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Chrysler Fiat Strategic Alliance
The Chrysler Company was founded by Walter Chrysler on June 6, 1925, when the Maxwell Motor Company (est. 1904) was re-organized into the Chrysler Corporation. Later Fiat S.P.A was merged into the company following a board approval and become Fiat Chrysler Automobiles NV (FCA). FCA became the owner of the Fiat Group, the holding company that consists most of the company's brands, like Ferrari, Maserati, Fiat Group Automobiles, and Chrysler Group Automobiles. Fiat rose the most in almost five years in Milan trading after Sergio Marchionne, chief executive officer of Chrysler and its Italian parent, struck an accord to buy a 41.5 percent stake from a United Auto Workers retiree health-care trust. The No. 3 U.S. carmaker will put up most of the funding for the transaction, underscoring the CEO’s reputation as a dealmaker. The agreement limits the amount of money that Turin-based Fiat must spend to take over and merge with Chrysler, which it helped rescue from bankruptcy almost five years ago. That puts the Italian company in a position to gain financial resources from the U.S. unit to help turn around unprofitable European operations. Marchionne has sought since taking the helm at Fiat in 2004 to combine the company with another carmaker to challenge Toyota Motor Corp., GM and Volkswagen AG (VOW) in sales. This was vital since Chrysler has a tremendous loss in 2008 and had to lay off many of their workers where strategic alliance was defiantly needed .They were also going bankrupt, so this was the best option to keep them afloat. They could not update themselves with the current economy and required to get assistance elsewhere. This deal was sensual for Fiat, since they could get the firm at a low price and re-venture North America. They also have a good thing going in that fact that they own 21 percent since 2009, then can get it increased to 35 percent this year and eventually might have 51 percent of the company. This was not the most ideal thing for Chrysler, but it was necessary. Chrysler has a brand name in North America, where Fiat lacks the visibility. Fiat has been very successful in Europe, where Chrysler does not have a strong dealer network there. Chrysler finds new markers by developing new range of vehicles. After the merger, Chrysler emerges from the bankruptcy and starts to restructure and Fiat gains a brand in North America and technology from here. Chrysler had always been behind Ford and GM and was known as the “number three.” Since the merger, they were able to gain more in Europe and new technology. As they are still not the number one company they have bettered themselves and are on the rise. The other five companies are still on the rise as well, so Chrysler-Fiat will have to work extra hard to compete with all of the technology, market share and consumer satisfaction. Chrysler’s strength has been in sport utility vehicles, pickup trucks and minivans. We do not know a great deal of Fiat’s degree of interest in these businesses. Nissan has an agreement with Chrysler whereby Nissan is to get a version of the Dodge Ram and Nissan is to build small cars destined for Chrysler. This will be hard to do in the short term. The alignment between Fiat and Chrysler does not exactly save Chrysler. It gives Fiat an entry into the U.S. In short, Fiat is to get 35% of Chrysler, will not pay any cash for the stake, and it will give Chrysler access to its technology. Fiat had publicly said it wanted a production base in North America for its Alfa Romeo brand and presumably the Fiat brand, too. Through its35% interest that it is getting in Chrysler, it would presumably have access to a U.S. plant to build its cars. The case is intended to have students look at the 2009 Chrysler-Fiat strategic alliance, its current issues, and future viability in the global auto industry. The new landscape of the...
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