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Fiat Acquires Struggling Storied Automaker
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In a landmark deal, Italian automaker Fiat acquires Chrysler. The struggling Chrysler Group was near potential liquidation before the agreement was made, saving the storied name brand and vehicles from a potential exit from the car market.
Immediately, Fiat CEO Sergio Marchionne took over as acting head of the newly merged group and spoke of plans to quickly reopen many idle factories, with some estimates saying the closures were costing the ailing auto group upwards of $100 million daily.
High labor rates and nearly 800 underperforming dealerships are said to have led to the automaker’s continued woes, leading to the necessity for a deal to be put in place.
According to a statement released by the company via ABC news “Work is already underway developing new environmentally friendly, fuel-efficient, high-quality vehicles that we intend to become Chrysler’s hallmark moving forward”.
This segment has been one that the company has continued to struggle to compete in and one of estimated greater importance with the trend of American buyers seeking more reliable, fuel-efficient vehicle options.
Management changes have already begun, as Marchionne seeks to make management decision-making more efficient and simplified. Those around him also allude to his desire to make the company leaner and more streamlined from an organizational standpoint.
The CEO is widely credited with saving the (then) ailing FIAT group 5 years ago and says he is confident he will be able to do the same with Chrysler.
The courts were highly involved in the process, including Judge Arthur Gonzales ruling in favor of Chrysler’s efforts to eliminate 789 dealerships – nearly 25% of its dealer base. Estimates pegged these underperforming dealers responsible for upwards of $1.5 billion dollars in annual losses.
Interestingly, Fiat won’t be injecting any capital into the ailing firm, yet intends to share billions of dollars worth of production and technology practices with them as part of the deal. In doing so, they will gain a 35% greater stake in the Chrysler Group.
Despite the past years of difficulties for the automaker, they did post their first profitable quarter in years in Q1 of 2011 and paid back the previously taken government bailout loan.
While now taking a larger focus on compact vehicles moving forward, the Dodge Ram trucks and Jeep Grand Cherokee have both been bright spots for the firm – with the Ram being the fourth highest-selling vehicle in the U.S.
So while the American auto industry as a whole has seen a rather sound recovery from its earlier woes and bailouts of yesteryear, mergers like this one undoubtedly point to a moving trend in automakers using a more international approach to manufacturing, technology, and resource fusion viewed as a necessity now to successfully compete in the global marketplace.
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