2009 Chrysler Fiat Strategic Alliance - Essay

The case is intended to have students look at the 2009 Chrysler-Fiat strategic alliance, its current issues, and future viability in the global auto industry. The new landscape of the American auto industry and the role of Fiat is analyzed in the cross-border tie-up. After de-merging with Daimler in 2007, Chrysler did not do well because of the 2008-2009 global financial crisis and its bankruptcy filing. Chrysler’s other problems included its financial constraints and heightened competition in North America. The company had no choice but to look for a partner.

During this process, Chrysler explored the possibility of a tie-up with GM, Ford, Volkswagen, Tata Motors, Nissan and Fiat. Eventually Chrysler decided on creating a strategic alliance where Fiat agreed on taking a 20 percent stake in Chrysler. In the next five years, the tie-up may increase Fiat’s ownership of Chrysler to 35 percent. Both companies show compatibility in their product portfolios, global operations, and technology sharing areas.

Case Objectives

The primary objective of this case is to analyze and discuss Chrysler’s 2009 strategic alliance with Fiat and its current and future prospects. Issues that are at the helm of this tie-up are technology sharing, global integration, quality control, and reorganization of brand portfolios. Students need to look at the intricacies of strategic alliances between two or more companies as well. As of May 2009, Chrysler is going through its Chapter 11 and corporate restructuring in the U.S. The company continues to shrink in terms of its manufacturing and global operations.

Suggested Teaching Approach and Student Assignments

Since the case is timely, it is recommended that class discussions should be based on the companies’ histories and their evolutionary growth (see Tables 2 and 3). Also important are topics such as strategic alliances, auto industry’s technology platforms, and brand portfolios. The questions included in the case for class discussion will require Web-based and library research on the part of students. It is recommended that the instructors provide a supplementary list of references on the auto industry (see: WardsAuto.com, JDPower.com, Automotive News, Google Search, Business Source Complete, Hoovers.com, Reuters.com, Value Line, Standard & Poor’s Industry Surveys, etc.). This will help students to be fully prepared for the case. Finally, students should be encouraged to visit Chrysler, Fiat, and other auto manufacturers’ Web sites before discussing this case in the classroom.

Discussion Questions & Answers

Question 1. What are your views of the 2009 Chrysler-Fiat strategic alliance and its future prospects in the auto industry?

Question 2. Analyze and evaluate Chrysler and Fiat’s strengths and weaknesses before and after their 2009 strategic alliance.

Question 3. Compare and contrast Chrysler and Fiat with five other global auto manufacturers (GM, Ford, Toyota, Volkswagen and Daimler) in the areas of global operations and manufacturing issues.

Question 4. Analyze Chrysler and Fiat’s brand portfolios in the world auto industry. How do you see both companies revamping and overhauling their brands in the short- (1-2 years) and long-terms (5-6 years).

Question 5. What did you learn from the Chrysler-Fiat Strategic Alliance regarding managing multinationals in the changing global business?

Case Analysis

The Chrysler-Fiat strategic alliance will provide a meaningful opportunity to both companies regarding dealing with survival and expanding their markets in Europe and North America.  As  of 2009, it is evident that the companies are off to a good start. Both firms have marketable brands in their market segments but lack a collective effort. The case is a good example in the area of cross-border alliances that take place between two or more companies. Since 2008, Fiat has actively sought a partner in North America because of the attraction of the market. This is also attributed to the auto industry’s consolidation, restructuring, and cost-cutting activities. Chrysler and Fiat ended up seeking an alliance because of their compatibility, product portfolios, and markets. In Chrysler’s case, the main motive was to seek a partner who could help strengthen its financial problem regarding new technologies, markets, and quality standards. Chrysler did very well after its 1980's reorganization and introduced many new models. In 2008-2009,Chrysler suffered because of the global financial crisis and weakened demand in the auto industry.

Before filing for Chapter 11 in 2009, the only alternative Chrysler had was to seek a partner. As of May 2009, Chrysler-Fiat Strategic Alliance looks feasible. At the same time, cross-border alliances are difficult to succeed because of differences in corporate cultures, ownership issues, regulatory barriers, and labor unions. As discussed in the case, Marchionne may become the CEO of Chrysler if Fiat raises its stake in the company. According to analysts, the Chrysler turnaround is possible if Fiat shares appropriate technology with Chrysler. In Chrysler’s case, the company can add a good value-added to the alliance by sharing its two cash cow products (Jeep vehicles and Dodge trucks) with Fiat.

Supplementary Reading

Harbour, James E. and James V. Higgins. (2009). Factory man: How Jim Harbour discovered Toyota's quality and productivity methods and helped the U.S. auto industry get competitive, Dearborn, Michigan: Society of Manufacturing Engineers.

Holweg, Matthias and Frits K. Pil. (2005). The second century: Reconnecting customer and value chain through build-to-order moving beyond mass and lean production in the auto industry, Boston, Massachusetts: MIT Press.

Johnson, Richard. (2005). Six men who built the modern auto industry, Osceola, Wisconsin: Motorbooks.

Maxton, Graeme P. and Wormald, John. (2004). Time for a model change: Re-engineering the global automotive industry, Cambridge, UK: Cambridge University Press.

Klier, Thomas and James Rubenstein. (2008). Who really made your car: Restructuring and geographic change in the auto industry, Kalamazoo, Michigan: W. E. Upjohn Institute.

Waller, David. (2001). Wheels on fire: The amazing inside story of the DaimlerChrysler merger, London, UK: Hodder & Stoughton.

Vlasic, Bill and Bradley A. Stertz. (2001). Taken for a ride: How Daimler-Benz drove off with Chrysler, New York: Collins Business.

Note: You need to go through the web Site of these companies to solve these questions.