When Chrysler saved Alfa Romeo

Chrysler and Alfa RomeoThe complete merge between Fiat and Chrysler is right in the corner. Fiat is about to control the totality of Chrysler in the next months, and this will mean several changes for both companies, Fiat and Chrysler groups. Even if there has been a positive cooperation between them, their business isn’t 100% integrated yet, and they continue to be 2 different societies with separate assets and financial results. Fiat owns 58,5% of Chrysler Group LLC, but it can’t access to its capital resources or take them out of the US. Contrary to what any one would have thought 4 years ago, Chrysler is the group bringing cash and not burning it anymore, while Fiat Group (at least in Europe) became a money burning machine without any clear solution in the coming years. One of the first guys to see this situation was Sergio Marchionne, who went to America to buy a bankrupted company to save Fiat from its extinction. If it wasn’t because of Chrysler, Fiat would have been already part of an Asian car group, as the profits coming from Brazil wouldn’t be enough to offset the big loses coming from Italy.

There are expected changes in terms of working habits and organizational culture, once the merge is completed. American model will prevail

There are expected changes in terms of working habits and organizational culture, once the merge is completed. American model will prevail

Fiat is getting ready to buy the remaining part of Chrysler, which is controlled by former employees of the company. Negotiations with VEBA fund are taking place at the same time a Delaware court takes time to decide on the right price Fiat should pay. However, Fiat is also considering to refinance its current debt in a global loan that would include the amount to buy the remaining 41,5%. Sooner or later Fiat and Chrysler will completely integrate their operations and business, and Chrysler profits will be finally available. Once the merge is complete there will be immediate effects. The first one is related to the headquarters location of the new giant, as Chrysler is operated in Auburn Hills, MI, and Fiat’s main offices are located in Turin, Italy. The second big impact will arrive from Financial Statements and the cash that Chrysler is producing. Fiat would access to it without any problem, and therefore it could use it as it should consider.

Fiat and Chrysler together: Jeep and Fiat will finally begin its B-SUV project in Italian factories. The small SUV is expected to be presented in 2014.

Fiat and Chrysler together: Jeep and Fiat will finally begin its B-SUV project in Italian factories. The small SUV is expected to be presented in 2014.

All of this will take place when Fiat struggles to survive in the worst auto industry crisis Europe has faced in the last decades. Fiat isn’t only having problems with its low production levels and over capacity of its European factories, but it is dramatically losing market share in many European markets. The lack of new models, and the big competition coming from Germany has a worse effect in upper segment brands, such as Lancia and Alfa Romeo, which had terrible results in 2012. Fiat brand has managed to maintain its levels thanks to the success of the Panda/500 and the new 500L. In my opinion, one of the first effects of the merge Fiat-Chrysler will be the rescue of Alfa Romeo. As I wrote before, Fiat brand is doing quite good with its latest launches. Lancia is now part of Chrysler brand plans, and the arrival of new models it’s a matter of time (months). Ferrari and Maserati are always in good shape. But Alfa Romeo is in a very complicated situation, and Chrysler’s good results could become the source of its resurrection. It’s simple: Chrysler earns lots of money, is working on new products (the next Chrysler 100 and 200, the Jeep Cherokee, the new Dodge Challenger). Meanwhile Alfa Romeo needs to update its poor range of products and bring new models if it really wants to compete in premium segments. The future of the whole group will strongly depend on Alfa Romeo’s. In other words, part of the money Chrysler earns could come to Italy to be invested in the development of the new Giulia D-Segment, the E-Segment sedan, and the SUV. Fiat and Chrysler are close to their final engagement. Alfa can’t wait for to long.

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24 responses to “When Chrysler saved Alfa Romeo

  1. Keep in mind that there is a big delay between spending money and having new product in the dealer showrooms. The Impala and Corvette are the first cars on the GM side that were developed post-bankruptcy. Starting spending now on a new program will result in new cars somewhere around 2016 or 2017, depending on hor new they really are.

    • Yes, but Fiat has been working on the development of the Giulia since 2 or 3 years. The problem, as usual, is money, and lack of demand

      • Right. So the question is, how far did they get before they stopped spending money?

  2. They really need to speed things up with the new products but I think there is a lot of work required with the dealers and PR in general. The image of the brand needs to change before the new products hit the showrooms. Now just after they worked at the speed of light (Like Marchionne says) to secure and rescue Chrysler, they need to work at the same speed to rescue Alfa.

