With a deal sealed to sell bankrupt Chrysler’s best assets to Italy’s Fiat on Wednesday, the real work can begin to rebuild the storied US automaker after its rescue from certain collapse. It won’t be an easy task, warned analysts, who cautioned that significant challenges remain and that it could be years before the alliance can claim to be successful.
The new Chrysler, which emerged from bankruptcy protection after just 42 days still has to contend with the collapse in global auto sales which led to its demise.
And there is no guarantee that consumers will flock to the Fiat-engineered small cars when they finally reach the US market.
“On paper, it looks great, but when you put them in front of the consumer it’s going to be the real test,” said Rebecca Lindland, an analyst at IHS Global Insight.
“We won’t know the success of this merger until we see the level of consumer acceptance,” she said.
SHARING
Fiat has acquired a 20 percent stake in the new Chrysler in exchange for sharing valuable technology, vehicle platforms and powertrains which will allow the Detroit automaker to meet upcoming emissions and fuel economy standards and expand its product offerings.
The Italian automaker will gain access to the lucrative US market and get closer to the economies of scale which chief executive Sergio Marchionne has said are necessary to compete in the global automotive industry.
Fiat, which did not provide Chrysler with any cash, will be able to increase its stake to a majority position once billions in government loans are repaid. While Fiat is expected to use Chrysler’s dealer network to launch its diminutive two-seater Fiat 500 in the US, new models built with Fiat’s technology will likely bear one of Chrysler’s brands in the coming years.
REPUTATION
The marketing expenses of launching a new brand are simply too high, particularly given the weak level of auto sales and Fiat still has work to do to overcome a reputation for poor quality it developed prior to being forced out of the US market in the 1980s.
But even with the recognized Chrysler brands, it is not clear that US consumers are interested in buying small cars, Lindland said.
“We have a lot of concern about whether the Chrysler, Dodge and Jeep buyers really will embrace Fiat-engineered vehicles,” Lindland said.
“We have a very modest forecast for these vehicles and we have no incremental growth for Chrysler,” she said.
MANAGEMENT
Perhaps an even more valuable asset Fiat brings to Chrysler is its successful management team, said Jeff Schuster, an analyst at JD Power.
“The Fiat side of the business is going to be getting the Chrysler team energized and looking at the brand messages and what that means and how Fiat blends into that,” Schuster said.
Chrysler’s workers have been hit by a painful failed marriage to Germany’s Daimler, years of layoffs and plant closures and months of speculation over possible mergers and a bankruptcy filing.
Now they can finally get back to concentrating on developing new products.
“They’ll be looking for stability and survival in the near term and small wins as they rebuild,” Schuster said. “This is a long process.”
A number of senior executives will be leaving, including the heads of product engineering and sales and marketing, and several Fiat executives have been brought over to fill top posts such as chief financial officer.
Marchionne will lead Chrysler with the help of former Chrysler vice chairman Jim Press, who was appointed deputy chief executive officer.
The real test for the new Chrysler is if they’re able to refocus their brands and improve their product offerings, said Jeremy Anwyl, president of research group Edmunds.com.
“They’ve got the Grand Cherokee launch which is a decent product, but after that it’s a vacuum,” Anywl said. “Obviously they’re going to be more of a niche player than they were in the past. They need to carve out their own space … for each of the brands there has to be some coherent vision — what’s a Dodge going forward? What’s a Chrysler?”
Chrysler is currently on track to lose its number four spot in the US market to Japan’s Honda, with sales were down 46 percent for the first five months of the year. Its share fell to 8.5 percent last month from 9.4 percent in April and 10.6 percent in May last year, Autodata said.
NO-LIMITS PARTNERSHIP: ‘The bottom line’ is that if the US were to have a conflict with China or Russia it would likely open up a second front with the other, a US senator said Beijing and Moscow could cooperate in a conflict over Taiwan, the top US intelligence chief told the US Senate this week. “We see China and Russia, for the first time, exercising together in relation to Taiwan and recognizing that this is a place where China definitely wants Russia to be working with them, and we see no reason why they wouldn’t,” US Director of National Intelligence Avril Haines told a US Senate Committee on Armed Services hearing on Thursday. US Senator Mike Rounds asked Haines about such a potential scenario. He also asked US Defense Intelligence Agency Director Lieutenant General Jeffrey Kruse
INSPIRING: Taiwan has been a model in the Asia-Pacific region with its democratic transition, free and fair elections and open society, the vice president-elect said Taiwan can play a leadership role in the Asia-Pacific region, vice president-elect Hsiao Bi-khim (蕭美琴) told a forum in Taipei yesterday, highlighting the nation’s resilience in the face of geopolitical challenges. “Not only can Taiwan help, but Taiwan can lead ... not only can Taiwan play a leadership role, but Taiwan’s leadership is important to the world,” Hsiao told the annual forum hosted by the Center for Asia-Pacific Resilience and Innovation think tank. Hsiao thanked Taiwan’s international friends for their long-term support, citing the example of US President Joe Biden last month signing into law a bill to provide aid to Taiwan,
China’s intrusive and territorial claims in the Indo-Pacific region are “illegal, coercive, aggressive and deceptive,” new US Indo-Pacific Commander Admiral Samuel Paparo said on Friday, adding that he would continue working with allies and partners to keep the area free and open. Paparo made the remarks at a change-of-command ceremony at Joint Base Pearl Harbor-Hickam in Hawaii, where he took over the command from Admiral John Aquilino. “Our world faces a complex problem set in the troubling actions of the People’s Republic of China [PRC] and its rapid buildup of forces. We must be ready to answer the PRC’s increasingly intrusive and
UNWAVERING: Paraguay remains steadfast in its support of Taiwan, but is facing growing pressure at home and abroad to switch recognition to Beijing, Pena said Paraguayan President Santiago Pena has pledged to continue enhancing cooperation with Taiwan, as he and Japanese Prime Minister Fumio Kishida expressed opposition to any unilateral change to the “status quo” in the Taiwan Strait using force, Japanese media reported on Saturday. Kishida yesterday completed a trip to France, Brazil and Paraguay, his first visit to South America since taking office in 2021. After the Japanese leader and Pena spoke for more than an hour on Friday, exchanging views on the situation in East Asia in the face of China’s increasing military pressure on Taiwan, they affirmed that “unilateral attempts to change the