Can the maker of the Cinquecento save an ailing US auto colossus? Beset by its own problems with debt and losses, Italian automobile maker Fiat flirted with bankruptcy just four years ago, but under the leadership of CEO Sergio Marchionne, the company bounced back and now projects it will meet its trading profit targets in 2009, despite the economic slowdown.
Now Fiat is negotiating partnership with Chrysler, which is on the brink of bankruptcy. Chrysler recently reported a 30 percent drop in US sales since 2007, and the company reported an $8 billion loss in 2008 alone. Analysts on both sides of the Atlantic are skeptical as to whether an alliance with Fiat will help Chrysler turn a profit again. The major concern is that Chrysler needs cash-and fast.
Although the deal with Fiat does not involve cash, Marchionne affirms it will pay off for both companies because it is based on reciprocal interest. ‘It will give us a stake in Chrysler and access to new markets, while the American carmaker will have competitive platforms for fuel-efficient vehicles with cutting-edge motors, transmissions and components for which our company is a recognized leader', he told the Italian press.
He projects that the partnership would also give both carmakers access to each other's assembly plants as well as sales and service networks in North America and Europe. These terms are essential to Fiat, which is eager to reintroduce the Alfa Romeo in the US market and introduce its popular new Fiat 500 city car. To turn a profit, both models need to be produced in the US. At the same time, Chrysler could benefit because it will be able to build smaller cars, using Fiat's mechanics and fuel-efficient engines, and tap Fiat's vast distribution network outside of North America.
However, the timeline is tight. US president Barak Obama has given Chrysler an April 30 deadline to either secure the partnership with Fiat or risk filing for bankruptcy.