FiAT CHANCE: (Death with Dignity, Part II)

IN PART I OF THIS NEWSLETTER (THE PRACTICAL HISTORY OF CHRYSLER, AND WHY IT HAS REACHED ITS LOGICAL END), I DISCUSSED THE EVOLUTION OF CHRYSLER’S “CULTURE OF CRISIS” THAT HAS HELPED IT SURVIVE NUMEROUS BRUSHES WITH BANKRUPTCY. AS IF ON CUE, FIAT HAS ARRIVED TO UNTIE CHRYSLER FROM THE RAILS. BUT TODAY’S DOMESTIC AUTOMOBILE INDUSTRY NEEDS TO RATIONALIZE ITS EXISTENCE IN ACCORD WITH HARD REALITY, NOT A NOSTALGIC MIXTURE OF RACE GAS AND RED PAINT.

PART II: THE CHRYSLER-FIAT ALLIANCE: WHY DIDN’T YOU THINK OF THAT?

If there’s one thing that everyone eventually is forced to admit, it’s that you get what you pay for. Daimler and Cerberus have tried their hands at spinning Chrysler into gold, until the point where all they wanted was to untie the lead from around their necks. So who’s paying for Fiat’s “free” 35% of Chrysler?

The alliance supposedly augurs a slew of synergistic potentialities that no one noticed before they were conjured: Chrysler gets economical products and satisfies North America’s pining for Fiats; Meanwhile, Fiat gets to buff the top of its line with Chrysler truck platforms, and bestow Chrysler-badged products on a clamoring worldwide market. It all works out great on a napkin, but how about in the strategic context of today’s automobile industry? It seems like a good idea to ask questions such as these:

Does America want Fiats and Alfa Romeos?
Fiat left the U. S. in 1984 to taunts of “Fix It Again, Tony.” Its products were caricatures of European quirkiness and poor build quality. It’s true that in the 25 years since, the whole European automobile industry has transformed itself. But in the same period, the low-production cost Asian makers have taken over what will always be the “economy” car class in this country, while the VW Golf/Rabbit and Mini hold on to the small “premium” slice of Oddfellows who don’t buy more car at their first opportunity — but who will also never buy less. The lovable little Fiat Chink-O-chento might catch a wave during sorority pledge week, but the Mini is already known as The Italian Job to anyone who lives cute.

Today’s Fiat seems to make great cars – for Europe. In every generation, America responds to an economic crisis by embracing small hatchbacks – the basic characteristic of the Fiat lineup – until times get better, when they happily give up 5 mpg for mid-size roominess and a “normal” profile.

The presto answer to that “challenge” is Alfa Romeo. Lots of people (including me) like the idea of Alfa coming back to the U.S., after slinking away under its own cloud “only” 14 years ago. But Gottahavitism as a life-philosophy is over, and so how many premium import buyers are going to make it past the BMW, Mercedes, Audi, Lexus, Acura, Infiniti, and even Cadillac dealerships? Only the surviving remnants of a tiny, Alfisti community can be relied upon to buy in a down market where competition is more intense than ever.

Do Fiat/Alfa/Lancia/Maserati/Ferrari buyers want Chrysler-based trucks and crossovers?
Large SUVs are falling back into the utility category, but despite the economy and a probable upward trend in fuel prices, crossovers have become a permanent part of the landscape, and are de rigeur in any brand’s lineup. Still, the trend has peaked, and the current entries are girding to keep their corner of the shrinking turf. Are Chrysler’s crossover platforms refined enough to put say, a Lancia or a Maserati badge on? To play in Europe, they will need new exterior panels, new interior, and new powertrains – in particular a large, advanced diesel and appropriate transmission. In the desperate, show-me-the-money crash that always follows a Synergy high, will Fiat be forced to hitch a crossover behind Ferrari’s prancing horse? In North America, any Alfa crossover will have to face off directly against the BMW X5 and Audi Q7, as well as all the others, and will have a hard time overcoming customers’ impression that they might as well just buy a Jeep.

Are the home market dealers going to be able to sell their transatlantic ally’s products?
Chrysler has been trying for decades to sell cars and trucks in countries around the world, and except for a thirst for Jeep Grand Cherokees in the time before European manufacturers figured out how to make their own utilities, it has never really worked. Chrysler has never had the resources to make the many subtle but important changes that make a car broadly acceptable to a different culture.

There are a myriad of qualities and features in any car that seem brilliant in one market, but inexplicably dumb in another. In the 25 years that Fiat has been absent from North America, they have missed out on the continuous refinement of peculiar American tastes and the countless subtle accommodations that their future competitors have made to suit American’s continuously-changing idea of what kind of vehicle they want.

THERE ARE TOO MANY BRANDS AND NAMEPLATES IN THIS MARKET, NOT TOO FEW. THIS DEAL CORRECTLY VALUES TWO THINGS: HOW MUCH THE CHRYSLER CORPORATION (AS DISTINCT FROM JEEP AND MINIVAN) IS WORTH, AND WHAT FIAT AND ALFA WILL ADD TO THE NORTH AMERICAN MARKET. THE TAXPAYERS SHOULDN’T HAVE TO PAY ANY MORE THAN THAT.

(c)2009 Joshua Davidson