  3. Old cars = lack of demand
    New “me too cars” = lack of demand
    New good fancy cars = a lot of demand!

  4. Audi’s success = Walter De Silvia who was the chief of Alfa Romeo’s design.

    • No, that doesn’t explain it, either, as Audi’s designs are clean, but unremarkable, even more unremarkable when one knows that they were designed by the same guy who designed the Alfa Romeo 156, a modern day design classic that essentially revived Alfa in the late 90s.

      I’ve always wondered why de Silva decided to jump ship to Volkswagen of all companies. Perhaps he realized he’d never be able to top the 156, and is happy to live off old merits while treading water at Audi since it pays his bills.

      • Probably he understood Fiat didn’t really want to support (invest in) Alfa Romeo.
        Without new products how a designer employs his time?

      • Yes, you’ve got a point there, but still – he left Alfa Romeo for frickin’ Volkswagen! Did he really want to design kitchen appliances on wheels for a living? Apart from job security I cannot see the appeal.

  5. Hi Juan
    BIG fan of your website. I have an unhealthy obsession with Italian cars, in particular Alfa and Maserati. Particulaly for someone that lives in Australia!!!! I consume alot of news on the Italian auto industry. Well done on what is fascinating analysis on Fiats range of auto products.

    I wouldnt say Fiat would have been finished by now without Chrylser. Mostly they would have been in serious trouble (when have they not been!). Anyway, the main thing is that they have opportunity problems now rather than trying to survive when Sergio took over.

    As for Alfa, I think we all underestimate what Sergio is doing. He has always said that market for cars has essentially fragmented into “cheap utilitarian vehicles like hyundia and upper end luxury/prestige like BMW/Mercedes. Now that Sergio has a range of “cheap” cars in place with the newly revamped Fiat range, he can now concentrate on his Premium range. Maserati is well and truly on its way and now its Alfa’s turn. Sergio has taken his time to get this right (redesign the 159 replacement, joint ventures with Mazda to create a cheap to build spyder, use Chrysler architecture to build SUV’s). The last thing he needs is yet another supposed re launch of Alfa without the depth of engineering, dealer network, etc. He is right to take his time, use the new profits to rebuild Alfa slowly (as much as it frustrates the motoring enthusiast). We only need to see the Alfa 4c as an indication of what the FIAT group can do when they are given proper resources. “The force is strong” with Alfa. Unbelievably, there is alot of good will still behind the brand in the USA and the rest of the world for that matter. Personally, when it comes to the “volume Alfas”, I think Fiat now needs to follow up the launch of the 4c, with the absolute upper end first. ie a “big” Alfa off the Ghibli platform create and a sense of prestige behind the brand with cutting edge technology that will make people stand up and take notice (eg 9 speed gearbox) and then roll out other models down the range eg Guilia, new giuletta, new Mito, new Spyder, etc. People will then walk in drooling over the 4c / big prestige Alfa and drive out with the new Giulia/Mito/Etc.

    Love your work Juan. “muchismo gracias or te ringracio” (whatever applies to your nationality).

    • Hi Johnno
      Thank you very much for your kind comment. Is always good to hear feedback (good or bad) about my work here. As you said, is not usual to find people like you in Australia. Normally people love German cars, but is good to know there are still people passionated about Fiat and its cars.

      You’re right about Marchionne and his strategy for Alfa Romeo. I think he is doing the right things and many people just don’t understand. The only thing I don’t think is right is time. They are taking to long and the competition is gaining more market share.

      Gracias a ti! keep reading (I live in Italy but I am Colombian)

  6. Also Egger, another talented designer who studied in Milan, left Alfa Romeo for Audi.
    It’s a dispora! Yesterday De Silva and Egger, today Giolito (the father of ugly Multipla) and Tencone… 😦

  7. Touching on the design subject. Is it just me or are VW group cars becoming less desirable with each new model despite pinching all those designers? The Golf Mk7 looks dated already to me. The Passat looks uglier than the Mk1, all the Audis look the same and the Octavia looks terrible.

    • At least they’re not becoming more desirable – it seems like VW is going for the clean, timeless but boring look across all its brands.

      Sometimes I find myself wondering that from Volkswagen’s perspective, perhaps the main advantage of it employing great designers like Giugiaro, de Silva and Egger is that they’re prevented from offering their services to the competition.

      As for the new Golf, isn’t it a bit strange that now that Giugiaro works for Volkswagen, and he is the automotive design legend responsible for the design of the Mk1 Golf, that VW wouldn’t let him design the new Golf instead of de Silva? Or perhaps the explanation is that de Silva is better at operating the photocopier?

  8. I was shocked when I first saw the new Cherokee. But since then I’ve begun to like it especially the two tone Trail Hawk version. It’s nothing like an Aztec.

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