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.
