The 2009 Chrysler-Fiat Strategic Alliance

1. What are your views of the 2009 Chrysler-Fiat strategic alliance and its future prospects in the auto industry? Analyze and evaluate Chrysler and Fiat¶s strengths and weaknesses before and after their 2009 strategic alliance (see Tables II and III). The alignment between Fiat and Chrysler does not exactly save Chrysler. It gives Fiat an entry into the U.S. In short, Fiat is to get 35% of Chrysler, will not pay any cash for the stake, and it will give Chrysler access to its technology. Fiat had publicly said it wanted a production base in North America for its Alfa Romeo brand--and presumably the Fiat brand, too. Through its 35% interest that it is getting in Chrysler, it would presumably have access to a U.S. plant to build its cars. Is Fiat capable of surviving in today¶s world? What about Chrysler? The company has been weak technically and does not have enough money to finance the kind of new vehicle programs that Chrysler needs to stay competitive in this market. Fiat is strong in small cars and in their engines and transmissions, as well as in luxury cars and diesel engines. Getting the technology could be a huge help for Chrysler, but the American company will still need the money and ability to create new cars even with Fiat technology. The alliance might help Chrysler if it needs to get more money from the American government in its battle to survive. Fiat needs a manufacturing base if it intends to reenter the American market. It makes no sense to import small or low-priced cars, or even midlevel cars from Europe, as the strong European currency makes that a money-losing proposition. If Fiat could manufacture in the U.S., it could build some variations of its cars for Chrysler. How this would fit with the cars scheduled to come from Nissan is another question. The problem is that it could take years for Fiat to pass on technology and build engines and transmissions for new Chrysler products, or even to build Fiats here and badge them as Chryslers. 2. Compare and contrast Chrysler and Fiat with five other global auto manufacturers (GM, Ford, Toyota, Volkswagen, and Daimler) in the areas of global operations and manufacturing issues (see Tables II and III). The problem is that Chrysler-Fiat can compete with other car manufacturers, however, it could take years for Fiat to pass on technology and build engines and transmissions for new Chrysler products, or even to build Fiats here and badge them as Chryslers.

3. 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 terms? Chrysler's strength has been in sport utility vehicles, pickup trucks and minivans. We do not know Fiat's degree of interest in these businesses. Meanwhile, another foreign maker, Nissan (which is part of the Renault/Nissan alliance) has an agreement with Chrysler whereby Nissan is to get a version of the Dodge Ram, a big pickup, and Nissan is to build small cars destined for Chrysler. 4. What did you learn from the Chrysler-Fiat Strategic Alliance regarding managing multinationals in the changing global business? What role did the U.S. government play in the formation of this alliance? A Chrysler/Fiat partnership is a great fit as it creates the potential for a powerful, new global competitor, offering Chrysler a number of strategic benefits, including access to products that compliment their current portfolio; a distribution network outside North America; and cost savings in design, engineering, manufacturing, purchasing and sales and marketing. This transaction will enable Chrysler to offer a broader competitive line-up of vehicles their dealers and customers that meet emissions and fuel efficiency standards, while adhering to conditions of the Government Loan. The partnership would also provide a return on investment for the American taxpayer by securing the long-term viability of Chrysler brands in the marketplace, sustaining future product and technology development for our country and building renewed consumer confidence, while preserving American jobs.

5. 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. Chrysler's sales are falling faster than the other Detroit manufacturers. Its December sales were off 53% from a year before, but the company still had 10% of the U.S. market that month. Chrysler is suffering because of its past emphasis on trucks, its weak front-drive car entries and perhaps because of a weak reputation for quality. All the negative news of the past several months may have scared away potential customers, too. Right now, Fiat sells Ferrari and Maserati cars in the U.S., but in tiny numbers. Last year's Maserati sale number was only 2,509, and there are plans to sell a few dozen very expensive Alfa models here in the near future.

