Case Study: Chrysler-Fiat Partnership Essay

When Americas economical crisis reached its apex, domestic car manufacturers were at the forefront of struggling industries, and Chrysler was one of the hardest hit (Car and Driver, 2008). In 2008 the automotive giant, along with fellow industry stalwart General Motors, received a $17.4-billion reprieve from the American Government to keep from closing its doors altogether (Car and Driver).Chrysler did lose a lot of respectability, and was ordered to cease and desist with any youthful product development until the smart set proved it could be a viable business (Gluckman & Kurczewski, 2009). However, the loan from the government proved to still non be enough to get Chrysler back on its feet, and in 2009 the play along filed for Chapter 11 bankruptcy (Groth, 2011). society faced its own organizational struggles in 2003-2004 before new CEO Sergio Marchionne led the Italian automotive manufacturer back to respectability (Gluckman & Kurczewski). Still, after watching European car sal es fall to a 17 year low and needing a pull ahead to his companys revenue, Marchionne saw the Chrysler situation as a way to get into the American market (The Economist, 2013).Objectives Sought by Each PartnerChryslers objectives in the partnership with Fiat were pretty simple it needed a monetary boost to maintain its place in the industry and new engineering science if it wanted to grow and advance (Marrs, 2009). After egregiously unsuccessful partnerships with Daimler-Benz and Cerberus Management Group and a multi-billion dollar loan from the American Government ended with Chrysler file for bankruptcy, the company was in desperate need of a method to regain viability (Marrs Krisher & Strumpf, 2009 Gluckman & Kurczewski, 2009).Although Chrysler received no money in the deal, it will emerge as a new, leaner group minus billions in debt, 789 underperforming dealerships, and burdensome labor costs, not to mention gaining Fiatstechnology to build new environmentally friendly, forc e out efficient, high-quality vehicles (Krisher & Strumpf). Fiats objective in the partnership was to provide a financial boost to its own company without accumulating additional debt (Ebhardt, 2013).Fiat, Italys largest auto manufacturer, would analogous to expand its market to become a global competitor. Fiat CEO Sergio Marchionne believes that to compete with General Motors, Volkswagen, and Toyota, the merged Fiat-Chrysler will need to produce 5.5-6 million cars a year, compared to its current output of 4.1 million (The Economist, 2013).Basis of Dialogue Leading to the PartnershipThe basis of a dialogue leading to a potential partnership was the invention of a mutually beneficial situation for all parties involved (Cox, 2013). Fiat has the capital, new technologies to develop high-efficiency cars, and reverence from Ferrari and Maserati fans that will allow Chrysler to regain its place among pass by domestic auto manufacturers in the United States (Groth, 2013). Fiat will shar e with Chrysler its platforms and powertrain technology, including engines, transmissions, and fuel-saving technology (Gluckman & Kurczewski, 2009).Through Fiat, Chrysler will also get better distribution of its products in Europe, India, Brazil and China (Gluckman & Kurczewski). Chrysler is the 3rd-largest U.S. auto company and is a trusted brand with the international appeal, customer base, and facilities that will allow Fiat to become a sober competitor in the global automotive manufacturing market (Groth). Chrysler was also in no position to be patient for an extended period of time. While its factories sit idled during the bankruptcy process, the automaker reportedly lost 100 million per day (Krisher & Strumpf, 2009).Steps Taken by Each CompanyThe partnership between Fiat and Chrysler, which is still an ongoing process, is being approached in phases. Initially Chrysler agreed to give Fiat a 35% holding in return for an influx of new engines and platforms, research and developm ent, and help retooling its plants (Marrs, 2009). This approach allowed both organizations to ease into the partnership, without either side immediately taking on too much debt or risk (Cox, 2013). Analysts were notable to exactly predict the partnership between Fiat and Chrysler.In fact, Chrysler was in talks with General Motors before both companies began to experience serious financial hardships (Gluckman & Kurczewski, 2009). Looking to avoid the management mistakes that doomed Chryslers partnerships with Daimler and Cerberus, Fiat CEO Sergio Marchionne has made it clear that Fiat/Chrysler will run as one company (Trujillo, 2013). As Mr. Marchionne announced at a media briefing, This management team spends their time traveling and making decisions, but this thing runs as one house. There is no question about who runs what I run one company (Vlasic, 2013, pp. 4).