Chrysler-Fiat Case

The introduction

Fiat was born in Turin, Italy in 1899, which now has developed into one of the world's most famous automotive multinational companies. As the Fiat group's largest company, Fiat auto company in the group has been the most important role in the business. From the birth of the first car in 1899, to 1908 into the U.S. market, and exported to France, Austria, Britain and other countries; From 1910, annual output of 1215 units, sales of 2.439 million vehicles by 2000, so far Fiat auto cars production has reached more than 7000 and in 2009, Fiat bought Chrysler so that make Fiat get into the north American market again. Fiat is gradually in the years of hone fiat illustrious name. FIAT is famous for its production of cars and light commercial vehicles, boasts FIAT (FIAT), alpha (ALFA ROMEO, ROMEO, LANCIA (LANCIA) brands such as active in international market.

As one of America's three big car company Chrysler auto company, was founded in 1912. In the early eighties of the last century, the company was on the verge of bankruptcy but was rescued by the U.S government. After that, the company constantly updating model strategy and smart management system, make the company was expanding rapidly. Company and lose no time to design and launch of new models conform to the trend of The Times, therefore, it enjoys a higher reputation than other cars, show more courage than competitors. As a result, it was known as the American auto industry design leaders. In 2009, due to the financial crisis and dilemma of development faced by Chrysler group co., LTD. the fiat group and Chrysler group announced that the two sides eventually established a global strategic alliance.

The case introduce the problems that the Fiat and Chrysler faced and achievements they got before they completed the alliance, besides the case also the impacts on the global auto companies because of the globalization and the following issues that the Fiat-Chrysler Group need to deal with after they completed the global strategic alliance.

1.What are your views of 2009 Chrysler-Fiat Strategic Alliance and its future prospects in the auto industry?

Chrysler and Fiat are two really different car manufacturers. Chrysler mainly manufactures mid-range cars, which also consume a lot of fuel. They are a major manufacturer in the US and have a good distribution network there, but have a lot of difficulties in order to penetrate the European market.

On the other hand, Fiat is really good at manufacturing small and fuel-efficient cars, but is only implanted on the European market.

Moreover, the global market is changing. Due to financial crisis, consumers purchase less cars and the industry is declining (at least in developed countries). Then, they are trying to find fuel-efficient cars, in order to save money (fuel prices are increasing) and to limit their impact on the environment. Innovation is the key to compete on this market, but research and development costs are huge.

The alliance consists to strengthen both companies. By sharing its technology, Fiat can enable Chrysler to build fuel-efficient cars to respond the growing demand. The counterpart for Fiat is the access to the US market they left in the 80's because of low market share and bad brand recognition. Furthermore, working together leads to scale economy and costs' reduction, and this is vital to compete with other brands. They can also join their resources in research and development in order to become a recognized innovative company. Once they will strengthen their positions on US and European market, they will be able to penetrate the emerging markets where the demand is growing.

This alliance is a good way to gain competitive advantage (by reducing R&D and manufacturing costs), to sell fuel-efficient cars to the US market and to deal with quality problems of both manufacturer which are cutting customer recognition. The alliance can lead Fiat and Chrysler to become major manufacturers on both US and European market, and to enter emerging markets in a longer term perspective.

2.Analyze and evaluate Chrysler and Fiat's strengths and weaknesses before and after their 2009 strategic alliance.

Before 2009:

Chrysler Fiat

Strengths - Strong distribution network in the US

- 3rd manufacturer in the US

- Some good mid-range cars

- Jeep and minivans are popular in the US - Recognized in Europe as a small car manufacturer

- Fuel-efficient technology

- Good innovation performance

- Quality improving

Weaknesses - Low market-share abroad

- Lack of innovation

- Low quality compare to competitors

- Incapacity to build fuel-efficient engines

- Catastrophic financial situation - No access to markets outside Europe

- Only recognized for small cars

After 2009:

Chrysler Fiat

Strengths - Strong distribution network in the US

- Recognition in the US

- Ability to build fuel-efficient cars thanks to Fiat technology

- Quality improving

- Mid-range and small cars

- Access to European market through Fiat distribution network

- Scale economy

- Stronger R&D capacity - Recognized in Europe as a small car manufacturer

- Access to US market through Chrysler distribution network

- Fuel-efficient technology

- Good innovation performance

- Quality improving

- Scale economy

- Stronger R&D capacity

Weaknesses - No access to emerging markets

- 55% of capital still detained by United Auto Workers (fiat is not the main detainer) - No access to emerging markets

- Only recognized for small cars