Auto-Bailout Irony: Chrysler Now Keeping Fiat In Business

Despite claims to the contrary, Chrysler is doing well. So well in fact, that Fiat is now in an unusual position of depending on the once struggling auto maker for its own survival.

While GM and Ford have been growing slowly, Chrysler sales continue to pass the 20% growth per year. A newly revitalized product lineup, centering around fuel-efficient SUV’s alongside sporty compact cars, has surged ahead in the world market. While other companies are concerned about overcapacity, Chrysler is concerned with lack of capacity. It is already having to re-open U.S. plants, while opening up new plants overseas.

Parent company Fiat, on the other hand, has a surplus of capacity for its European brand names. As a result, it is now turning one Italian factory over to Chrysler to produce its new model Jeep Grand Cherokee, complete with a brand new diesel engine giving it better fuel efficiency than many sedans. Impressive feat for a company which Mitt Romney said should go bankrupt.

The situation is such that David Cole, a founder of the Center for Automotive Research in Ann Arbor, Michigan, termed it so:

“It’s not Fiat saving Chrysler, it’s Chrysler saving Fiat.”

Some questioned the sale during the height of the recession to Fiat. But the numbers speak for themselves. Chrysler has returned to its traditional spot in Detroit as an innovator and leader. Looking back through its history, most auto trends started not with General Motors or Ford, they began with Chrysler. The first mass produced car designed for aerodynamics (1934 Chrysler Airflow), the first pony car (1964 Plymouth Barracuda), the first mass market minivan (1984 Dodge Caravan), first mass market car completely designed in a computer (1995 Dodge Neon), first production car to ship with an onboard computer (multiple 1976 models), the list goes on and on.

The original Fiat deal was to secure bridge financing to enable Chrysler to survive the economic downturn after its then owner, Cerberus Capital, loaded it down with almost $7 billion in debt. The bridge financing, earned in part by Fiat’s takeover of the firm, is now shoring up Fiat in Europe. Rather than building new factories to service Europe, Africa and Asia, Chrysler is taking over Fiat’s underused facilities in Europe. This move is one of many expected in the future as the firms continue the merging process. One of the earliest moves, for instance, was Fiat’s choice to have Chrysler’s Dodge subsidy handle the design and development of their Compact U.S. Wide (CUSW) platform, the upgrade for the popular Fiat Compact platform used on earlier vehicles such as the Alfa Romeo Giulietta and Fiat Viaggio. This new platform, which arrived in showroom floors as the 2013 Dodge Dart last year, is poised to be the main compact car platform for Fiat for the next decade.

The Author's Current Dream Car

The Author’s Current Dream Car

The story of the Chrysler/Fiat merger is turning into less of a buyout and more of a real partnership between the two firms. This is not unexpected, as the two firms have had very deep ties going back decades. The partnership and merger of the firms is turning into the real story. Chrysler offers a variety of vehicles which customers, simply, want. Their “imported from Detroit” campaign was a stroke of genius, their “halftime” commercial featuring a pre-chair Clint Eastwood is still being talked about years later. And now, the investment in Chrysler by Fiat is paying back the Italian firm in kind. A true partnership; not a buyout, but a marriage.

Nathaniel Downes is the son of a former state representative of New Hampshire, now living in Seattle Washington.
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