Creative Global Investments analyst Sabine Blümel takes on the Fiat-Chrysler marriage at just-auto.com [sub] and she seems unable to find anything positive to say about the deal. “A three-way alliance, also including GM Europe, and even better, also GM Latin America, would have given [Fiat Group] a full-range product portfolio and an extended and strengthened geographic footprint,” says Blümel. Take GM’s Opel or Latin American ops out of the picture, and you’ve got a nasty case of the not-so-muches on your hands. “We see little potential strategic benefit for the Fiat and our concerns regarding the benefits for Fiat from the alliance have, if anything, increased since the alliance plan was first announced,” is the verdict.
“Fiat has the wrong model portfolio and expertise to succeed in the US. Fiat’s centre of gravity, both in expertise and market positioning is in the A- and B-segment, i.e., the ‘compact basic class’ that currently accounts for less than 4% in the US light vehicle market. Moreover, the alliance does not help Fiat address its own structural problems, including streamlining the production network, extending its geographic foot-print beyond Italy and the Latin markets and extending the product line-up above its mainstay of A-B-segment.”
Good thing Fiat only paid $0, then.
The blind leading the blind.
woopty-doo. Another analyst shares their “wisdom” with us.
““Fiat has the wrong model portfolio and expertise to succeed in the US. Fiat’s centre of gravity, both in expertise and market positioning is in the A- and B- segment, i.e. the ‘compact basic class’ that currently accounts for less than 4% in the US light vehicle market.”
Didn’t stop Toyota, Honda, and Nissan from giving us the Yaris, Fit, and Versa, but they are the smart companies, right? So it’s all good I guess.
Compare the analyst with the continuing whine of the so called auto intelligencia in the blogashere saying “Why do the Euros and Asians get all the cool small cars; How come we can’t get the Euro Focus; Give me Fiesta; Give me Cinquecento; blah, blah, whine, whine.
I say give small cars a chance. And I like big cars better. But I like choice best of all. The hell with the so-called “analysts”.
Fiat may have its mainstay in the A and B-segment, but it also has a rather competent platform for the C-segment and even the D-segment (Alfa 159). Fiats problem in those segments is not that it doesn’t have the technology or the technical capability to compete, it just lacks critical mass in those segments on the European markets. Chrysler offers them an entry on the US-market which is as far as cars are concerned a market that starts from the C-segment upward.
That means Fiat will be able to sell its C- and D-platforms (underpinning Dodges and Chryslers) in much larger numbers than before (even in case Chrysler drops to a modest 5 % of the US market, it will represent more C- and D-segment sales than Fiats entire European sales in those segments). On top of that, the platform of the 300C and its siblings finally offers Fiat something to base the successor of the Alfa 166 on without incurring horrendous costs.
Neither Fiat nor Chrysler stands much of a chance competing directly against the entrenched mainstream competition at this point. Honda, Toyota, and Hyundai are all too good at what they do. But they have a fighting chance of survival in the US if they successfully exploit niche markets with vehicles like the 500 and the Wrangler, like AMC did with the Rambler 50 years ago. If they have the patience to slowly expand from their niches into the mainstream, they could become the next Honda or Hyundai in America. Otherwise they’ll be the next AMC/Renault.
Fiat’s centre of gravity, both in expertise and market positioning is in the A- and B-segment, i.e., the ‘compact basic class’ that currently accounts for less than 4% in the US light vehicle market.
Yeah, and because *nothing ever changes*, we *know* that this will hold true *forever*
Chrysler was holding its own in most segments before fuel skyrocketed, followed by the economy going into the tank. Its first problem was no credible small cars to sell. Fiat’s products 3 yrs ago would have fixed this issue, in large part.
Chrysler has been strong in trucks, suvs and large cars. Fiat strong in small. In the middle, where both have entries that are not particularly strong, surely there are enough decent components to come up with a decent entry in that market.
I am keeping an open mind here. If Fiat has some strong operations people who can flesh out what had been a very well run company before the Germans got hold of it, and if the general economy improves, and if we see a decent product mix over the next couple of years(I know, a lot of big “ifs”) this deal has a chance. I am really starting to like the prospects of this company better than GM, though that is a very low bar.
The UAW owns Chrysler, not Fiat… Fiat will manage it to see if they can get something out of it, but they paid $0 and walking away won’t be hard.