Australia etc. 1995). That $2 billion helped jump-start Fiat's recovery. Do you understand?´ The agent of the workers or the representative then gestured to the workers who immediately stopped their mills to the astonishment of the manager meaning he needs to communicate to the workers himself to command them to run the mill.A few years ago. Canada and Mexico other than few minor islands such as Costa Rica. and it is also the leader in Brazil. which still needs those pickup trucks from Chrysler. ³The style of management of government in different countries can also be anywhere on the scale. 2006) ‡ Contrasting management styles The management style in the US is entirely different from that of Italy and for that matter even different from the neighbouring country Canada and some of the countries which are politically similar to the US such as the UK. GM had bought 20% of the Fiat auto business. design and innovation to the company which were few of the key elements that brought the US car giant to the plight it is in right now. I run it. but then paid Fiat $2 billion to get out of the deal. whereas the tried and tested US model of management concentrates on finance and marketing and the Japanese one on quality and just-in-time production. Extensive literature covering the trials of the Fiat Company of Italy and the Franco Japanese Collaboration Nissan-Renault¶s attempts of acquiring a stake in the Chrysler Company which was declared bankrupt following the withdrawal of support of the US government in early 2009. The following aspects of the business process will be covered in the report. ³The positions of the country on the scale mentioned by the author can only be referenced relative to other countries and there is no country which is absolutely authoritarian or absolutely . In the case of Fiat it is not quite the case because it already has operations in the US in the form of its subsidiary Maserati. 2006). The following story can represent the epitome of American style of management which can at times get indigestible for outsiders or a newbie. which is weak outside North America. Various factors like the following will come into picture one the operations of the Fiat Company start towards acquiring a stake in the Chrysler group LLC.´ There are certain things that a certain branded management style is really keen on stressing and the ones marked as priority for the US and Japanese makers are listed above. Yet Chrysler. of course. The management style is more about short term risk management and not much about long term prospects because it has been the case for the recent past after the revival of the US from the recession of 1970s. The Chrysler-Fiat deal might--just might--stir interest in Chrysler from Nissan. Fiat had a partnership with General Motors. while the industry was down 7%. 2006) ³These commentators argue that. The Company plans to run its North American operations with the US plant as its base in the region. and is the leading seller there. Others dropped sharply too. The report is intended to serve as a guideline for the Fiat Company based in Italy for its considerations of acquiring an Automotive manufacturing company in the US to expand its operations in the United States where it doesn¶t have direct presence except for its premium sports car brand Maserati. It is strong in Italy. Europe's version emphasises softer people skills (Manfred. The management style of Europe is more about an organized hierarchy which is more formal compared to that in the US which is a highly relaxed work culture with assistants over riding the bosses at instances when they have got the experience and skill to perform certain jobs. but its November sales crashed 24%. and maybe minivans. The feasibility report is documented for the purpose of the board members of the Fiat group in helping their decision process about the feasibility issues including practical constraints like possible competition from similarly poised brands and legal parameters like industry norms. but Fiat's CEO seemed particularly worried. A manager who was appointed to the textile mill came into the weave room and told in an authoritarian tome-³I am the new manager here. too. The report will include several sections that cover the various issues that will probably come up in the way of the Fiat Company in its process of acquiring an auto plant in the US. (Manfred. the Caribbean Islands etc. The priority aspects when it comes to management style with respect to Fiat are more modelled around innovation and excellence in design and catering to the customer¶s requirement. does not seem to gain any global trading advantages in the alliance. The Fiat Company after several considerations and lobbying with several automakers in the world especially in the US. (Manfred. Fiat is not a global competitor like Volkswagen. too. Cuba. This goes on to tell the type of communication used in the US which needs to be taken care of in the case of a company starting its operations. Fiat's European sales were down only 5% after 11 months last year. with the US being its strategic interest which has never dying thirst for autos and also the absence of the company in the region including the entire region of North America comprising mainly of the US. When I manage a mill. These include the ability to form a common vision in culturally diverse organisations and help to promote collaboration across borders. environmental regulations and restrictions on foreign companies operating on the US soil. The differences in management styles come of in fact as a boon for the operations of Fiat because of the stress on financial discipline and marketing control the Chrysler company has over its US operations coming hand in hand with the Fiat¶s involvement in the new merger alliance that brings a sense of quality. How will it all end²The deal making may not be over. from fully authoritarian (dictatorship) at one end of the scale to fully participative (policy decided by the people) at the other end´ (Myers.

