Case Study: Chrysler-Fiat Partnership

When America's economical crisis reached its apex, domestic car manufacturers were at the forefront of struggling industries, and Chrysler was one of the hardest hit (Car and Driver, 2008). In 2008 the automotive giant, along with fellow industry stalwart General Motors, received a $17.4-billion reprieve from the American Government to keep from closing its doors altogether (Car and Driver).

Chrysler did lose a lot of respectability, and was ordered to cease and desist with any new product development until the company proved it could be a viable business (Gluckman & Kurczewski, 2009). However, the loan from the government proved to still not be enough to get Chrysler back on its feet, and in 2009 the company filed for Chapter 11 bankruptcy (Groth, 2011).

Fiat faced its own organizational struggles in 2003-2004 before new CEO Sergio Marchionne led the Italian automotive manufacturer back to respectability (Gluckman & Kurczewski). Still, after watching European car sales fall to a 17 year low and needing a boost to his company's revenue, Marchionne saw the Chrysler situation as a way to get into the American market (The Economist, 2013).

Objectives Sought by Each Partner: Chrysler's objectives in the partnership with Fiat were pretty simple: it needed a financial boost to maintain its place in the industry and new technology if it wanted to grow and advance (Marrs, 2009).

After egregiously unsuccessful partnerships with Daimler-Benz and Cerberus Management Group and a multi-billion dollar loan from the American Government ended with Chrysler filing for bankruptcy, the company was in desperate need of a method to regain viability (Marrs; Krisher & Strumpf, 2009; Gluckman & Kurczewski, 2009).

Although Chrysler received no money in the deal, it will emerge as a new, leaner group minus billions in debt, 789 underperforming dealerships, and burdensome labor costs, not to mention gaining Fiat's technology to build new environmentally friendly, fuel efficient, high-quality vehicles (Krisher & Strumpf). Fiat's objective in the partnership was to provide a financial boost to its own company without accumulating additional debt (Ebhardt, 2013).

Fiat, Italy's largest auto manufacturer, would like to expand its market to become a global competitor. Fiat CEO Sergio Marchionne believes that to compete with General Motors, Volkswagen, and Toyota, the merged Fiat-Chrysler will need to produce 5.5-6 million cars a year, compared to its current output of 4.1 million (The Economist, 2013).

Basis of Dialogue Leading to the Partnership: The basis of a dialogue leading to a potential partnership was the concept of a mutually beneficial situation for all parties involved (Cox, 2013).

Fiat has the capital, new technologies to develop high-efficiency cars, and reverence from Ferrari and Maserati fans that will allow Chrysler to regain its place among top domestic auto manufacturers in the United States (Groth, 2013). Fiat will share with Chrysler its platforms and powertrain technology, including engines, transmissions, and fuel-saving technology (Gluckman & Kurczewski, 2009). Through Fiat, Chrysler will also get better distribution of its products in Europe, India, Brazil and China (Gluckman & Kurczewski).

Chrysler is the 3rd-largest U.S. auto company and is a trusted brand with the international appeal, customer base, and facilities that will allow Fiat to become a serious competitor in the global automotive manufacturing market (Groth). Chrysler was also in no position to be patient for an extended period of time. While its factories sat idled during the bankruptcy process, the automaker reportedly lost 100 million per day (Krisher & Strumpf, 2009).

Steps Taken by Each Company: The partnership between Fiat and Chrysler, which is still an ongoing process, is being approached in phases. Initially Chrysler agreed to give Fiat a 35% holding in return for an influx of new engines and platforms, research and development, and help retooling its plants (Marrs, 2009). This approach allowed both organizations to ease into the partnership, without either side immediately taking on too much debt or risk (Cox, 2013).

Analysts were not able to exactly predict the partnership between Fiat and Chrysler. In fact, Chrysler was in talks with General Motors before both companies began to experience serious financial hardships (Gluckman & Kurczewski, 2009).

Looking to avoid the management mistakes that doomed Chrysler’s partnerships with Daimler and Cerberus, Fiat CEO Sergio Marchionne has made it clear that Fiat/Chrysler will run as one company (Trujillo, 2013). As Mr. Marchionne announced at a media briefing, “This management team spends their time traveling and making decisions, but this thing runs as one house. There is no question about who runs what; I run one company” (Vlasic, 2013, pp. 4).

Executive Decisions: Fiat's decision to merge with Chrysler was an easy one from a business standpoint, but not so much from a legal, financial, and logistics aspect. Fiat now owns a 58.5% holding in Chrysler Group with the challenge being to lift its stake to 75%, at which point it will be able to use the American firm’s cash flow to finance itself (The Economist, 2013).