If nothing else they can evaluate all of the Chrysler talent, cherry pick a few dozen of their Best and Brightest to take back to the mother ship and walk away.
Oh boo-hoo the Americans will be mad and will stop buying all of our Italian cars, oh wait.. they don’t buy them now! WIN-WIN!
I hope it all works for everyone, but if it doesn’t the Feds will need to do more bailouts or UAW might have to run Chrysler back into bankruptcy to avoid paying benefits to their own members.
If I was a TV robot from a 1960s adventure/sci-fi series, I would say “Danger Will Robinson, Danger.” every time somebody mentioned Chrysler and Fiat in the same sentence.
For those who thinks Fiat has a strong small car portfolio: there is a reason that Fiat was not doing business in the US, the largest auto market up to last year. And that reason still holds.
lw :
June 12th, 2009 at 5:06 pm
I hope it all works for everyone, but if it doesn’t the Feds will need to do more bailouts or UAW might have to run Chrysler back into bankruptcy to avoid paying benefits to their own members.
———————————————
Wouldn’t it be hilarious when the UAW suddenly finds itself as the first and only bond holder and has no other investors to screw?
@wsn
I would find it more interesting if GM line workers have to take a cut in pay (via higher dues) so that Chrysler retirees can keep their health plan.
It’s only starting to get complicated.. This was an “easy” round.
“Moreover, the alliance does not help Fiat address its own structural problems, including streamlining the production network, extending its geographic foot-print beyond Italy and the Latin markets and extending the product line-up above its mainstay of A-B-segment.”
I find Blümel’s reasoning highly suspect.
First, the deal expands Fiat’s geographic footprint into North America, which is still one of the world’s largest markets. Her argument that the deal does nothing to expand Fiat’s geographic footprint is nonsensical.
Second, the deal puts Fiat squarely into the SUV and full sized pickup truck businesses, both of which are doing very well in certain emerging markets and remain large businesses in North America. Jeep remains a highly valuable brand, and Fiat controls it now. It also ads a still valuable Minivan product line and a fresh new pickup truck design. Fiat-Chrysler also has some very competent, low-cost factories in Mexico. Also, Alfa-Romeo makes some very nice products in the C and D size categories, and those platforms lend themselves well to replacing the Sebring sized car.
Ms. Blümel makes no mention of Marchionne’s successful turn arounds of Case-NewHolland and Fiat. An executive with a track record of turning around multiple struggling manufacturing businesses is a hard thing to find.
consumer reports has not recommended a chrysler product in years, and still does not recommend them even at fire sale prices.
fiat is gonna try and rescue this pathetic excuse for a car company, and try to make a little money in the bargain.
will it work? who knows.
but we could give them a chance to see if they can make a silk purse out of this sows ear.
John Horner: It also ads a still valuable Minivan product line and a fresh new pickup truck
The Chrysler mini-vans and Dodge pickups are not likely to find many buyers outside of Chrysler’s current geographical foot-print. Europe has a raft of better-sized mini-vans; I doubt Latin America is very interested either. And the rest of the world uses much smaller and more efficient small work trucks than our American behemoths.
I agree that Marchionne has a good track record, but he’s not superhuman either. He’s got an uphill battle. It’s true, too, that in Europe, only the very smallest Fiat’s do well; the market for them here is very limited. I wish him luck. He’s going to need it.
And so the relentless negative drumbeat continues. The subtext is so obvious: Whatever the Obama administration has done must surely fail. In fact, even though Chrysler only emerged from bankruptcy this week, the new company has already failed.
Sorry, but I ain’t buyin’ what you been sellin’.
Carlos:
I don’t want Obama to fail… I want him to do what I want.
I didn’t vote for him, because he promised to do things that I didn’t want.. Now he is doing those things and I still don’t want them.
So I’m going to bitch, moan, complain until he either does things MY way or someone takes over who does.
And if the things he does DON’T work then I will have the right to say “Told ya.. should have listened to me.”
If they DO work, well then I was the dummy and I get the benefits of his success. Also I can live with not being as smart as POTUS.
So really this is a WIN-WIN for me.
Paul Niedermeyer: Chrysler Grand Voyagers have been sold successfully in Europe for year now, and the medium duty versions of the Ram platform has potential in world markets as well. But, the biggest global potential of the Chrysler portfolio is probably for the Jeep brand.
