Fiat Tries To Take The Wheel In Detroit

CBS Evening News: After Partnering With Chrysler, Successful Italian Automaker Must Try To Understand U.S. Market

(CBS)  A week after Fiat joined hands with Chrysler, the Italian automaker is looking to buy GM's European operations and its Opel brand - a move that could make it the world's fourth largest car company.

"Right now, they're bargain shopping. Let's face it," analyst Jack Nerad told CBS News correspondent Anthony Mason.

Nerad says it's the new survival strategy.

"To play in this game in the future car companies are feeling they have to be global or they're not a player at all," he said.

Only five years ago, Fiat itself was on the brink of bankruptcy. But new CEO Sergio Marchionne engineered a stunning turnaround. As car sales slid across Europe in March, Fiat's sales were up almost 15 percent.

"Fiat has demonstrated that it can build the clean, fuel-efficient cars that are the future of the industry," President Obama said.

But international mergers can be tricky and Chrysler's previous marriage ended in divorce after Daimler, the German automaker, lost billions. Now its Fiat's turn to try to understand the American customer.

"That was Daimler's failing with Chrysler," Nerad said. "They didn't really get the North American market. They didn't get what the Chrysler brand stood for."

In Europe Fiat has been using an American actor to sell its cars. But as the commercials point out, when you buy a Fiat "George Clooney is not included."

For now, Ferrari and Maserati are the only Fiat-owned brands sold in the U.S. The Italian automaker pulled out of the American market in the early 1980's, when some buyers joked that Fiat stood for "fix it again, Tony."

But Fiat still has its fans here, like Bobb Rayner, who's owned nine of the cars. As head of the largest Fiat fan club in the country, he likes to quote his favorite auto writer: "...who said the Germans invented the automobile, the Americans turned it into a disposable item, but the Italians taught it how to dance and sing."

If its bold expansion strategy is going to work, Fiat will need to give Detroit some dancing lessons.

[growlll]

Safer is very debatable on 70s Flea-ats. Their lock lever for the gas peddle as cruise control was a dandy of a deadly idea not to mention the lack of a oil pump in the engine and zirk fittings for the engine main bearings.

[piewilbur]

It is no doubt true that Fiat had difficulties in the American Market. In many ways it was technologically advanced and helped pioneer concepts that are common place today, like overhead cam engines with timing belts. But back in the 70's these concepts were relatively unknown and missunderstood in the U.S. Most mechanics did not have a clue what they were doing so that when a problem did occur getting service was often dicey at best. The American public were also clueless. While many American muscle cars were putting out 1/3 to 1/2 horsepower per cubic inch. Fiat was putting out about 1 horsepower per cubic inch, normally aspirated and without modification. But this also meant that some components were stressed more and required a strict adhearance to scheduled maintenance, which rarely occured with the average Fiat owner. Fortunately , today timing belt technology has matured and is extremely reliable. I had owned a number of Fiats over the years and had driven well over 400,000 mile in one and over 300,000 in another. Pound for pound and dollar for dollar Fiat made a vehicle that was fun to drive and a heck of a lot safer than a Pinto, or for that matter most compact vehicles. Absolutely there were some issues with Fiat that could have been improved. I believe they had difficulties understanding how the American government could impose legislation for Auto manufactures to meet certain regulation and when the American auto manufactures' could not, supposedly, meet the deadline, the legislation would be changed. Meanwhile, many imports would make the investments to meet the legislation. I for one would like to see Fiat bring some passion back into Chrysler. For too long, if the average American believed the bigger the better, and their appetite for humongous tuna boats could not be satiated. It is time to conserve and smaller cars are a start. If Fiat can speed the process of Chrysler delivering affordable fun cars to the American market I am all in favor.

[budmag06]

Here come those boxy, little government "peoples" cars that no one will want but, you will be forced to purchase. Fiat will not be the "savior" of the US auto industry but, will be a major player in the destruction of another freedom, the freedom to own the car of your choice.

[growlll]

The issue with unions is a lot of people dont trust the corrupt people that run them at times not to mention the front for the mob and KGB. How about that Jimmy Hoffa?

[sjmst]

I am wondering how the persons commenting came to believe that Fiats are junk "now?" Because they were, in their opinion, junk then (40 years ago?). Fiat is not the same company it was FOUR years ago, much less FORTY.
Who is rescuing who? Fiat is soon to be the world's 4th largest automaker for a reason. Give them (and in fact, Chrysler) a chance. I think you will be very pleasantly surprised.

[cbs4111]

Fiat has a large number of small cars, cars like the Honda Fit or Toyota Yaris, and micro-cars like the Smart Fortwo. These are cars that Chrysler currently doesn't have, but niche cars nevertheless with relatively small sales volume. In the American market, these Fiat cars will go up against a growing number of Japanese and Korean fuel-efficient small cars, but Fiat hasn't done well in markets where they compete with the Asian manufacturers. Not well at all. They essentially have no presence in Asia whatsoever. The Asian manufacturers simply have superior products. The Fiat-Chrysler merger will bring a few Fiat products to the US, products that won't sell well, and a few Chrysler products to European and South American markets. The merger can't really prosper until the engineering and manufacturing departments of the two companies can be merged and more competitive mainstream products are designed, products that can be produced at lower cost. This won't happen soon, if at all, so Fiat-Chrysler will be unprofitable for the foreseeable future. Prepare for huge government bailouts to continue, but now instead of a wealth transfer to Chrysler creditors, the bailouts will go directly to the UAW as they now own the majority of Chrysler. Unfortunately, with the Fiat merger, the American taxpayer will also have to prop up the Italians.

