1 FIAT / Chrysler Alliance The Baobab Group CARPENTIER Rodolphe CURIEL FRANCO José Carlos MAURIN Matthieu ORIEULX DE LA PORTE Matthieu OULION Anne-Sophie

1

FIAT / Chrysler Alliance

The

Baob

ab G

roup CARPENTIER Rodolphe

CURIEL FRANCO José CarlosMAURIN MatthieuORIEULX DE LA PORTE MatthieuOULION Anne-SophieRONVAUX PhilippeROUX Vincent

The Fiat/Chrysler Alliance Groupe Baobab – 12-01-2009

2

PLAN

1. What is an Automotive merger

2. Presentation of the two protagonists

3. The Fiat/Chrysler merger

The Fiat/Chrysler Alliance Groupe Baobab – 12-01-2009

3The Fiat/Chrysler Alliance Groupe Baobab – 12-01-2009

1. What is an Automotive merger ?

effzef

• Vef•Zefe

What is a fusion?:

• When companies share or transfer their capital and create a single company

Strategy of the fusion:

• Economical or production:• Vertical : with a client or a supplier• Horizontal : with a competitor on a same market

• Financial:• conglomerate


1. What is an Automotive merger ?

effzef

• Vef•Zefe

Kinds of fusion:

• fusion absorption :

• All the shares are bought by the absorbing company

• Simple fusion:

• A new share is created proportionally to the degree of absorption

• For each share, share holders are given a part of the share of the absorbing company



effzef

• Vef•Zefe

FIAT• “Fabrique Italienne Automobile de Turin”

• the brand of Fiat Group : fiat Auto, Fiat Professional, Alfa Romeo, Lancia,

Maserati and Ferrari



effzef

• Vef•Zefe

FIAT

• Large series of product : 23 models in 2010 + 3 models of vehicles

running on natural gas (Evo Punto, Grande Punto and Panda)

• production policy based on ecology



effzef

• Vef•Zefe

FIAT

• located in different areas of the world like Brazil, Argentina, Turkey,

China, Vietnam, Russia, Venezuela, Egypt and Iran recently



effzef

• Vef•Zefe

FIAT• strengths of fiat:

• The strongest in term of petrol engine (but not in term of diesel engine)

• The best bodybuilders in the world: for example Pininfarina

• Diversification: Fiat GroupAutomobiles

materials foragriculture and publicworksindustrial vehiclesand buses

metallurgy

automotivecomponents

production system

49%

20%

17%

12%

• weaknesses of fiat :

• Average treasury

• Average brand image : reliability problem



CHRYSLER

effzef

• Vef•Zefe

• 4 major Brands: RAM, Dodge, Jeep and Chrysler

• 90% of its revenue made in the US

• Owned at 80 % by a private equity firm named Cerberus

• 3rd largest of the “big three” (with GM and Ford)



CHRYSLER

effzef

• Vef•Zefe

Situation just before the alliance:

• High dependancy on gas-guzzling vehicules (SUV and Trucks)• High dependancy on the US market• Too few experimented managers

• 65% drop in sales in Decembre 2008 compared to 2007• No new products to be released• Very poor client satisfaction• A 6,9 Billion $ dept

Threat to be put under the protection of chaptre 11 regarding bankruptcy



effzef

• Vef•Zefe

Complementary in term of range of products

What can Fiat acquire What can Chrysler acquire

advantage Big cars Little cars

risk

/

problem of credibility with small cars under the Chrysler name

Significance : +



effzef

• Vef•Zefe


advantage USA market

(Alfa Romeo and Fiat 500)

European and south American market

(Jeep)

risk Too late arrival on the US market

Significance : +

Enter a new market / distribution network



effzef

• Vef•Zefe


advantage Production facilities in US

• fiat’s gasoline multi air engines

• Production facilities

• new sedan platforms

• central electric car system

risk

Significance : ++

Sharing of technology



effzef

• Vef•Zefe


advantage Will reach a production capability of 4.5 millions of cars

Purpose : to reach 5 to 6 millions of cars

risk Product range complementary : no risk of internal competition

Significance : +++

Minimum production volume



effzef

• Vef•Zefe


advantage To compete with Mercedes and BMW on the US market

risk No sell of Fiat’s cars on the US market

Significance : +

To eliminate a competitor



effzef

• Vef•Zefe


advantage • ecological cars

• little and middle cars Platforms

• restructure organizational frame

risk

Significance : +++

Know-how

“The single most important thing was to dismantle the organisational structure,” he recalls. “We tore it apart in 60 days, removing a large number of leaders who had been there a long time and who represented an operating style that lay outside any proper understanding of market dynamics.”

Sergio MarchionneIn their place he promoted a group of younger executives, many with a background in consumer marketing, who understood and could provide what he wanted: accountability, openness, rapid communication and impatience with hierarchy and internal politics.



effzef

• Vef•Zefe


advantage Neither company has a good brand image to benefit from

risk To merge too much

Significance : -

Brand image



effzef

• Vef•Zefe


advantage • R&D in new technologies (electric cars)

• infrastructure costs

risk

Significance : ++

Sharing of investment costs



effzef

• Vef•Zefe


advantage • 20% of Chrysler’s shares (plus and option for 35%)

• No cash but long term profits

risk Needs to renew with profitability to reimburse loans and to be listed on the stock exchange market

Significance : +

Financial situation


4. Conclusion

effzef

• Vef•Zefe

• good idea but : • experience proves that automotive mergers are difficult ... Especially with Chrysler• human aspects• don’t merge too much

• new type of alliance : no exchange of cashMight become common in the near future in the auto industry

21Impact de la Crise financière sur l'industrie Automobile Groupe POUND – 16-12-2009

THE END

Thank you for your attention

Any questions ?

Documents

1 FIAT / Chrysler Alliance The Baobab Group CARPENTIER Rodolphe CURIEL FRANCO José Carlos MAURIN Matthieu ORIEULX DE LA PORTE Matthieu OULION Anne-Sophie