The 2009 strategic alliance between Chrysler and Fiat provided both companies opportunities to address weaknesses. Chrysler gained access to Fiat's fuel efficient vehicle platforms and technology to comply with its government bailout conditions, while Fiat gained entry into the lucrative North American market. However, challenges integrating the corporate cultures and brands exist. The alliance allowed both companies to survive the economic crisis but synergies have been slow to realize. Fiat has continued restructuring in Europe with job cuts due to financial losses while Chrysler's new Dart model from the alliance has struggled with slow sales.

1. The 2009 CHRYSLER-Fabbrica Italiana
Automobili Torino (Fiat)
STRATEGIC ALLIANCE
http://www.youtube.com/watch?feature=endscreen&v=cpi2IAec9Ho&NR=1

2. Case Questions
1. What are your views of the 2009 Chrysler-Fiat strategic alliance and its future
prospects in the auto industry?
2. Analyze and evaluate Chrysler and Fiat’s strengths and weaknesses before and
after their 2009 strategic alliance.
3. Compare and contrast Chrysler and Fiat in the area of global operations and
manufacturing?
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 and long
term?
5. What did you learn from Chrysler-Fiat Strategic Alliance regarding managing
multinationals in the changing global business? What role did the US gov’t play in
the formation of this alliance?
6. What has happened to the company since this case was written as the alliance was
being formed? Give an update as of the time of your reading this case.

3. History of Chrysler
• Founded in 1924 by former exec of Buick Motor Co. Walter Chrysler
• 1928: intro Plymouth and DeSoto
• 1940’s: domestic car production was banned; made trucks, tanks and
armaments WWII
• 1960’s : entered Euro mkt
• 1970’s: focused on ‘gas guzzlers’; saw 26% fall in production
• 1978: Lee Iacocca becomes CEO; “Lead, follow or get out of the way”
• 1980: received $1.5 bil loan from US gov’t

4. Con’t
• 1996: gained 16.2% mkt share; but still ranked 3 rd. US auto industry
• 1998: Merged with Daimler-Benz, became DaimlerChrysler, HQ moved to
Stuttgard. Cost $36bil
• 2001: cut 26,000 jobs due to competition, quality issues, changing mkts
• 2005: good sales of Ram, Sedan and Magnium brought $2bil in profits
• 2006: net loss of $1.5bil due to competition and changing mkts
• 2007 Feb: cut 13,000 jobs (16% of workers)
• 2007 May: de-merger; Chrysler sold to Cerberus Capital Mgmt sold for
$7.4bil

5. Con’t
• 2009 Apr: recession and high gas prices forced
Chrysler into Chapter 11 bankruptcy
• 2009 Sept: Fiat obtained 20%

6. History of Fiat
• 1899: Fiat formed by Giovanni Agnelli (fam still owns 35%)
• 1969: acquires Lancia and 50% of Ferrari (now 85%)
• 1970-80’s: operating loss due to labor strikes and oil shocks
• 1976: Libyan gov’t bought 10%; protest to deal by Italian businesses
• 1980-85: cut 100,000 jobs
• 1986: obtained Alfa Romero, becomes largest Euro automaker
• 2000: GM purchases 20% for $2.4bil

7. Con’t
• 2004: Sergio Marchionne becomes CEO
• 2005: GM pays $2bil in cash to end 5 yr partnership
• 2009 Feb: Fiat gained 20% in Chrysler (non cash, should provide tech and
markets)
• 2009 Sept: merger concluded, Fiat owns 20%.

