2009 Chrysler-Fiat Strategic Alliance Case Study

Topics: Automotive industry, Chrysler, Fiat Pages: 13 (4066 words) Published: December 10, 2010
The 2009 Chrysler-Fiat Strategic Alliance

A strategic alliance links two or more companies operations by combining manufacturing resources and knowledge. These tie-ups combine R&D, product development, distribution networks, and other areas in knowledge allocation. With that said, Chrysler was ordered by the U.S. government to form an alliance and file for Chapter 11 bankruptcy in-order to acquire government bailout. So, in early 2009, Fiat turned out to be the key contender for Chrysler and in April 2009, Chrysler and Fiat announced their strategic alliance and agreed on a new ownership structure. In May 2009, Chrysler filed for Chapter 11 bankruptcy in a New York court and started the process of a company-wide restructuring. Chrysler and Fiat, as well as the Obama Administration, announced that the Fiat Group, plans on providing technology-related expertise and assembly platforms to Chrysler. The focal aim of this alliance is to allow Chrysler to survive and develop small and fuel-efficient autos in North America. The initial formation of this alliance allocated Fiat with twenty percent ownership of Chrysler and could raise its stake to thirty-five percent. After 2013, if Fiat meets certain conditions such as, introducing fuel-efficient cars and manufacturing small auto engines in North America, their shares of Chrysler ownership may rise to fifty-one percent. Therefore, this strategic alliance will benefit both companies and allow Fiat entry to the United States.

Italy Fact Sheet:

* Italy has a diversified industrial economy:
* divided into a developed industrial north, dominated by private companies, and a less developed, welfare-dependent, agricultural south, with high unemployment. * The Italian economy is driven in large part by the manufacture of high-quality consumer goods * produced by small and medium-sized enterprises, many of them family owned. * Italy also has a sizable underground economy: (accounts for 15% of GDP) * most common within the agriculture, construction, and service sectors. * Italy has moved slowly on implementing needed structural reforms such as: * reducing graft, overhauling costly entitlement programs, and increasing employment opportunities * The Italian government has struggled to limit government spending * public debt remains above 115% of GDP, and its fiscal deficit - just 1.5% of GDP in 2007 - exceeded 5% in 2009 as the costs of servicing the country's debt rose. * A tax amnesty program implemented in late 2009 to repatriate untaxed assets held abroad has netted the federal government more than $135 billion. * The Automotive industry in Italy is a large employer in the country, with a labor force of over 196,000 (2004) working in the industry. * Italy is the 5th largest automobile producer in Europe (2006) * Today the Italian automotive industry is almost totally dominated by Fiat Group * 2001 over 90% of vehicles were produced by Fiat

* Italian automotive part industry covered over 2,131 firms and employed almost 250,000 people in 2006 * Italy's automotive industry is best known of its automobile designs and small city cars, sports and supercars * automotive industry makes a significant contribution of 8.5% to Italian GDP

United States of America Fact Sheet:

* The US has the largest and most technologically powerful economy in the world * per capita GDP of $46,400.
* The US is a market-oriented economy
* US business firms enjoy greater flexibility than their counterparts in Western Europe and Japan * decisions to expand capital plant, to lay off surplus workers, and to develop new products * At the same time, they face higher barriers to enter their rivals' home markets than foreign firms face entering US markets. * US firms are at or near the forefront in technological advances * especially in computers and in medical, aerospace, and...
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