After some weeks dealing with other matters, I’m back with our site. So many things have happened in the new year. The main event: Fiat completed Chrysler acquisition. Finally, after 4 years dealing with Chrysler problems and hard negotiations with labor unions, Sergio Marchionne announced that Fiat finally owns 100% of Chrysler shares. His first goal was achieved with a very positive impact for both companies: they have a safer short and mid-term future, but there’s a lot to do. The details of the deal are well-known by everyone now while we are all waiting for the final decision on the Headquarters location the name of the new company. The marriage Fiat-Chrysler wasn’t the only recent important news in the automotive world. While Marchionne announced that Chrysler, Dodge and Jeep are now wholly owned subsidiaries of the Italian carmaker, the Peugeot-Citroën PSA board approved cash injection by the Chinese automaker, Dongfeng, and the French government in a move looking to save the company from bankruptcy. Two big events that must be carefully analyzed, specially considering the reaction of common people.
I must say that I was really happy when I saw the news confirming the final acquisition of Chrysler. Fiat needed this alliance which can be the first step for ensuring its future in the coming 3 years. The last 2 years have been particularly hard for the Italian car maker, and things seemed to get worse with the recent results in Brazil. Chrysler good results were the best hope Fiat had as an independent car manufacturer. It was Marchionne’s first goal and it was the reason why so many projects were blocked in Turin. For sure it is not enough to survive in the long-term future, just as the CEO said. The merge allows Fiat and Chrysler to gain some positions in the ranking by production capacities, but the new group is still very far from the industry leaders: Toyota, GM and VW. If the new-born car group wants to survive it must rise its production/sales levels up to 6 million units in the next 3 years, or it must find another partner, hopefully Asian. Fiat-Chrysler plays an important role in North America (world’s second largest car market) and South America. The position in Europe isn’t that relevant. That’s why it must enlarge its operations in Asia as soon as possible. That should be Marchionne’s second goal.
Despite the excellent news coming from Florida (where the deal was closed), the reaction in Italy wasn’t that good. Shares value jumped 16% the day after the announcement, but common Italians were skeptic and critical about the agreement. This is based on the comments made by Italians in the web. Many people complained about the fact that Fiat was using government’s money to buy a foreign company and then move the HQ and production. Many others considered that Fiat wasn’t Italian anymore, while others said that the agreement was only good for the stakeholders but not for the Italian employees. Nonsense! the deal with VEBA means that Fiat is finally a global player! it means that it is no longer dependent on the troubled Italian car market. It means that the new group includes strong and global brands such as Jeep (the world’s largest SUV-maker). A lot of research and development savings will come. Common technologies and expertise. And the best of all: the mix of 2 cultures that enjoy making cars.
In the other hand there is PSA with its serious financial problems. The French auto maker, Europe’s second largest, keeps struggling to survive as it is still strongly dependent on European car market. The strategy of launching new cars in a market that is completely flat means more loses and problems with its factories. The nice DS range and the interesting 208/2008 haven’t been able to stop the cash burning problem. The situation of PSA is quite complicated now. That’s why, in a historical decision, the company’s board approved an outline deal to raise 3 billion euros by selling stakes in the automaker to China’s Dongfeng and the French government. It means that the Peugeot family won’t have the control of the company anymore as each part will control 14% of the shares. As it is, it seems that the agreement is a desperate solution for a serious problem. It seems that the Peugeot family didn’t have any choice and the company is now partly owned by a foreign company. And for sure, it won’t be the last 14% stake Dongfeng will buy.
My point is that 2 traditional European carmakers experienced big changes but from 2 different points of view. While many Italians complain about the recent moves of Marchionne, they don’t realize of the enormous achievement Fiat had as an independent automaker. They were able to anticipate current European car industry crisis, and go to Detroit to rescue Chrysler knowing the big risk it would represent for Fiat. Marchionne and his team bought a bankrupted company and rebuilt it from zero. It wasn’t a foreign company buying an Italian one. No, Italians made it by their own, with hard work and courage. Thanks to that, Fiat is now the world’s seventh largest carmaker and can save its independence at least for the next 5 years. PSA, with all its big range of nice cars and its relatively strong position in European market, is no longer autonomous on its decisions. Chinese came and bought a part of Peugeot. Fiat went to America and bought all Chrysler in an integration process that will benefit both parties. The future? to have a Chinese partner is not a bad thing: PSA has now more chances in China and a lot of money can come to develop more cars. And that’s Fiat’s main challenge: to grow in China by itself. Time will tell us.