The direction of a company is typically expressed by the shareholders who are voiced through the board directors which is again executed through the hands of the executives of the companies headed by the CEO. it is also an observed trend that companies in the US are developing a corporate executive structure which partially decentralizes the executive power in the wake of the results when the power is centralized in the hands of a very few executives of the companies. working under an indirect supervision of board of directors who will be headed by a Chairman. The compliance of executives and directors is essential to nurture the confidence of the shareholders and also the American public who needed to be taken into consideration for their indirect contribution through the government bailouts of the companies in various industries including the automotive field. Compared to states such as Russia. 2006). Though the above traditions and customs represent a surprisingly high importance attributed to the roles of executives in the US. Warren Buffett at Berkshire Hathaway. CFO and CIO. The US is a country where free market systems prevails and the shareholder is the final long term dictator in terms of the company¶s long term objectives and goals. with the entities with . This style of dynamic result oriented culture in the case of executives can be regarded as a healthy trend for Fiat Motors for its operations on the American Soil. The way the boards are composed vary largely in different countries and regions. the industry is fairly free of any government intervention except for welfare and environmental laws and regulations which will be dealt in the appropriate section below. Shareholders: Shareholder forms the pillar of the Corporate Governance structure anywhere in the world. The corporate governance in the US is the one that has been as a standard reference for almost most of the world at least so far at a time when the supremacy of the US is being questioned with the proceedings from all the parts of the world with its political and financial interests being under threat. The shareholder system works in a slightly different way outside the US. JurgenSchrempp at DaimlerChrysler represents their respective companies and they walk the talk when it comes to what they represent.participative but just relative. This particular hierarchy of corporate heads is pretty much the same around the world including the Europe as well as many developing nations around the world. dictatorship type regimes of democratic governments tend to threaten the towards the participative style of management. Japanese boards on the contrary have very few outsiders due to their cultural reasons which place members of closely associated families in the boards. The corporate machinery is keen on revamping the structure towards a more regulated structure which intends to prevent the unwanted expenses leaking out of the companies¶ treasuries. The number of directors in the US ranges anywhere between as less as 4 and as many as 35 with most of the boards operating. 2006). Jack Welch at General Electric. It is to be noted here that the executives of the companies in the US especially those working for the Auto companies in Detroit bear a personal connection to the companies they work for (Manfred. The British and the Swiss differ from their fellow Europeans in that they have a single tier management oriented structure. European style of governance on the other hand which is the style of the Fiat company endorses a two tier structure with the employees being a part of the directors board and the actual elects of the shareholders forming the other tier of hierarchy. The move of CITIBANK to label 300 of its executives as µCorporate Leverage Population¶ can be referred as an example to this trend. US seems like a more friendly and like minded nation to expand operations for the Italian automaker. After all. the primary thing that comes to mind is the CEO who is the head of the executives of a company as mentioned above. Directors: The board of directors are the ones that have a final say in many strategic decisions of the company. The position of the US on the above scale seems to be fairly to the right with a great deal of participation of the people in the form of the private sector evident. The different practices in different countries put the US structure of Board of directors at a fairly neutral venue which is not of quite significance for the Fiat Company¶s operations in the nation. where the communist style of management still lingers around despite its historic move towards capitalism. The Corporate Governance structure is based on three major components: Executives: Whenever we talk of Corporate governance. They drive the cars of the company for all their personal use and it is considered a lack of respect if any of the executives drive cars made by the competition. American businesses have been driving the world's economy for most of the past decade´ (Manfred. The governance structure of the American style involves a CEO who will be the head of the executives like CTO. The expansions especially put extra onus on the executives when it comes to leading the operations of the company into a new region. The businesses in the US because of the recent debacles are facing a tough period which is focused more on regulating the corporate governance in the country (Manfred. whereas the boards in other countries average close to 12 members. The main difference between the American boards and boards of companies based in other countries seem to be composition of the boards with the American boards having a very few number of insiders in the board with most of the members of the board of directors being contributors from different walks of life for a proper input for the management to take educated decisions. 2006) Corporate governance structure ³The American model for corporate structure and governance is the one that most researchers might point to as the paradigm for the new millennium. Corporate governance is a complicated aspect of a Company and the US corporate structure is no exception with the Chrysler Company offering a corporate governance structure that serves as an opportunity for Fiat to put the foot on gas when it comes to corporate discipline. (Manfred. While Italy has some communist leanings in the past. 2006).

