A tie-up between Chrysler and Fiat, as announced earlier this week, could “bring a whole new batch of fun to drive, fuel-efficient and environmentally friendly cars to [US] shores,” according to an Edmunds.com editor.

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“For example, Chrysler, Jeep and Dodge dealerships in the US could become outlets for upscale Alfa Romeos and the economical Fiat 500 mini-car – the European Car of the Year in 2008,” John O’Dell said.


Fiat is to take a 35% equity interest in Chrysler in exchange for access to Fiat’s competitive, fuel-efficient vehicle platforms, powertrain and components, among other mutual benefits.


AutoObserver.com editor Michelle Krebs said: “Both companies have hinted loudly about their desire for a global strategic alliance, and this is not the first time that these two companies have dealt with each other, so the partnership isn’t shocking the auto industry.”


Edmunds listed what it sees as pros and cons of the deal:

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Pros:



  • Fiat gets access to the US market for not only Alfa-Romeo but also for its small cars, a segment in which Chrysler desperately needs to compete.
  • Chrysler finally gains worldwide distribution for its brands, especially Jeep which has great potential.
  • Fiat can provide technological advancements including its well-regarded diesel systems, which is critical as Daimler continues to pull out of that role in its relationship with Chrysler.
  • Chrysler will be able to make better use of its plants thanks to new product development.
  • Both sides can benefit from “best practices” learnings; for example, Fiat can learn from Chrysler’s world-class engine plant, which topped the Harbour report in terms of productivity.
  • Suppliers will benefit from extended business opportunities.

Cons:



  • It can be challenging for two companies (especially from different cultures) to come together effectively.
  • Chrysler really needs cash, but it is unclear that this deal would deliver any immediate cash flow to the company. Fiat does not have much cash either, and maximising this relationship could be expensive.
  • Chrysler will need to retool its facilities, which will take valuable resources.
  • It will likely take time and effort to convert Fiat technology to meet US standards.
  • Fiat is re-entering the highly competitive United States marketplace carrying a legacy of unreliability from its past efforts in that market.
  • The current economic climate makes this an especially difficult time to overcome hurdles, launch products, rebuild reputations and gain market share.