Fiat-Chrysler Signaling Early Strategy Moves

Fiat-Chrysler Signaling Early Strategy Moves

By Michelle Krebs August 31, 2009

Led by new CEO Sergio Marchionne, Chrysler Group LLC management reportedly will report next month to its newly appointed board of directors about how managing owner Fiat S.p.A. plans to begin meshing the two companies' operations to move Chrysler forward in the U.S. market.

Marchionne is expected to lead a briefing of the 9-member Chrysler board that has individuals appointed by Fiat, the U.S. Department of Treasury (because of Chrysler's acceptance of billions in loans from the government's Troubled Assets Relief Program) and the United Auto Workers union (which has a minority ownership in Chrysler), according to Bloomberg News reports.

 

Although only Chrysler management knows what is to be detailed in the briefing, the company already has been making moves that appear to be aligning broadly with Marchionne's stated plan to transfer Fiat-developed small-car platforms and fuel-efficient powertrain technology to Chrysler in order to improve Chrysler's competitiveness in the U.S. market.

• It has been reported Fiat plans to build a compact car - perhaps the popular 500 - in Chrysler's assembly plant in Toluca, Mexico, that currently builds the Dodge Journey crossover and the Chrysler PT Cruiser (a car whose production run was scheduled to end, but that termination was delayed). The lower cost of Mexican assembly potentially improves the car's chance for profitable sales in North America.

• Reports last week said Chrysler could be working to dissolve its joint-venture agreement with partners Hyundai Motor Co. Ltd. and Mitsubishi Motors Corp. at the Global Engine Manufacturing Alliance (GEMA) four-cylinder engine plant in Dundee, Mich., with the possibility Fiat could be angling to take full control of the plant.

It would not be an unexpected development. The GEMA plant last year was named the highest-productivity North American powertrain plant by the industry-benchmark Harbour Report, but neither Mitsubishi or Hyundai has ever taken engine supply from the plant, which began operation in 2002 but has long been rumored to be ripe for purchase or as a candidate for contract engine assembly for another automaker outside the alliance.

And last year, GEMA's longtime president, Bruce Coventry, was named to head Chrysler's Global Electric Motor Cars electric-vehicle division, although he stayed on as GEMA's non-executive chairman. Coventry's reassignment was considered a precursor to a future tactical move with GEMA.

• Rumors have begun to swirl regarding several Chrysler U.S. manufacturing sites and what products they might eventually be making. It's possible Fiat, which has been anxious to reintroduce its Alfa Romeo brand in the U.S., could quickly develop new Alfas based on the competent rear-wheel-drive underpinnings of the Chrysler 300 and Dodge Charger large cars.

Buying time to execute the reorganization would seem to be a priority for Fiat's near-term strategy for Chrysler. After the company's extended shutdown earlier this year and eventual short bankruptcy, it's been feared launches of vital new products could be delayed.

 Chrysler already announced a stay of execution for the PT Cruiser, and the company also reportedly is considering extending the life of the slow-selling Chrysler Sebring and Dodge Avenger midsize cars because, as with the PT Cruiser, their planned discontinuation will leave Chrysler patently short of product to park in the showroom; it is expected to be a minimum of 18 months - and likely longer - before any new vehicles based on Fiat platforms are available in the U.S. -- Bill Visnic

Photos

1 - Fiat-Chrysler CEO Sergio Marchionne (courtesy of Fiat)

2 - Fiat 500 (Bill Visnic)

3 - Chrysler GEMA plant (courtesy of Chrysler)

4 - Chrysler PT Cruiser (courtesy of Chrysler)

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.