Many European countries. (CIA) The prevailing condition regarding the fuel prices in the US is also a thing of encouragement for an automobile company to enter and do business because of the freedom to introduce models which are less fuel efficient. hazardous waste management and storage tanks. The point that regulations will be different from state to state. The enthusiastic nature of the American Shareholder along with the existing threat of the government takeover serves to increase the already high levels of shareholder participation thus resulting in a healthy mix of shareholder-director partnership in the combine. its plants what the new conglomerate company will be making in the near future. There are two big countries neighbouring the US. The US economy is one that gives scope for the sale of goods of a versatile nature and this makes the economic state of the country especially favourable for the sale of a wide stable of cars from the house of Fiat motor company to be either manufactured or imported to be marketed in the US and neighbouring countries. The aspect of neighbouring countries is as well to be considered when it comes to the economical aspect of running the show with US as the newly added hub for operations. The US style shareholder culture. There are certain regulations that the federal government enforces in the treatment of waste which is a common by product of industries. in fact 50 of them and certain territories like Puerto Rico and some islands which have different laws between each other. (Michigan. It is indeed a rare opportunity for a company to get access to three big markets by venturing into a country. A recent study shows that a typical auto assembly plant must comply with about 900 distinct requirements. The average economical situation taking into account the purchasing power parity combined with the high fuel prices give a little scope for cars of very less fuel efficiency like the sports cars which are the specialty of the Fiat motor company marketed under the Maserati brand name. has the potential to impact the environment. 2009). are justly proud of the "social" models of capitalism they embrace (Joel. The European market is a very fuel efficiency sensitive because of mixed reasons. ‡ Laws and regulations The laws and regulations make the most important aspect of study in the contemplation of enterprise operations in overseas locations. which in the case of Auto plants is both in the form of the Industrial machinery to make the cars causing direct pollution while the end products which are delivered also causing pollution and often it is this where the EPA regulations are enforced. First of all there need to be approval from the Energy and Pollution Authority (EPA) when setting up any manufacturing plants that cause pollution directly or indirectly. There are certain county laws that need to be followed by any entity operating a manufacturing plant in the US. efficient universal health care and tough fuel economy standards for cars--that should be discussed and . Apart from the legal structure which in itself poses several challenges there are regulations from the industry which need to be followed for diplomatic purposes. The companies also with more involvement from their local investors are inclining towards this type of shareholder system. The size of the economy even considering the purchasing power parity offers a great opportunity for the investors because of the immense potential for automobiles in the US at any given time.Canada and Mexico. 1999).´ There are some many types of regulations that needed to be taken care of when it comes to setting up plants irrespective of whether the company is a foreign or a domestic one (Jackson. The main difference here will be the Fiat Company will not instantly be setting up anything but will be making plans to change the constitution of the company. There will be many legal aspects that need to be taken into account and in this case the Fiat motor company is venturing into a nation where the legal system is one of the most complicated in the world. particularly the northern ones. now spreading towards outside of the US gives a bright opportunity for the investment prospects of the new company with the investment of Fiat in Chrysler Group. 1999) State of the economy The economy of the US is a overwhelmingly large and is the largest economy of the world with the 2nd following by a significant margin. in general. There are many policies--such as Danish incentives for industrial firms to greenify themselves. water discharges. air emissions. There are lots of states. In the case of Auto plants the government requires a proper system of metal waste treatment which needs to be made before any plans are carried out with any existing manufacturing plants of Chrysler.the controlling number of shares running the companies in an ownership style in many cases. region to region with the laws changing also with counties. (CIA) ‡ Type of governments ³But it's also critical not to see Europe's new tilt as affirming Reaganite cowboy capitalism. The regulations are of many sorts when it comes to operating manufacturing units especially the auto plants in the US. These requirements deal with emergency planning and community right-to-know. The regulatory system though is systematic and organized in the US is lot easier to deal with compared to the third world countries because of the relatively simple process in keeping up to the regulations. The economy of Canada also ranks in the top 10 though Mexico is not right there it is considered one of the fastest growing economies of the world. There are certain steps that need to be taken care of and they go on to ensure that the process is met and there are no hassles involved. The involvement of the average shareholder is increasing by the day with the globalization of the way business is done and with the increasing reach of the American and similar like minded investors around the world who fore see and work towards a dynamic shareholder activism. 2010). it is heavily regulated. There are few things that need to be taken into account (Michigan. ³Because the auto industry. The following is an example what the present scenario is right now in terms of regulations.

