Chrysler and FIAT Open Up Shop Together (755)

Overview:
Regular readers of this column will recognize our guest writer Merkel Weiss and may recall he is an automotive engineer who has worked for Chrysler in his younger years and a professor of automotive design at the prestigious Pasadena based Art Center College of Design right above the Rose Bowl. Herewith is Merkel’s informative view at historic car makers Chrysler and Fiat.

Opinion:

FIAT is an acronym for Fabbricca Italiana Automoboli Torino, and for some who have had some older experiences with the marque here in the USA, Fix It Again Tony. While it is impossible to go back and review all of the horror and success stories which have only improved with the telling, it can be said that Chrysler and FIAT have had many business dealings together and for the most part they have been lucrative ones for both parties. The current linkup promises to be just such an opportunity.

Several years ago when fuel was hovering near $4 per gallon, it was both General Motors and Ford who entered into a contractual agreements with FIAT. GM wanted access to small platforms which were versatile from a manufacturing standpoint, while Ford was looking for a chassis in order to put the new generation Ford Ka into production in Europe. Today, the new Ka has been shown and has met with wide acclaim, while GM quietly paid FIAT the sum of $2B to get out from under the contract. Ford has always made a good variety of small, fuel efficient cars in Europe but has not exported them to the US. GM has a genuine need for small car expertise and ironically paid FIAT the amount required to design and develop the small FIAT Cinquecento (pronounced Chink-way-chen-tow or 500) platform, the car that brought FIAT back to profitability. That money would have equally been useful to GM to do the new Volt platform engineering, I suspect.

When Mercedes Benz acquired Chrysler in the “merger of equals”, the German owners managed to infuse Chrysler with a healthy dose of good-old front-engine, rear-drive platforms, mostly borrowed from older E-Class tooling, modified to work with American hardware. This has done well to bolster the upper end of the Chrysler lineup. The existing product portfolio of highly successful fuel efficient and spacious front-engine, front wheel drive cars from Neon to Intrepid was pretty much ignored, however. While the upper end products were developed, the midrange products atrophied and some, like the Neon, were dropped from the lineup. This is particularly sad now when it is clear that an American car as large and space efficient as a Dodge Intrepid that achieves 30+ miles per gallon on the highway would be an excellent product during times of elevated fuel prices.

I think that everyone will agree that there is simply no question that the price of fuel will rise to and beyond the $4 level once again, the only question is when and who will be prepared with the appropriate lineup of vehicles. Chrysler has shown that they have the expertise to be that company, only lacking as all the Big 3 in the kind of ultra-high fuel economy, price-point vehicles that FIAT can supply.

FIAT has a long history of building automobile factories in remote locations. They pioneered robotic assembly line plants in the 1970s and have successfully built them all over the world, in many cases establishing a viable presence for the operators. So in this sense, it would seem to be, on the surface at any rate, no great difficulty for FIAT to construct a factory in Mexico to produce the Cinquecento by 2011 as planned. The car has been a smash hit in Europe, both for its good looks and its frugal operation.

The FIAT Cinquecento is an extremely sexy compact FWD hatchback coupe. In my opinion, it is exactly the kind of product that is needed and sooner rather than later. It is the kind of product that, like the 300 in its day, creates lust in the buyer. It is exactly the kind of product that the auto industry thrives on but has lacked to a large extent lately, with the possible exception of the ill-timed return of the muscle car era. The lust in buyers has been missing for the most part because the emotion has left product design. It seems like all of these once-great companies have either forgotten or ignored the emotional latch to the buyer that has catapulted them to greatness in the first place. One quick look at the Cinquecento will remind you that it’s not too late to put some of that emotion back into the sheet metal. Further, it will remind you that at least one firm has not forgotten who they are and how they got there.

I have driven the car and I can say without reservation that it is a serious hoot to drive. Yes it is very small, but it does not feel very small – in fact it feels quite spacious inside. Yes it agile, but not at the expense of feeling skittish. Yes it handles quite well with surprisingly little body roll, but it also rides very well, in fact much better that one would expect from looking at its external dimensions. For Chrysler, this car would be the lineup equivalent of the old, but well respected Dodge Colt, supplied by Mitsubishi.

According to the terms of the agreement between Chrysler and FIAT, there will be at least four other cars available in the US as well, derivatives of the Grande Punto and Panda platforms. The Alfa Romeo Mito is another one of the products that is being considered to be imported by Chrysler. The Mito (Me-tow), named for the towns where Alfa and FIAT are headquartered (Milano and Torino), is the same kind of lust-after product that you would expect from the Italian firm owned by FIAT.

There are many hurdles to jump in order to get where Chrysler and FIAT need to go. The first is relatively straightforward. Chrysler needs to stay in business long enough to get the product lineup out to the market, perhaps another two years. This is no small thing. The market is truly grim these days and the product that they have to sell right now is equally so. The ageing 300 series, the 4-door Charger and the Challenger are all very cool, but not the right products for the current market. Their Jeeps, pickup trucks and minivans, ditto. They are desperate for a new era of products that build on their current lineup, but move toward the future needs of Americans.

Given that Mercedes still holds a 20% stake in Chrysler and FIAT would acquire another 35%, the remaining American share is left at 45%. FIAT has stated categorically that they have no interest in running Chrysler, but to be fair, Mercedes probably said that too. There is simply no doubt that Marchionne, turnaround wizard that he is, could easily do a more credible job of running the conglomerate company than Nardelli, whose experience in the auto industry is limited to his previous position as CEO of Home Depot. It should be obvious even to the casual observer that some better direction at the top would be very advantageous about now. Chrysler has a long history of managing failure rather brilliantly, if you recall the most recent prior occasion when Lee Iacocca spoke before Congress and the nation. The result was the Loan Guarantee Act of 1980 where the US countersigned a bank loan to keep Chrysler in business. Indeed it was the success of sales in the marketplace that Chrysler managed poorly. They managed to parlay some rather handsome designs and a cost structure advantage in the industry into the current narrow and dated product offering, which is not totally different from where they were in 1978-9 before the front wheel drive Omni/Horizon and K-Car products saved them. At this point we don’t even know if Congress will look favorably upon the 55% foreign-owned portion of Chrysler in terms of potential loan/bailout funding. We certainly hope they will because now, as in Iacocca’s time the job loss is still considerably more disadvantageous that the loan or bailout, as the case may be. Further, at this point it really doesn’t look like the alternative options for Chrysler are very good at all.

Gas Stats:

$2.17/ Gal avg. March 28, ‘09

www.fueleconomy.gov

for more information.

43.5 Highway MPG

Pricing:

MSRP $26,000.