The obstacle is the United Automobile Workers union (AUW), which owns the other 41.5% of Chrysler (Cox, 2013). As of now, the two sides are locked in a legal battle over pricing, with Fiat offering $140 million for the remaining shares while the AUW values the contested holding at a minimum of $342 million (Ebhardt, 2013).

Another consideration is how Fiat will pay for the shares once a price is determined. Fiat CEO Sergio Marchionne has stated that Fiat has the finances to purchase the remaining Chrysler stock, but the more Fiat is forced to pay, the more fresh equity it will need to raise to avoid a credit downgrade (Cox). Reports have said that Fiat is in talks with numerous banks to borrow as much as $10 billion, with the plan of purchasing the remaining Chrysler stock and refinancing the company's $6.1 billion in debt as well as its own $2.6 billion revolving credit line.

CIO Issues and Concerns: Assuming I was the Chief Information Officer (CIO) at Fiat, my first concern would be to devise a plan for infrastructure and establishing a timeline for deliverables. The Fiat/Chrysler partnership is referred to as a merger but it's more like an acquisition, with Fiat restructuring Chrysler's management philosophy (Rosevear, 2013). In that regard Fiat will be responsible for dispersing their technical ideology to all of Chrysler’s dealerships and factories. CIOs have to make the technical adjustments to ensure that all necessary information systems will co-exist and function properly in an inter-organizational environment (Hughes, Williams, & Ren, 2012).

There is a distinct difference between partnering with a company that is similar and partnering with a company that is identical. Identical partnerships are usually unsuccessful because both organizations are marketing the exact same products to the exact same customer base (Egan, 2012). Partnering with a similar company allows each organization to have its own unique niche (Egan).

Obviously in a partnership some organizational information has to be shared, but it falls on the information technology department, and ultimately the CIO, to protect that data that is critical to the organization in terms of competitive advantage (Edgar & Lockwood, 2011). The CIO is largely involved in making the technical decisions that will lead the organization into the future. As the business strategy changes in regards to partnering with another organization, the CIO’s technical decisions will need to support that strategy.

Conclusion: The Chrysler Group, the 3rd largest automobile manufacturer in the United States, is in dire financial trouble. The American economic crisis left Chrysler struggling to stay afloat and eventually needing a bailout loan from the government to keep from closing its doors completely. After unsuccessful partnerships with Daimler-Benz and the Cerberus Management Group, Chrysler eventually filed for Chapter 11 bankruptcy, with the stipulation that they would not be able to perform any organizational activities until they proved that they could be a viable institution.

Fiat Motors, Italy’s largest automobile manufacturer, is looking for an inroad to the North American market that will allow it to compete on a global scale with General Motors and Volkswagen. The partnership between Fiat and Chrysler will allow both organizations to reach their objectives.


  • Car and Driver. (2008). Domestic automakers get reprieve. Retrieved from
  • Cox, R. (2013). How a Fiat-Chrysler merger could work. Retrieved from
  • Ebhardt, T. (2013). Marchionne holds talks to push ahead Fiat-Chrysler merger. Retrieved from
  • Edgar, W., & Lockwood, C. (2011). Understanding, finding, and applying core competencies: A framework, guide, and description for corporate managers and research professionals. Academy of Strategic Management Journal, 10(2), 61-82.
  • Egan, B. (2012). Strategic alliances and partnering with competitors. Retrieved from
  • Gluckman, D., & Kurczewski, N. (2009). Fiat and Chrysler announce strategic alliance. Retrieved from
  • Groth, A. (2011). From Jan. 20, 2009 to today: More on why the Fiat-Chrysler merger makes sense. Retrieved from
  • Hughes, D., Williams, T., & Ren, Z. (2012). Is incentivisation significant in ensuring successful partnered projects? Engineering, Construction and Architectural Management, 19(3), 306-319.
  • Krisher, T., & Strumpf, D. (2009). Done deal: Fiat buys Chrysler assets. Retrieved from
  • Marrs, T. (2009). Chrysler and Fiat merger - noise, vibration & harshness. Retrieved from
  • Rosevear, J. (2013). Fiat moves closer to a merger with Chrysler. Retrieved from
  • The Economist. (2013). Hoping it will hold together. Retrieved from
  • Trujillo, M. (2013). Full merger moves forward for car companies Fiat, Chrysler. Retrieved from chrysler
  • Vlasic, B. (2012). A merger once scoffed at bears fruit in Detroit. Retrieved from