The economy if it can support profits for a company with the relatively high operating costs in a country like US spells lots of bright future for countries in the developing phase because of their unsaturated demand for quality of living and moderate costs involved in manufacturing. Other than the few above mentioned hiccups doing business in Detroit is both prestigious and profitable from an economic point of view. 2009. 2009) The political situation in the case of Chrysler company is a complicated one because a careful study is to be made to know the political atmosphere of the UAW¶s Chrysler wing.S. The political situation of a country which is a major factor in deciding the feasibility and the practical element makes the US a very favourable destination with the least amount of expected government intervention in businesses. 2009) ‡ Political situation The political situation is a very stable system in the US which is as mentioned in other sections which is a conducive atmosphere for doing business of this scale. . Protecting the American business interests is one of the priorities of the government in the US which is surely a positive sign for the Italian auto maker. President Obama laid out a framework for Chrysler to achieve viability by partnering with the international car company Fiat. factories. and save for a secure retirement. Chrysler has an opportunity to thrive as a long-term viable 21st century company. it has also been responsible for helping build our middle class. Chrysler will use Section 363 of the bankruptcy code to clear away the remaining impediments to its successful re-launch. Chrysler has not only been an icon of America¶s auto industry and a source of pride for generations of American workers. Workers unions and the local public which also need to be taken into account when it comes to major operations of the scale of running a manufacturing unit. Conclusion: The overall decision of a foreign company entering the US market and establishing operations in the US is a positive sign for the US economy and the world economy because of the high operating costs in the US.S. The Chrysler group which needs some investment in the shorter term to invest in small cars is expected anyways to meet the tougher laws by increasing the compact cars mix in their line up which falls in line with the regulations of the US government. Fiat and their key stakeholders have made unprecedented sacrifices and executed an agreement that positions Chrysler for a viable future.S. The strategic interests which include the tax differences in operating the new conglomerate with domestic manufacturing and oversees manufacturing also resulted in the setting up of the new company with US manufacturing operations. spreading R&D and design development costs over higher volumes. As a result of the sacrifices by key stakeholders and a substantial commitment of U. ‡ Fiat is contributing billions of dollars in advanced technology and intellectual property. The entry of a European Automative company into the US would certainly strike a right chord with the American public who are seeing many jobs going out of the country in the recent times to neighbouring countries where manufacturing costs are low. Chrysler. Fiat¶s technology will allow Chrysler to build new fuel efficient cars and engines in U. government resources. making it more competitive in an increasingly global and consolidating industry.Italy and its new strategic interest. Though there are attempts underway in the US with the democratic leadership in power. US is very much on the right when it comes to the type of governments with minimum government intervention in the policies and capitalism being the pride of the nation with companies working in the lobbies in a systematic way to have the legislations charted out that protects the American Business interests. The political situation is especially important for an automaker to perform business in a country because there can be problems arising at various levels because of the complexities of manufacturing plants. factories. There will be issues such as labour and land acquisition problems which are tied up to politically motivated reasons arising sue to the political ideologies of various parties involved such as the political parties. send their kids to college. (Joel. the US in general is still behind the herd in following stringent environmental laws. Thus the political arena of the US is one factor which makes the US a favourable place to do business at least when it comes to the daily operations once the deal is arrived with the local labour union called the United Auto Workers(UAW). and offering Chrysler access to a global distribution network.perhaps even adopted in some form in the U. giving countless Americans the chance to provide for their families.The US. to make the US environmental law more eco friendly which the local industry considers as anti Industry referring to the American Detroit based auto industry. This in fact can turn out to earn short term gains for the Italian automaker which is not mandated to invest in any green technologies at a time it attempts to get a complete reins of the historic auto company which is in ruins of sort. The relationship of a company with its wing or division of the UAW plays an important role in making or breaking the plans of a company in Detroit. To execute this agreement. DETAILS OF MERGER : Obama Administration Auto Restructuring Initiative Chrysler-Fiat Alliance On March 30. The alliance will create the sixth-largest global automaker. The Chrysler Fiat Alliance ± Shared Sacrifice ‡ The alliance will retain Chrysler¶s existing factory footprint and continue producing Chrysler cars in U.S.´ The above statement resonated with the basic differences between the home turf of the Fiat company. After a month of close engagement with the President¶s Auto Task Force. (Joel.

