Case Study: The Chrysler-Fiat Strategic Alliance

1) The Chrysler-Fiat strategic alliance had two main goals. Foremost, to help Chrysler survive and rearrange its operations. Secondly, to aid Fiat’s access into the North American market that the company withdrew from in the early 1980s. Both companies intend on sharing the technology platforms in their vehicles, and have the potential to be competitive factors in the industry. Concerning rearrangement and global incorporation, Chrysler and Fiat would like to pursue corporate activities that help reduce cost by sharing knowledge in R&D and assembly operations. For Chrysler, this is the only available option for survival. For Fiat, the collaboration with Chrysler is a unique opportunity to enter into North America where the company carries limited

The company maintains an established distribution and sales network in the U.S. and Canada. In addition, Chrysler owns Jeep and Dodge brands. Major weaknesses of Chrysler are its 2007 de-merger with Daimler that brought massive losses. Chrysler also has quality problems and limited models in its subcompact cars range. The company’s past alliances with Mitsubishi and Hyundai did not create a good value-added. Fiat has made a tremendous recovery under the leadership of Sergio Marchionne. The company is profitable and its brands are visible. Many new small car models have been introduced by Fiat. Quality has improved and its turnaround strategy is in progress. Fiat’s corporate culture and business practices have improved under the new management. Fiat’s major weakness is its marketing machinery that may not be as effective as its competitors in Europe. The company has a limited product portfolio in global markets. After the alliance, both companies are expected to do better if no market or company-related disruptions occur. The major strength of the alliance will be product portfolios and sharing of technology platforms in their assembly operations. Other advantages are sharing of R&D and dealer networks in Europe and North America as well as Chrysler’s reorganization that could result new products in small car

FCA has seen remarkable growth in the U.S. and China, but sales in other global markets have been mixed. Last year 's global sales were 4.6 million, or about two-thirds of the way to the target. FCA had the range and depth of the product to meet customer’s demand in variety of marketplaces, but everything really did not go as well as expected. This exaggerated the sales pressure and the dealers said that they were asked to do extraordinary things to hit the sales target. Approaching its final two years of the five-year business plan, Marchionne has taken the company into an uncharted territory in order to increase its profit margins. They will free up capacity to build even more high-margin Jeep SUVs and Ram pickups by early 2017 by ending its passenger car production in the U.S. According to Marchionne, FCA’s North American profit margin (which was 7.9% during the second quarter of 2016) is capable of giving a tough competition to the General Motors (with profit margin of 12.1%). For 2018, the company has aggressive and achievable goals of earning 9 billion euros in operating profit and zero industrial