Chrysler Group LLC is trying to return to its glorious days as one of the “Big Three” through its Italian connection in Fiat, a giant European Automaker. On Wednesday, January 22, Fiat completed the acquisition of the third largest U.S. automaker, making it a wholly owned subsidiary. The $4.35 billion deal boosts Fiat to the seventh largest automaker in the world.
It is not the first time that Chrysler was merged with a foreign automaker. Daimler-Benz AG merged with the company in 1998 to create DaimlerChrysler. In 2005, Chrysler was considered the healthiest of the Big Three. The combination of two giant automakers, however, failed to generate any synergy usually expected from a corporate merger. Daimler-Benz later sold its shares to Cerberus Capital Management in 2007. When the 2008 financial crisis swept the world, Chrysler received $8 billion from the U.S. federal government when President Obama forced the company into Chapter 11 bankruptcy through the government restructuring program for auto industry.
Fiat first moved to purchase Chrysler in 2011 when it bought shares held by the U.S. Treasury. At the same time, Chrysler repaid the U.S. and Canadian government loans of $7.6 billion. On January 22, 2014 when completed the purchase of remaining 41.5 percent of shares from the union-controlled trust fund, Fiat has become a sole owner.
Sergio Marchionne, Fiat’s CEO, certainly expects Chrysler to strive to return to its former glory through its Italian connections in Fiat’s finest design, fuel-efficiency, and engine technology; Fiat also owns Alfa Romeo, Maserati, and Ferrari. As Chrysler has very limited product line-up, Fiat’s outstanding sedan and compact product line will introduce a variety and freshness to Chrysler’s.
Interestingly, Chrysler has been on the good run since 2011. It has had nine straight quarters with profit. The good performance by Chrysler actually helped Fiat in its income statement. As the European Market is still not fully recovered from fiscal crisis in EU members, Fiat lost $340 million in the third quarter of 2013. With Chrysler’s profit, Fiat instead made $260 million. This probably has made Marchionne’s decision to turn Chrysler into a wholly owned subsidiary much easier.
Optimism surrounding Fiat’s complete acquisition of Chrysler is not limited to Fiat and its executives. The SF Examiner by the Associated Press reports, dealers are enthusiastic that the acquisition will improve the quality and diversity of Chrysler’s cars. Many dealers believe that Fiat is a perfect fit for Chrysler. Pamela Burger, a Chrysler dealer in San Diego, stated that Fiat deserves to own Chrysler when it was the only one that helped Chrysler move out of bankruptcy and grow into a profitable company. Clay White, another Chrysler Dealer from Virginia labelled Daimler’s acquisition of Chrysler as pillaging and commended Fiat’s management. State Sen. Dick Brewbaker from Alabama, who owns Chrysler dealership, indicated that Fiat’s acquisition greatly improved the interior quality of Chrysler products.
Fiat and Chrysler as one company have many challenges ahead. Chrysler has no product, except Jeep and Dodge, to stand among the crowd in fiercely competitive motor industry. Fiat is facing lackluster recovery in its largest market, Europe. The one company, however, will allow Chrysler to strive to return to its glory days through Fiat’s Italian connections, while Fiat earns new market and partner.
By Jonathan JY Jung