‡ The UAW has made important concessions on wages.6 billion payable over approximately 13 years with a 9% rate of interest and will receive 55% of the equity of New Chrysler. while difficult. give up its 19% equity interest in Chrysler¶s ultimate parent. Treasury also has the right to select the initial group of four independent directors. The loans will be secured by a first priority lien on all of Chrysler¶s assets. ‡ The U. and their stability will be strengthened from the Daimler contribution of $600 million. government is prepared to provide approximately $3. Cerberus will contribute a claim it had against Daimler to assist in the Daimler settlement with the PBGC. government has committed to provide assistance sufficient to help give Chrysler a chance to achieve financial viability. There is also an additional note of $288 million which is a fee for making these loans. but thereafter will not play a role in the governance or management of the Company. in the form of a term loan with $2. ‡ Working capital: The U.3 billion in debtor in possession financing to support Chrysler through an expedited chapter 11 proceeding. Fiat will have the right to earn up to 15% in additional equity in three tranches of 5% ± each in exchange for meeting performance metrics.S Chrysler facility. benefits.S. that performs at 40 mpg. ‡ This new Chrysler will establish an independent trust (VEBA) that will provide health care benefits for Chrysler¶s retirees. Michigan to the new Chrysler alliance. ‡ The newly reorganized Chrysler will purchase substantially all of the assets of the old Chrysler out of a chapter 11 bankruptcy case in exchange for a $2 billion payment to its secured lenders. Government Support: Consistent with the President¶s commitment to provide adequate working capital to help Chrysler through this restructuring period and loan up to $6 billion to the Chrysler-Fiat Alliance. The interest will be an appropriate combination of cash and payment-in-kind. and retiree health care that. pensions and health care for retirees and make Chrysler more competitive. Details on U. Cerberus has also agreed to transfer its ownership of the Chrysler headquarters in Auburn Hills.S. government is prepared to loan approximately $4. ‡ Daimler. the U. Based on its substantial financial contribution. ‡ Chrysler¶s largest secured creditors have agreed to exchange their portion of the Company¶s $6. Lastly.S. The VEBA will have the right to select one independent director and will have no other governance rights.1 billion due in 30 months and the balance 50% due on the 7th anniversary and 50% due on the 8th anniversary of the loan.S. ‡ Cerberus has agreed to waive its share of Chrysler¶s $2 billion of second lien debt and forfeit its entire equity stake in Chrysler. U. on the same basis as the four independent directors initially chosen by the U. In addition.S. and settle its guaranty obligation to the PBGC by agreeing to pay $600 million to Chrysler¶s pension funds. providing Chrysler with a distribution network in numerous foreign jurisdictions. ‡ Loan to the New Chrysler: Upon closing. Fiat will have the right to select three directors of Chrysler once reorganized. next generation engines at a U. Treasury will receive 8% of the equity of the new Chrysler. Chrysler¶s current minority shareholder. the U. has agreed to waive its share of Chrysler¶s $2 billion of second lien debt.S. Canadian Government Participation: . Canada will also have the right to select one independent director. and manufacturing state-of-the art. The Bankruptcy Court process will be used to confirm this treatment on those lenders that failed to accept the offer that was accepted by a majority of the lenders.7 billion to New Chrysler. ‡ The Chrysler Pension Plans will be preserved.9 billion secured claim for their pro-rata share of $2 billion in cash at closing. including introducing a vehicle produced at a Chrysler factory in the U. will help save jobs for active employees. ‡ The Governments of Canada and Ontario will together receive 2% of the equity of the new Chrysler. The VEBA will be funded by a note of $4.S.S. Details on the Chrysler Fiat Alliance: ‡ Fiat will contribute a free license to use all of its intellectual property and "know how" to capitalize Chrysler in exchange for 20% of the equity of the reorganized Chrysler.