I agree that the Fiat-Chrysler deal is a tough slog, but my point is that the main arguments put forth by Blümel simply are not true. Fiat is gaining a big new geographic market and Fiat does have platforms to share with Chrysler which can bring value to the table.
Turning around Chrysler is a much easier job than turning around GM because Chrsyler is much smaller, does still have a couple of strong niche products and does have a new boss with a strong track record. I’m not loading up on Fiat stock, but they do have a real shot.
I don’t want Obama to fail… I want him to do what I want.
I’d like Santa Claus to bring me a pony, too.
consumer reports has not recommended a chrysler product in years, and still does not recommend them even at fire sale prices.
Consumer Reports wouldn’t recommend a Chrysler product if Chrysler were the last car company on Earth. According to CR, only a few of their vehicles (e.g. RAM, Compass, Caliber, Patriot) achieve average or better than average reliability.
That means CR won’t recommend any other vehicle in Chrysler’s line up until reliability in their scoring system improves. Period.
Of Chrysler’s product lineup, I like the Jeep Patriot, and would consider one, but its interior is full of hard plastics with manual windows and it’s like driving in a tunnel from what I’ve seen.
Chrysler just puts too much emphasis on style and not enough on basic useability. The Patriot, Nitro, Commander, Liberty, and Caliber are just a few of the vehicles that have had too much emphasis put on their “in your face” styling and suffered in many other areas as a result.
The odds are against the deal working, but at least they have a strong leader who knows cars. Ford has a strong leader who does not know cars. GM has a weak leader who probably does not know cars. So who will succeed? Probably Chrysler, if any of the domestics make it.
lw:
I don’t want Obama to fail…
A year ago, would anyone suggesting a merger with Fiat have been taken seriously? Sure, their cars are OK to good, but they’re going against established players like Honda, Toyota, Mazda, and Subie in the US market.
Obama didn’t get my vote, but more than anything, I’d like to see the US succeed, foremost by the economy growing again. If that means Obama succeeds, fine. But, Obama and the current Congress seem carter-esque and 1970s-like to me.
Obama threw a lifeline to BOTH Chrysler and GM – and invested political capital into saving them both. By rescuing both, he increases the chance that neither make it and become permanent wards of the state.
The political cost could then be high.
I just had a look at Karesh’s reliability database, and to me it looks like CR is not that far off in their reporting. If you have access to TrueDelta, look at the Town & Country: it goes from bad to worse. From 2006 to 2008 model years, trips per year per 100 went from 70 to 77 to 89. They’re going the wrong way!
This doesn’t bode well for them re: the 2009 TTAC TWA award list.
I didn’t vote for him, because he promised to do things that I didn’t want.. Now he is doing those things and I still don’t want them.
So I’m going to bitch, moan, complain until he either does things MY way or someone takes over who does.
Unfortunately, “MY way” is essentially what an obstructionist party tell them for most people.
There really is no compromise for people like that, so I don’t know why the current admin even bothers at times.
Fiat might work out perfectly, tho odds are against it, but the given the circumstances it was decided to be the least worst decision, so how it can interpreted as the end of the world is quite interesting. And by interesting I mean pretty idiotic way of looking at a cost analysis you disagree with but lack convincing arguments against.
ihatetrees:
I smell a Carter as well… So maybe the next prez is Reagan like…
agenthex:
“Unfortunately, “MY way” is essentially what an obstructionist party tell them for most people. There really is no compromise for people like that, so I don’t know why the current admin even bothers at times.”
Not sure I even understand this comment… Most liberals that I know vote/think about issues. Most conservatives (not I didn’t say Republicans) that I know vote/think based on principles.
I vote/live based on a few principles. I don’t worry about issues.
Most liberals that I know vote/think about issues. Most conservatives (not I didn’t say Republicans) that I know vote/think based on principles.
I vote/live based on a few principles. I don’t worry about issues.
Avoiding depth and understanding is how the powerful manipulate the little people.
The world we live in works on causation, not abstractions of the human mind.
Why do we fight a battle? Not because we need to protect the lord’s castle and he can’t afford mercenaries, but we’re one people acting for liberty and freedom for all, right?
Don’t ever expect to be told anything but “principles” when it’s your mind they’re after.