2009 Chrysler-Fiat

Strategic Alliance Case Study

MGT 5545

Group 5: James Henry-Rhoads and Hang Truong

Image from: http://www.npr.org/programs/atc/features/2007/may/chrysler/chrysler.html

Image from: http://www.npr.org/programs/atc/features/2007/may/chrysler/chrysler.html

How Automobiles have Evolved

• https://www.youtube.com/watch?v=VdS1Mgu11vg

Competitors

Auto Industry Bailout

• Total size of bailout: $80 billion

• Chrysler’s total Treasury debt peaked at $12.5 bilion

• U.S. Treasury expects to write off $14 billion

▫ Even though there will be this write off, the bailout is still considered successful because the companies have survived thus far.

http://www.nada.org/NR/rdonlyres/B7D968E7-8070-4701-93E6-6B95EB83AA0D/0/Chrysler_Restructuring_Plan_Full_021709.pdf

Fiat

• Fabbrica Italiana Automobili Torino or Fiat was founded in 1899

• Very well known in Europe

• Still 30% owned by Angelli family

• Existing partnership with Mazda

Recent Timeline of Events1998: Daimler-Chrysler partnership2000: Fiat enters partnership with GM2004: Sergio Marchionne becomes CEO of Fiat2005: GM sells shares in Fiat and is forced to pay $2

Billion on a put option for the right to sell after significant losses due to a failed partnership

2007: Daimler sells remaining shares to Cerberus Capital Management for $6 Billion

2009: Auto bailout and Chrysler bankruptcy. Chrysler is issued new U.S. Treasury loans to continue operations. Fiat takes a 20% stake in Chrysler which is also financed by the U.S. Treasury

2011: Chrysler-Fiat has paid back all Treasury loans2013: Fiat owns 61.8% of Chrysler and would like to

purchase the remaining shares owned by the UAW to gain 100% ownership of Chrysler.

Fiat’s Return to America

• Fiat had been gone from the American market for decades

• Introduced Fiat 500 to America

▫ Sales were slow at first, but continue to improve

• Recently introduced Chrysler 200

▫ Which is actually a re-badge of Lancia

▫ Lancia is another Italian car owned by Fiat

• 2014 Dodge Dart will be a re-badge Alfa Romeo 169

• http://www.youtube.com/watch?v=lB0q_jkjq5U

Alfa Romeo to be Reintroduced• After the success of the Fiat 500, Alfa Romeo

will return to the U.S.

• Three base models: Giulia, the 4C, and the Duetto sports car (shown in picture).

• Will capitalize on the strong marketing of the 500, and should benefit from the same novelty factor.

Benefits for Chrysler

http://www.nada.org/NR/rdonlyres/B7D968E7-8070-4701-93E6-6B95EB83AA0D/0/Chrysler_Restructuring_Plan_Full_021709.pdf page 83

SWOT Analysis

Chrysler

Strengths & Weaknesses

Opportunities & Threats

Fiat

Strengths & Weaknesses

Opportunities & Threats

Strategic Alliance

• Complementary goals

• Reasons for forming this Strategic Alliance:

▫ Chrysler survives as a company and has new global opportunities to expand its brand

▫ Fiat can expand into North American market

• Type of Strategic Alliance: Equity

Organization Structure

• Integrated Global Structure

▫ Global Geographic Structure

• Divisions are separated by regions

Changes to Chrysler

• New technology to develop small powertrain engines

• Develop fuel efficient automobiles

• Develop low carbon emission automobiles

• New management: Sergio Marchionne

• Plant closures

Chrysler in WorldwideChrysler has distribution centers in over 29 countries in Europe, including Italy. As well as 8 countries in Asia, 19 in Latin America, and 14 in the Middle East & Africa.

Chrysler in the U.K.

Chrysler: Dodge Charger

• http://www.youtube.com/watch?v=p47cJVUSkM8

Fiat in the U.S.

• https://www.youtube.com/watch?v=XKUrYf1z9Bg

Fiat near Kansas City

https://www.youtube.com/watch?v=H-fH73qIvsQ

Update

• Consecutive quarters of positive net incomes

• Increased U.S. sales by 21%

• Increased U.S. market share from 10.7% to 11.4%

• Net profit of $2.2 billion

• Paid back auto bailout loan to the U.S. gov-$10.6 billion