While the Obama administration works to save Chrysler and GM, they've made an interesting requirement. If the government has its way, Detroit's Big Three will become the Grande Tre. Marone!
Chrysler, under the administration's plan, would join forces with Italian automaker Fiat. Unable to clear its debts, the nation's third largest automaker will file for Chapter 11 bankruptcy protection in New York. This move, which won't affect Chrysler's ability to sell cars, buys the manufacturer time to forge a partnership with Fiat Group SpA.
While Ford and GM are publicly owned, Chrysler is a private company. Until recently, the investment firm Cerberus Capital Management currently owned about 80 percent of Chrysler, while Daimler AG (the company behind Mercedes-Benz) held just under 20 percent. However, under recent terms, Daimler walked away from its share completely. Now, Chrysler is expected to enter bankruptcy protection, and emerge jointly-owned by its union with Italy's Fiat, with the U.S. treasury holding onto a share of the company until federal bailout loans have been repaid.
Many scenarios for managing the new company have been suggested, but most see Fiat executives taking a leading role. Fiat's CEO may even chair the joint company. And regardless of who is in charge, several Fiat products are likely to appear on Chrysler lots in the near future.
Rumors of a Fiat/Chrysler merger have been floating around for months, but many Americans are unfamiliar with the Italian automaker and why it might want a piece of a struggling American car company -- especially since most of Chrysler's trucks and SUVs could barely fit through some of Italy's tiny streets.
A History in Italy and the USA
Fiat SpA is an Italian automotive company that's known for its quirky and fun-to-drive small cars. Fiat is also the parent company of other Italian automakers, including Alfa Romeo, and has ownership stakes in Maserati and Ferrari.
Some American drivers may remember Fiat. The brand used to have a place in the U.S. market, but left in 1980 amid poor sales. The brand also had trouble fighting perceptions of poor reliability and safety. However, since then, Fiat has carved a niche in Europe and the rest of the word with its strong lineup of efficient engines and well-designed platforms.
And that's where the attraction lies. Fiat isn't the first European make to try its hand at running Chrysler. In the late 1990s, Chrysler merged with Mercedes-Benz. The difference is, while Chrysler and Mercedes were able to cut costs by sharing some components, both companies were focused on large sedans, sports cars and SUVs - not the best models to have on hand when gas prices skyrocketed, the economy tanked and consumers moved toward smaller cars.
Fiat, on the other hand, makes small cars that have proven to be both popular in Europe and fuel efficient. By partnering with the Italian brand, Chrysler can have immediate access to small-car platforms and technology that will drastically scale back the time needed to launch smaller, more efficient models. And Fiat will gain a dealership network and access to the American market for its small cars.
Coming to a Dealership Near You?
What kind of cars could American consumers expect from Fiat if the merger goes through? One that many small car fans are waiting for is the Fiat 500. The cutely styled micro car slots right between the MINI Cooper and Smart Fortwo, and could steal sales from both. The Fiat Panda is another small city car with SUV styling, but urban size. It's also available as the Panda Cross, which, according to Fiat's UK site, adds four-wheel drive and makes the small car off-road ready. Both cars have been named European car of the year.
Chrysler's bankruptcy allows the courts to reduce the automaker's costs and obligations, trimming away unprofitable operations so that Chrysler can emerge a leaner, more competitive company. With Fiat's fuel-efficient lineup available to Chrysler dealers, a more competitive Chrysler is possible. While there is no guarantee the merger will go through or be successful, you may soon see 500s and Pandas hiding among the 300s and Rams at Chrysler dealerships.