Chrysler Needs Another Move, Besides Fiat

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So now we know why Chrysler executives have been insistent that Chrysler isn’t folding its tent just yet: It turns out there is another automaker interested in teaming up with Detroit’s ailing No. 3 automaker.

The recently announced partnership with Italian automaker Fiat at least proves that Chrysler still has something to offer – and that a deal is possible in an awful economic climate. As proposed, Fiat will get a 35 percent stake in Chrysler. What Chrysler gets is access to Fiat’s technology and its car platforms. That could give Chrysler a way to hurry some smaller cars into the market without having to develop them from scratch, at its own expense.

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But this hardly sounds like a full-blown survival strategy, which Chrysler Vice Chairman Jim Press seemed to acknowledge when he told dealers that the Fiat deal is “a piece of the puzzle.” Here are some other pieces of the puzzle that are still missing:

Cash. How’s this for a sweet deal: Fiat gets one-third of a big U.S. automaker, without having to spend a dime. By offering in-kind assets like technology and car platforms - instead of cash that Chrysler still desperately needs to stay in business - Fiat has very little to lose. But American taxpayers do: To close the deal, Chrysler will reportedly need another $3 billion loan from the U.S. government, on top of $4 billion it’s already gotten.

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Cars. Theoretically, the deal makes sense, since Fiat makes the kinds of small, thrifty cars that Chrysler sorely lacks. But Fiat doesn’t sell cars in the U.S. any more, and it can easily take a couple of years to re-engineer foreign-made cars so that they meet U.S. safety and environmental standards, and appeal to American buyers. Does Chrysler have that long? For a company that needs emergency government loans just to avert bankruptcy, waiting until 2010 or 2011 to introduce a few fresh small cars seems like an eternity. Will the government nurse Chrysler along until Fiat arrives on U.S. shores?

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Credibility. Would you buy a Fiat? Most Americans would probably say maybe – once its reliability is proven. Fiat’s portfolio includes glamorous brands like Alfa Romeo and Maserati, but it sells virtually no mainstream cars in the United States. It used to – and they had a marginal reputation for reliability. That can be overcome, but only by building bulletproof cars, over time. Dressing Fiat products in Dodge or Chrysler clothing probably won’t help much, since those brands aren’t highly rated either.

Customer confidence. In addition to all its other problems, Chrysler is suffering from death-watch syndrome, as speculation about its demise makes buyers even more reluctant to buy a Chrysler product. A sketchy partnership with a company most Americans know nothing about will do little to change that. Chrysler should quickly reveal what the other pieces of the puzzle are.

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Chrysler
  • Rick Newman

    Rick Newman is the author of Rebounders: How Winners Pivot From Setback to Success and the co-author of two other books. Follow him on Twitter or e-mail him at rnewman@usnews.com.