Fiat Automotive Empire Like an Octopus

FiatFiat’s automotive empire is like an octopus, reaching out to conquer the world. The tentacles of Fiat CEO Sergio Marchionne’s automotive holdings now includes Alfa Romeo, Chrysler, Dodge, Ferrari, Fiat, Jeep, Lancia, Maserati, and Ram Trucks in their warm embrace. Fiat builds cars, or has stakes in companies that build them, in Argentina, Brazil, Canada, China, France, India, Italy, Mexico, Poland, Serbia, Turkey, and United States. The sun may set on Fiat’s automotive empire somewhere over the Pacific, but not for long.

The Italian-born Marchionne moved to Canada with his family he was 14, and was educated there. Now a naturalized Swiss citizen, the multilingual Marchionne is a perfect match for Fiat’s global empire. A hands-on, shirt-sleeve manager who often ignores chains of command, the chain-smoking, hard-driving (never mention the time he totaled his personal Ferrari), Fiat CEO performed some serious corporate surgery to bring Chrysler back from the grave.  

He streamlined the Chrysler lineup, bringing much need quality control to the company and opened up foreign markets to Chrysler products by selling them through Fiat’s Lancia dealer network. At the same time, he has used the Chrysler Division to bring Fiat and Alfa Romeo back into the United States through the Chrysler channel after long absences .

Never shy about controversy, the sometimes brash Marchionne made news today by withdrawing Fiat’s request for a $700 million aid package from the Canadian government but announced that Fiat is keeping its Chrysler assembly lines in Canada anyway….for now. However, the Fiat CEO also served notice that the assembly lines might not stay in Canada if the business climate does not improve there. Marchionne wants concessions from both Canadian labor unions and from the Canadian government to lower the cost of producing the vehicles in Canada.

The decision will keep the next generation of Chrysler’s minivans rolling off the assembly lines in Windsor, Ontario, across the Ambassador Bridge between Windsor and Detroit until 2016, when Chrysler’s collective bargaining agreement with the labor unions runs out. Marchionne withdrew his request for the aid package when it became a political football as Canada’s two major parties engaged in a shouting match in the media over whether or not Canada should help a private company like Chrysler.

Jerry Dias, the president of Unifor National, the union that counts 39,000 auto workers among its 300,000 members, wants to keep Chrysler in Canada, but he also wants the Canadian government to fork over the $700 million aid package so his members do not have to make more significant concessions to keep the automaker there. He expressed disappointment in Marchionne’s decision to walk away from the aid request, because the union cannot make such a request on behalf of the company.

Fiat’s Chrysler Division currently makes Chrysler and Dodge minivans in the Windsor plant, but plans to reduce that number to one minivan and one crossover vehicle in the next product run. Chrysler will continue to manufacture three other products, the Chrysler 300, Dodge Charger and Dodge Challenger, in the Brampton, Ontario, plant near Toronto. The company makes its Jeep, Dodge Durango and Chrysler 200 vehicles in the United States.

Chrysler is no stranger to controversy…or brinkmanship. In 1979, Chrysler’s then-CEO Lee Iacocca arm-wrestled $1.5 billion in loan guarantees from Congress to stave off bankruptcy. The company was teetering on edge of disaster again by the time the first Chrysler Minivans showed up in American showrooms in 1983, saving the company from extinction. In 1998, Chrysler,  then back on the ropes, ended up in a shotgun wedding with Daimler-Benz, the parent company of Mercedes-Benz.

Both sides agreed that it was a marriage of equals. It was nothing of the sort. Like most shotgun marriages, things started out badly and went downhill from there, in a classic mismatch of corporate cultures. The joint venture bogged down in culture shock as the high-end German car maker struggled to understand Chrysler’s low-end people-mover vehicles. Frustrated, Daimler bought out Chrysler’s remaining outside shareholders in a stock swap deal for Mercedes stock, and Chrysler became a division of Daimler-Chrysler until 2007, when Daimler-Chrysler sold 80 percent of its stake in Chrysler to Cerberus Capital Management, which changed its name to Chrysler, LLC.

Chrysler, LLC.,  finally went bankrupt in 2009, but the company stayed in business through a sale of assets to a new company, Chrysler Group, LLC, with the U.S. government paying $8 billion for a 21 percent stake in the new company. Later that year, Chrysler fell under Marchionne’s management when Fiat bought a 20 percent stake in the restructured company.  

Unlike the Mercedes merger, Fiat has successfully revived the Chrysler brand with Marchionne’s “World Class Manufacturing” concept which improved quality control across the product line, instead of concentrating only on the high-end vehicles, as Mercedes did. Fiat cemented its ownership of Chrysler in January of 2014 when it announced it would purchase outstanding shares in Chrysler, LLC.

During the 2014 Super Bowl, Chrysler aired a two-minute commercial featuring music legend Bob Dylan performing a tone poem in his patented talking blues style extolling the virtues of Chrysler’s American made vehicles under the company’s “Imported from Detroit” sales slogan. Critics of the ad campaign were quick to point out that Chrysler builds the majority of its products outside the U.S., including its most popular bread and butter vehicles, the Dodge and Chrysler Minivans.

Dylan was a strange choice for a Chrysler spokesperson. In 1983, he cut a song called “Union Sundown” bemoaning the loss of American jobs that were being exported overseas, in which he wrote: “Well, it’s sundown on the Union, and what’s made in the USA, sure was a good idea, til greed got in the way.”

Chrysler’s minivans will continue to roll of the assembly lines in Windsor, Ontario, across the Friendship Bridge to Chrysler showrooms across America but, after 2016, it is anybody’s guess where they will be coming from.

Fiat’s automotive empire may be like an octopus, but this octopus may be tone-deaf too.  All the others are.

By Alan M. Milner

ABC News
Detroit Free Press

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