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http://www.youtube.com/watch?feature=endscreen&v=cpi2IAec9Ho&NR=1
Case Questions
1. What are your views of the 2009 Chrysler-Fiat strategic alliance and its future prospects in the auto industry? 2. Analyze and evaluate Chrysler and Fiats strengths and weaknesses before and after their 2009 strategic alliance. 3. Compare and contrast Chrysler and Fiat in the area of global operations and manufacturing? 4. Analyze Chrysler and Fiats brand portfolios in the world auto industry. How do you see both companies revamping and overhauling their brands in the short and long term? 5. What did you learn from Chrysler-Fiat Strategic Alliance regarding managing multinationals in the changing global business? What role did the US govt play in the formation of this alliance? 6. What has happened to the company since this case was written as the alliance was being formed? Give an update as of the time of your reading this case.
History of Chrysler
Founded in 1924 by former exec of Buick Motor Co. Walter Chrysler 1928: intro Plymouth and DeSoto 1940s: domestic car production was banned; made trucks, tanks and armaments WWII
Cont
1996: gained 16.2% mkt share; but still ranked 3rd. US auto industry 1998: Merged with Daimler-Benz, became DaimlerChrysler, HQ moved to Stuttgard. Cost $36bil 2001: cut 26,000 jobs due to competition, quality issues, changing mkts
2005: good sales of Ram, Sedan and Magnium brought $2bil in profits
2006: net loss of $1.5bil due to competition and changing mkts 2007 Feb: cut 13,000 jobs (16% of workers) 2007 May: de-merger; Chrysler sold to Cerberus Capital Mgmt sold for $7.4bil
Cont
2009 Apr: recession and high gas prices forced Chrysler into Chapter 11 bankruptcy 2009 Sept: Fiat obtained 20%
History of Fiat
1899: Fiat formed by Giovanni Agnelli (fam still owns 35%)
Cont
2004: Sergio Marchionne becomes CEO 2005: GM pays $2bil in cash to end 5 yr partnership 2009 Feb: Fiat gained 20% in Chrysler (non cash, should provide tech and markets) 2009 Sept: merger concluded, Fiat owns 20%.
Future Trends
Global consolidation and mergers (may result in closure of plants, dealers, jobs) Restructuring and efficiencies due to flexible manufacturing, product dev, and supply / value chain
A painful realignment made tougher by falling sales..Change in coming, and its coming with gut-wrenching speed..This time no one is calling a downturn, but a permanent change in direction of the North American industry. ~ The Harbour Report 08
Classic example of competition, evolution and creative destruction
Fiat Strengths
Strong leadership under Sergio Marchionne; resulting in successful turnaround strategy, improved business practices and culture. Reinvigorated in Europe Popular in small car segment, with many new models Improved quality Pay off of alliances (eg. Tata, Ford, GM)
Weaknesses Lacks charisma in global mkt Limited product portfolio in global mkt
Financial Losses (-4% sales growth, 08) Alliances with Mitsubishi & Hyundai unproductive
Corporate Tie-up
Aim is to create optimality from R&D, product dev, distribution, knowledge sharing, i.e. economies of scale Fiat to provide tech-related expertise and assembly platforms to Chrysler for it to dev small, fuel efficient autos in North Am (e.g. 2013 Dodge Dart) http://bcove.me/xm22gffp Non-cash deal; initially 20% stake, could increase to 35%, after 2013 up to 51%...must meet conditions, i.e. fuel efficient cars and small auto engines in North Am.
Part of US govt bailout and bankruptcy proceedings; Obama admin provided $4 bil to Chrysler with conditions Fiat to receive access to lucrative North Am mkt (quick market penetration strategy) Opportunities to target small / compact car and hybrid segments where Fiat is strong Possible weaknesses: poor corporate integration (differences in corporate culture), mismatch of brand portfolio, R&D priorities, control issues, regulation & antitrust issues, distribution & ownership problems
Outlook
he will create a new company consisting of Fiat Auto (without Ferrari, Maserati or the rest of Fiat group), Chrysler and GM Europestakeholders would be Agnelli family, UAW union health-care fund and GM..In a normal year that could expect revenues of $100bil from sales of 6mil cars-just above Mr. Marchionnes viability threshold. ~ The Economist.
Your Take
1. What are your views of the 2009 Chrysler-Fiat strategic alliance and its future prospects in the auto industry? 2. Analyze and evaluate Chrysler and Fiats strengths and weaknesses before and after their 2009 strategic alliance. 3. Compare and contrast Chrysler and Fiat in the area of global operations and manufacturing? 4. Analyze Chrysler and Fiats brand portfolios in the world auto industry. How do you see both companies revamping and overhauling their brands in the short and long term? 5. What did you learn from Chrysler-Fiat Strategic Alliance regarding managing multinationals in the changing global business? What role did the US govt play in the formation of this alliance? 6. What has happened to the company since this case was written as the alliance was being formed? Give an update as of the time of your reading this case.
My Take
Alliance may have drawbacks, but seem to be good fit for both. Chrysler needed the alliance due to bankruptcy and conditions of bailout and a partner to bring innovation, R&D, low-cost tech and access to EU mkt; Fiat will have access to North Am market and distribution. Synergies may not all work due to issues of culture and integration, however opportunities exist to reduce costs, and provide low-priced fuel -efficient automobiles. In short run Chrysler will have gain new platform for fuel efficient vehicles, a segment it is not presently competitive in and access to EU; Fiat will gain entry to Am mkt. In Long run, new technologies may result from partnership. Opportunities can result from a crisis. Chrysler can increase mkt share in mid and low size segments and Fiat entry to the North Am market. The Dodge Dart introduced but very slow sales. Negotiations with unions in Italy have been ongoing; Fiat set to cut jobs due to losses of 700 billion euros.