government will stand behind Chrysler¶s efforts to use our bankruptcy code to clear away remaining obligations and emerge stronger and more competitive. Treasury in lending money to Chrysler and New Chrysler based on a 3:1 formula using Canadian currency. Chrysler will continue operating in the ordinary course. Pension Plan and VEBA funding will be transferred to the purchaser. the capabilities and resources within the business can be identified and evaluated as to how they add value to the goods and products. In order to effectuate this alliance without rewarding those who refused to sacrifice. the day after the filing will not be materially different from the day before the filing. ‡ Suppliers: Chrysler will seek authority at its "first day" hearing to continue to pay suppliers in the ordinary course. This agreement will continue once Chrysler has emerged from bankruptcy. some did not.S. Workers compensation claims will continue to be paid by Chrysler¶s insurers. wages and ordinary benefits.S. Warranties: ‡ Chrysler will continue to honor consumer warranties.Fiat Value Chain Analysis Using the value chain analysis framework (pictured left). Primary Activities . Moreover. The following parties will be treated as described below: ‡ Employees: Employees will get paid in the ordinary course. There are some dealers that Chrysler has identified and certain other dealers identified by GMAC as being risky credits that will not continue with Chrysler. Government is supporting the automotive restructuring initiative by promoting the availability of credit financing for dealers and customers. Treasury¶s Supplier Support Program will continue to operate. Chrysler Financial has agreed to uphold and cooperate in the transition of its current agreements with dealers to GMAC. Viable Financing Solution: ‡ Chrysler will enter into an agreement with GMAC to provide dealer and customer financing.2 . Assuming the sale moves forward as expected. The amount lent by the Canadians is incremental to the funding referenced above. In addition. In particular. Treasury made available the Warranty Support Program to Chrysler and $280 million was funded to a special vehicle available to provide a backstop on the orderly payment of warranties for cars sold during this restructuring period. including liquidity and capitalization that would be available to GMAC. Executing the Chrysler-Fiat Alliance While many stakeholders made sacrifices and worked constructively in this process. ‡ Dealers: Chrysler will seek authority at its "first day" hearing to honor its customer warranties in the ordinary course. and Chrysler suppliers benefiting from the program will continue to receive that benefit.S. The U. From an operating perspective. ‡ Creditors: A majority of the Senior Secured Lenders now support the transaction with Chrysler. During this process. including salary. the U. It is expected that the terminated dealers will wind down their operations over time and in an orderly manner. 3. a group of investment firms and hedge funds failed to accept reasonable offers to settle on their debt. and by providing the capitalization that GMAC requires to support the Chrysler business. Chrysler will seek to continue to honor its dealer incentives for those dealers who are expected to continue to be part of Chrysler¶s distribution network going forward. the U.S.S. ‡ UAW: The modified labor agreement reached between the UAW and Chrysler will be operative.‡ The governments of Canada and Ontario will participate alongside the U. the U. Yesterday.

The high quality of the management team. who are a reputable supply chain company. The purpose of this R&D is for: "(i) the optimisation and further development of fuel-efficient conventional powertrain technologies including the investments in machinery and tooling for the launch of a new family of more efficient transmissions. Consumers are gaining more bargaining power.Comau. compared with 751 million in 2007 (Fiat S. the company has gone from strength to strength and transformed it's brand image (Marchionne. Pressures to keep costs low are also higher than ever. especially Sergio Marchionne. This occurs in an international business environment where the pressures for cost reductions are high and the pressures for local responsiveness are low. This is true due to the squeezed profit margins experienced by all incumbents of the automotive industry and also the fact that most cars are replicated globally. 2009). Sergio Marchionne. Fiat attained loan finance to fuel it's most recent research and development project. Support Activities * Infrastructure . * Logistics . in order to ensure efficiency in inbound and outbound logistics (CEVA. and (ii) the development of new more fuel-efficient exhaust systems.The Fiat brand is now more reputable than it once was. but not elsewhere. The adaptation could. At present the car industry is in tough times with demand slowing and costs rising. and 7 plants located in Italy. It seems as though the decisions come from the top in a clear cut way. It is no longer associated with poor quality and reliability. the global industry leader. Fiat powertrain technologies have recently created a partnership with CEVA Logistics. the style can be implemented into the vehicles around the world. This keeps costs lower than if the goods were outsourced. it appears that Fiats currently employs a global business strategy. * Final assembly . Sergio Marchionne. 