8. Ownership Structure of Chrysler
before and after 2009

10. Features of Global Auto Industry
• One of the largest industries
• Socio-political element (local politics, regulation, national pride, part of
military industrial complex esp war time)
• Relationship with unions
• Hundreds of alliances, joint ventures, collaboration, consolidations over
past 20yrs
• Change in demographics, demand in emerging mkts and high costs lead to
estab. plants in low cost economies (seeking max. return on investment)

11. Future Trends
• Global consolidation and mergers (may result in closure of plants, dealers,
jobs)
• Restructuring and efficiencies due to flexible manufacturing, product dev,
and supply / value chain
• “A painful realignment made tougher by falling sales..Change in coming,
and it’s coming with gut-wrenching speed..This time no one is calling a
downturn, but a permanent change in direction of the North American
industry.” ~ The Harbour Report ’08
• Classic example of competition, evolution and creative destruction

12. Chrysler and Fiat strengths and weaknesses
Chrysler Strengths Fiat Strengths
Estab. brand and distribution in North Strong leadership under Sergio Marchionne;
America resulting in successful turnaround strategy,
improved business practices and culture.
Major maker of utility trucks
Reinvigorated in Europe
Jeep and minivans very popular Popular in small car segment, with many new
models
Improved quality
Pay –off of alliances (eg. Tata, Ford, GM)
Weaknesses Weaknesses
De-merger created problems
Lacks charisma in global mkt
Quality issues
Limited product portfolio in global mkt
Financial Losses (-4% sales growth, ‘08)
Alliances with Mitsubishi & Hyundai
unproductive

13. Corporate Tie-up
Aim is to create optimality from R&D, product dev, distribution, knowledge sharing, i.e. economies
of scale
Fiat to provide tech-related expertise and assembly platforms to Chrysler for it to dev small, fuel
efficient autos in North Am (e.g. 2013 Dodge Dart) http://bcove.me/xm22gffp
Non-cash deal; initially 20% stake, could increase to 35%, after 2013 up to 51%...must meet
conditions, i.e. fuel efficient cars and small auto engines in North Am.
Part of US gov’t bailout and bankruptcy proceedings; Obama admin provided $4 bil to Chrysler with
conditions
Fiat to receive access to lucrative North Am mkt (quick market penetration strategy)
Opportunities to target small / compact car and hybrid segments where Fiat is strong
Possible weaknesses: poor corporate integration (differences in corporate culture), mismatch of
brand portfolio, R&D priorities, control issues, regulation & antitrust issues, distribution &
ownership problems

14. Outlook
• “…he will create a new company consisting of Fiat Auto
(without Ferrari, Maserati or the rest of Fiat group), Chrysler
and GM Europe…stakeholders would be Agnelli family, UAW
union health-care fund and GM..In a normal year that could
expect revenues of $100bil from sales of 6mil cars-just above
Mr. Marchionne’s viability threshold.” ~ The Economist.

15. Your Take
1. What are your views of the 2009 Chrysler-Fiat strategic alliance and its future
prospects in the auto industry?
2. Analyze and evaluate Chrysler and Fiat’s strengths and weaknesses before and
after their 2009 strategic alliance.
3. Compare and contrast Chrysler and Fiat in the area of global operations and
manufacturing?
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 and long
term?
5. What did you learn from Chrysler-Fiat Strategic Alliance regarding managing
multinationals in the changing global business? What role did the US gov’t play in
the formation of this alliance?
6. What has happened to the company since this case was written as the alliance was
being formed? Give an update as of the time of your reading this case.

16. My Take
Alliance may have drawbacks, but seem to be good fit for both. Chrysler needed the
alliance due to bankruptcy and conditions of bailout and a partner to bring innovation,
R&D, low-cost tech and access to EU mkt; Fiat will have access to North Am market and
distribution.
Synergies may not all work due to issues of culture and integration, however
opportunities exist to reduce costs, and provide low-priced fuel -efficient automobiles.
In short run Chrysler will have gain new platform for fuel efficient vehicles, a segment
it is not presently competitive in and access to EU; Fiat will gain entry to Am mkt. In
Long run, new technologies may result from partnership.
Opportunities can result from a crisis. Chrysler can increase mkt share in mid and low
size segments and Fiat entry to the North Am market.
The Dodge Dart introduced but very slow sales.
Negotiations with unions in Italy have been ongoing; Fiat set to cut jobs due to losses
of 700 billion euros.