler

    Chrysler - now with more loveThat was probably the easy part. And it was definitely fast too, taking only 42 days for the US government to orchestrate yet another bailout, this time for the hot potato auto company known as Chrysler.

    Daimler, I hardly knew you. Maybe the Italian will make a better soul mate.

    Under the new plan, here’s how the ownership structure will look:

    • 20% Fiat  (could grow to 35%)
    • 55% Union
    • 25% US and Canadian governments

    In addition, the federal government slipped Chrysler its presumably last allowance payment, in the form of $6.6 billion in exit financing.

    We’ve seen this movie before — and we’ll see it again. Part 2, GM edition, is just around the corner, so consider this a warm-up act of sorts.

    The expectation is that the new company will be able to emerge free from the burden of crippling labor costs and debt levels. Fiat should be able to provide expertise in fuel efficiency, having made small (and quirky, no?) European runabouts for decades.

    But now with this latest (non-11) chapter almost behind them, Chrysler must now actually think about selling cars. The past numbers tell a sad story indeed: 10% market share in the US (behind GM, Toyota, Ford and Honda), sales down 46.3%. Then there are the hard luck dealers. Hundreds will be shuttered with inventory re-allocated. Being a Chrysler dealer was an exercise in patience, blind love, and ultimately, misery, followed possibly by financial ruin.

    The new icon for the hearland of America?
    Fiat 500: The new icon for the heartland of America?

    How will the new Chrysler compete?

    Like GM, product line simplification is in order. Why is that BMW, Mercedes, Honda, Toyota and other successful auto companies can operate with simple, mostly unified brands? Chrysler has Jeep, Dodge, and, of course, Chrysler. I realize that Honda (Acura) and Toyota (Lexus) have created premium brands to sell at the higher end markets, but they took decades to build them, sticking unwaveringly to the original plan.

    Fuel efficiency is also key — or so you would think. With $3-4 per gallon gasoline, why not ship the Fiat 500 over here pronto and create some excitement with a new product? I already partially know why this too may not work.

    How would middle America respond when they walk into their local Chrysler dealer and see some silky Italian econo-box, “Buongiorno!”. I’m not so sure the heartland is ready to trade Chargers and minivans for sex and whimsy.

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