Chrysler-Fiat Could Find Welcoming Marketplace, Experts Say
January 21, 2009
By Dale Buss
If the Chrysler-Fiat alliance makes it out of the crib, the 
combination could provide each company with some potent new assets in the U.S. and global marketplace.
Chrysler could badge fuel-efficient, Fiat-based or -built small cars under its Chrysler brand and fill out the American industry's weakest car lineup as well as gain access to Fiat's global retail network. Broader distribution of Chrysler's iconic Jeep brand -- into Asia, for instance -- would be one possibility.
Fiat could gain reentry for its own brand after a 27-year absence from the U.S. market and, more likely, finally gain a distribution foothold for the premium Alfa-Romeo brand that it has been trying to reinsert into this country for several years.
"It offers opportunities to both sides because there's a complementary setup in terms of Fiat having an infrastructure that it can use in North America and Chrysler gaining access to an international network of Fiat dealers," said a primary consultant to the global auto industry.
American Footprint
For Chrysler, a partnership with Fiat that brought new small cars as well as perhaps an additional mainstream brand and a new luxury marque would boost both showroom traffic and dealer confidence, noted analysts for IHS Global Insight.
Chrysler has "a dealer network whose size is geared toward a much greater market share than Chrysler currently enjoys [or is likely to enjoy anytime in the near future]," IHS Global Insight said.
The consultant noted that consolidation will continue to occur among U.S. auto dealers "because of customer requirements and strong representation of brands at the point of sale. That requires a certain scale. And when you have more brands using one dealer, essentially, you can achieve economies of scale in the dealer network."
Exactly how vehicles and brands would be aligned under such expansion isn't clear yet. "I would expect to see the Chrysler name on some Fiat products rather than the Fiat name, although I believe that Alfa could be a brand itself," said David Cole, chairman of the Center for Automotive Research, in Ann Arbor, Michigan.
Stephen Berkov, Edmunds.com's executive director of client strategy, said that such an approach "could lead to the strengthening of the Chrysler brand again" similar to how the company's short tenure under Mercedes-Benz ownership infused Chrysler's vehicle lineup with technological sophistication and other enhancements. The spiffy Chrysler Crossfire convertible sports car, for example, was based on the Mercedes-Benz SLK, Berkov noted, while Chrysler's innovative but poor-selling Pacifica crossover had the underpinnings of the Mercedes-Benz E-Class platform. Chrysler, under Cerberus Capital Management ownership, has eliminated both the Crossfire and Pacifica from its product line.
Chrysler-badged Fiat vehicles are more likely than stand-alone representations of the Fiat brand "because it's still a good brand and is recognized by Americans and has much greater acceptance than Fiat," said David Johnston, CEO of Strategic Vision, an Atlanta-based marketing agency whose clients have included Ford, Chrysler and their dealerships.
Whither Alfa-Romeo
What to do with the Alfa-Romeo brand seems to be iffier. Fiat had been planning to return the upscale line to the U.S. market by next year. And, as Berkov noted, "Chrysler doesn't have a Lexus or Acura" luxury brand of its own.
But timing could be an issue. "They wouldn't do it until the economy picks up, or it would be a major blunder," Johnston said, maintaining that neither the automotive marketplace nor American consumers would be especially hospitable to a "new" luxury brand here at a time of such overall economic pain and auto-industry contraction.
The global consultant disagreed, however. "Timing is always an issue, but there is definitely some heritage and definitely some interest [in Alfa-Romeo] in the U.S. market," he said. "They really wouldn't have to wait."
Jeep already is distributed in Europe, but Cole was among those who believes that Fiat could super-charge the brand's presence on the continent, for one thing, and elsewhere including Asia.
"I could also see Fiat eventually coming up with crossover [vehicles] for Jeep," Berkov said.
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