Fiat is Past, Present and Future Partner of GM, Ford and Chrysler

(MoneyWatch)  NEW ORLEANS -- The global auto industry is a small world, illustrated by the fact that Chrysler, Ford and GM respectively are just beginning a relationship with Italy's Fiat Auto Group, in one already, or on the rebound from one.

The Chrysler-Fiat deal announced earlier this week is Fiat's newest and potentially most significant trans-Atlantic alliance. Fiat is set to take a 35 percent share in Chrysler, which could grow up to 55 percent.

Fiat contributes "billions and billions and billions" of dollars worth of engineering work and technology that could be used in small cars for Chrysler, said Jim Press, vice chairman and president of Chrysler.

In return, Chrysler has idle factory capacity that could be used to build cars in North America for either or both partners, plus a U.S. distribution network, which Fiat lacks, Press said. Press spoke at an industry confab here hosted by J.D. Power and Associates, timed to coincide with the annual convention of the National Automobile Dealers Association.

Reaction to the deal was mostly positive, at the meeting. "I don't want to say, 'a match made in heaven,' because that's what people said about DaimlerChrysler, but that's what it is," said Mike Jackson, CEO of AutoNation, the biggest auto dealer chain in the United States.

"It's a global game, and Chrysler is a regional manufacturer in North America, a truck-based manufacturer. Fiat is a regional manufacturer with a European base that specializes in A-B-C cars," Jackson said, in an interview on Jan. 23. The rest of the world refers to mini-cars, sub-compacts and compacts as A, B and C segments, in that order.

Ford is also in a limited product-sharing alliance with Fiat, since the Ford Ka sold in Europe is based on the same platform as the Fiat 500. Mark Fields, Ford president of the Americas, said that on the face of it, Ford has no objection to the proposed Fiat-Chrysler relationship.

GM offers a cautionary tale about Fiat. GM bought 20 percent of Fiat in 2000, for $2.4 billion. Fiat bought $2.4 billion worth of GM stock. GM ultimately wrote off its entire investment in Fiat, and paid Fiat another $2 billion to end the relationship.

"Fiat five years ago was a joke and a laughingstock, but it has great technology today," Jackson said. Jackson acknowledged that Fiat's lingering reputation in the United States for poor quality is a "marketing challenge," but he said Fiat's products today are competitive. "I think it's a good deal," he said.

Chrysler, which had no hope for long-term survival without a partner, better hope so.