Evaluating the Chrysler-Fiat Auto Alliance in 2012
1191 WordsMar 27th, 20155 Pages
1. What are your views of the Chrysler-Fiat auto alliance and its status in 2012?
Despite some drawbacks, the alliance has worked well, and has been beneficial for Chrysler and Fiat. The growth and survival of both companies had faced problems in the areas of technology and quality standards. Chrysler needed the alliance for survival due to its bankruptcy position and conditions of bailout. It also needed a partner to bring innovation, increased R&D opportunities, low cost technology and access to European markets. Fiat wanted to reenter the North American market and needed access and distribution through an established manufacturer that knew the market, and had the technology available; which would be possible through a strategic…show more content…
The company had also encountered growth and survival difficulties in the areas of technology and quality standards.
Chrysler’s strengths before the alliance were that it was a well-known competitor in the American market and had solid growth in minivans and the Jeep brand. Its weaknesses were its reputation for poor quality products, low market share, and global recession pressure in 2008-2009 which ultimately led to its downfall.
Strengths after the alliance are combined production capacity, technology sharing, overall increases in sales, and major savings in joint product development and in supplier and dealer networks. Chrysler recovered financially and repaid $7.6 billion of its bailout loans to the U.S. and Canadian governments in 2011, six years before the required date. This was a major achievement of the alliance and its credibility in the auto industry. The Chrysler-Fiat alliance sold 4.2 million vehicles worldwide in 2011, and Chrysler saw an 18% sales increase in 2012. Weaknesses have been in the post-alliance integration. Fiat’s sales declined in European markets due to the economic downturn in 2011, and labor related issues in Italy disrupted corporate efficiencies.
3. Compare and contrast Chrysler and Fiat with other auto manufacturers.
In 2012, only three American auto manufacturers prevailed in North America: General Motors, Ford, and Chrysler, while Japan had three major firms:
The case details the events that led to the financial crisis at Chrysler Motors LLC (Chrysler), the third largest automaker in the US. Chrysler's inability to launch vehicles in accordance with customers' requirements and poor business strategy resulted in declining auto sales. Moreover, the global financial crisis in 2008 worsened the situation further; Chrysler found it increasingly difficult to continue its operations. To overcome its problems, Chrysler approached the US government for a loan. The company received a federal loan of US$ 4 billion in January 2009 out of the requested amount of US$ 7 billion. In order to get additional federal loan, Chrysler was asked to establish an alliance with Fiat SpA (Fiat) on or before April 30, 2009, restructure its debt and negotiate with UAW (United Auto Workers) and CAW (Canadian Auto Workers) to reduce costs.
Chrysler was able to reach an agreement with Fiat and was able to convince UAW and CAW to reduce costs. However, it failed to get all its creditors to agree for debt restructuring. On April 30, 2009, Chrysler, along with its 24 wholly-owned US subsidiaries, filed for bankruptcy protection under Section 363 of Chapter 11 of the US bankruptcy code. As part of its bankruptcy filing, Chrysler announced that it would establish a global strategic alliance with Fiat. The case ends with a discussion on the future challenges for Chrysler.
» Analyze the reasons for the financial problems faced by Chrysler.
» Study the rationale for poor business performance of Chrysler in the recent years.
» Evaluate the alliance between Chrysler and Fiat and examine its potential synergies.
» Analyze the future challenges of Chrysler.
Chrysler Motors LLC, Bankruptcy Protection, Fiat SpA, Voluntary Employees' Benefit Association, US Treasury Department, Federal Loan, Restructuring Plan for Long Term Viability, United Auto Workers, Canadian Auto Workers, Debt Restructuring, Bob Nardelli, Global Financial Crisis, Business Strategy, Lack of Innovation, Lee Iacocca, DaimlerChrysler Merger, Merger of Equals, Restructuring Plan, Fiat-Chrysler Alliance, Powertrain Technology, Fiat's Global Distribution Network, Strategic Partnership, Winding Up of Operations
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