None of this makes any sense at all. Not at all, except when you consider that Obama now can use the Federal budget to buy union votes. If he had let Chrysler fail the unions would have become, at the very least, apathetic toward Democrats. Obama took ownership of Chrysler away from investors and essentially gave gave the company to the UAW and the Italians. Why should anyone care? This deal slammed the pension plans of other non-UAW American workers, all pension plans invested in Chrysler took it in the shorts. Maybe your plan too.

The Obama directed merger will soon be seen as the AIG of the automotive industry and the average American buyer will avoid Fiat-Chrysler like Vice President Biden avoids the swine flu.

[start99]

Ok give em a chance..however why seek foreign when we can stay right here and be self sustaining? Why is that...airlines are converging and have been...what up with these guys? USA depending on someone else to survive? Wow! What a concept!

[toldyouso29]

The German auto company which formerly took over Chrysler failed because they did not understand (nor did he American portion of Chrysler divulge) the neture of Chryslers relationship with the UAW or the actual realuty of the UAW's relationship to its own workers.

When the mgmt tried to get the UAW in line--they found the bosses and workers in the UAW willing accomplices/collaborators BUT they underestimated the power , solidarity, and cooperative power of the actual workers. Continually the UAW would make numerous concessions to the detriment of the workers and tried to return power back to mgmt and within the company, angry workers across the nation would create an internal slow down, sabotage lines, make suboptimal parts and literally choke the company from within.

When Chrysler tried to replace key workers, new comers were ferreted out as spies and got everything from threats to vandalism to personal property but most importantly they would be taught incorrectly so that they could not take over thr key functions as millwright, trouble shooters, etc.

And for all jealous people who think Unions and wanting too much miney are to blame--those who start at Chrysler come in at 13.00/hour, must work from 90 days to 6 months before being accepted into the Union. The % of money that Chrysler gives to Union workers is less than 11% of the gross. The Executive officers of Chrysler alone make more money in contrast/relative to the Unions.

If you don't bellyache over a ball player making millions as an individual or an auto CEO making 23 to 50 million/year; then you have no credibility to be jealous or bellyache on Union workers making 32K to 70K/year (up to supervisory level (not counting benefits)

Further, all you haters who cry about illegals and lowered wages should realize that without Unions ALL companies would depress wages AND hire the cheapest labor because companies don't care about their wokers, they care about their profits and bonuses for upper mgmt. The only reason Isuzu and others pay near wages of Chrysler and others is to keep Unions out and to discourage Unions fron starting--but once all Unions are gone--no matter what Industry--Americans will be reduced back to slave labor.

If you dispute this, think how long it took businesses to raise the minimum wage...and even now, that wage is well below poverty , level. Even 8.00/hour is less than 15K /year.

those who "hate unions" don't know anything about them except what compnaies have said over the years. Without unions, those who work for Cjrysler would probably be lucky to make 10.00/hour and of course that would mean that Isuzu and others would pay their employees about 8.50 to 9.00 to say they were competetive.

But the real point to know about Chrysler, is that the workers are organized AND that they are a union within a union. Chrysler's union sold out to mgmt decades ago--but even so, those in the Union do not cross skilled labor--and it is skilled labor who dictates shutdowns, slowdowns, sabotaging, etc when the union gets too cozy with mgmt or tries to teach the worker's a lesson.

You may think Chrysler should just fire them all and completely move to Mexico.. the problem is Chrysler's own work force as well as other automakers are a key market. If they get rid of all their American workers and those salaries--they kill that market, kill ancillary market etc. then they can vuild a market in India, China and Mexico--but instead of 12-60K for a car--in order to compensate--they would have to charge only 3K-20K for the most expensive cars--until the Mexicans/Indians/Chinese organized..and they also decide that if the CEOs can make 40 million a year--they should each at least get to make 32- 70K a year--then the problem starts again.

ASK NOTHING OF WORKERS THAT IS NOT ASKED OF MGMT. If multimillion dollar salaris sit well with Republicans, then the least they can pay their employees is 1.5% of ehat the CEO makes...LOL

[u-r-right]

For me, the deal breaker would be high maintenance costs. Why does it seem the European cars are the most expensive to maintain? I love my VW but won't be buying another because of the ridiculous maintenance costs.

[tmittelstaed]

It could work. Too many people out there think that just because they drive a car that they know all about the auto business. The problem is that to understand the auto market you need to think like a new car buyer, which most people aren't. A new car purchase is for most new car buyers the ultimate vanity purchase. It's completely illogical from a financial perspective since you can get a 1-2 year old vehicle that is still under warranty and you will not take the depreciation price hit.
What took the US domestic car makers by surprise was the unexpected and sudden jump in oil prices which over a period of a quarter of a year, almost completely killed demand for the SUV. They had no profitable small car product while the Japanese automakers who for years could not sell SUV's in their own country, had profitable small car product. So what else do you expect to have happened? The big 3 always viewed their small car product as entry-level cars used to build brand loyalty with 20-somethings who had no money, to enable them meet CAFE requirements, and to provide bait-n-switch products for the dealers to get people in the door so they could be upsold to better and more profitable cars. They were never intended as a profit-making product in their own right - whereas the foreign automakers absolutely had no other choice but to build their business around making profitable small cars. When people started buying more of them and fewer of the profitable SUV's it killed any chance of profits for the Big 3.
Chrysler will still sell their bigger cars, like the 300, but it will likely just brand-and-distribute the smaller Fiat-produced cars. If the Fiat-built product is priced right (ie: undercutting Toyota) and marketed right then it will sell and the money from that will prop up Chrysler for long enough for Chrysler to design better small cars and figure out how to make and sell them at a profit. And we are already seeing the beginnings of a viral marketing campaign in the US to push Fiat vehicles. I would bet we will be seeing a lot of these Chrysler/Fiats in movies over the next couple of years.