2009). Fiat have realised this and tried to increase their size in order to achieve better and more efficient economies of scale. * Marketing and service . Since the arrival of the new CEO. Responding to local markets may be especially difficult for Fiat to implement due to its style and design being part of it's uniqueness as a brand. This means that production can be closely monitored but it also means that export costs will be higher and the ability to be locally responsive is low. take the form of marketing and sales.The research and development for Fiat is carried out at two centres: CRF and Centro Stile.p. assembles most of the finished components to complete the manufacturing process. The abundance of mergers and strategic partnerships has increased significantly in the last few years with the global economic downturn meaning the reduction in consumer demand and reduction of profits. Although this is good. This is also a subsidiary of Fiat S.p. 2007).p. MagnetiMarelli also sells to third parties which creates profit to be used for production or Fiat car components (Fiat S.0 . it can be assumed that the quality of service is high.1 . aiming mainly at CO2 reduction" (EIB. which is highlighted through the number of mergers and acquisitions that have been made with other incumbents.* Research and development . 2008). Some may change due to legal requirements but these are minor issues. it does not sufficiently address the needs of consumers in different markets. the way in which these come together has to be of great efficiency or it will cause lags in production. Since the appointment of the new CEO.Current Strategy In light of the research brought forward. * Components . which means that the need to be more locally responsive is higher than it has been. In June 2009 (EIB. costing 900 million Euros. who is one of Fiat's subsidiaries. * Human Resources . instead. these have been Chrysler and Opel.A.Because Fiat has many suppliers. mainly for smaller vehicles application. not just in the actual product. The increasing need for local responsiveness to achieve customer satisfaction means that Fiat will need a different method of keeping costs low or even increasing sales to counterweight the balance on the profit and loss account. A majority of its production still emanates from Italy. this strategy is no longer suitable for the changing environment of the automobile industry. in the case of Fiat. The company also uses FPT Powertrain Technologies for the production of engines and transmissions. in 2004.A. 2009). except Brazil. This could be a reason for the firm not performing very well outside of its domestic market or at most. This is in keeping with the Italian design being a key theme through the brand image and keeping production Italian helps towards that but it doesn't have to. Fiat has not been able to secure another global strategic alliance in recent times as other manufacturers have. Because Comau is the market leader. who has a long successful past in non specific management.A. Distribution in America should be aided through the 35% stake in Chrysler and the use of their distribution channels.Good infrastructure in Europe. To change that Italian flair to be more conducive to the market of sale would dilute the unique selling point of the cars. in keeping with the design and "flair" still coming from Italian roots. 2007). Recently. A global alliance could mean sharing resources in order to reduce costs in both parties.Current Strategic Implementation The current operations are formulated predominantly around Italy and the head office in Turin. 4. All the plants are located in Europe except for the plant which operates in Brazil. In evaluation. Although the global strategy keeps cost low. It has a well developed R&D department that uses its expertise to produce the cars looking like they do. The profitability has increased dramatically from the appointment and Fiat has looked like expanding once again incorporating a stake in Chrysler in 2009 and a bid to buy Opel from general motors in order to secure a large market share in Europe. 4. Europe. the company seems to be a lot more structured in the way that it is run. powertrain and electronics components. As long as the research and development centre is based in Italy and has the same Italian designers. It would benefit Fiat to attain an alliance with a Japanese car company such a . which is essential for any car manufacturer.Fiat's main component manufacturer is MagnetiMarelli. This could be seen to keep the brand image "Italian".

The vast U. . can start producing cars for American consumption. The American market has been notoriously hard for Fiat to crack.S market will be opened up and with help from its alliance with Chrysler. Apparently. it will be a breakthrough in Fiat history and the dawning of a new age. The New York Times (2009) is quoted as claiming that Fiat plans to take the model into Chrysler dealerships as soon as 2010. seeing their exit from the marketplace in 1984 (LA Times.Honda or Nissan in order to gain knowledge of local tastes and consumer preferences so as to expand operations there. If these plans go ahead and the 500 is a success like it has been in Europe. Fiat is to re-launch itself into the US market using the 500 as its weapon. the Chrysler alliance needs to be used to its full potential. Also. This shows the reasoning behind Fiat forming the alliance with the struggling Chrysler. 2009).

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