Evaluating the Chrysler-Fiat Auto Alliance in 2012

Case 8: Evaluating the Chrysler-Fiat Auto Alliance in 2012  

Name: Link(Liu)，Euro(Wang), Erica(Wang)

Course: MBA662 - Managing A Global Organization

Date: March 23th 2019

Summary

The article introduced that due to the global financial crisis, Chrysler is in a difficult situation. In order to survive and develop in the future and enter new markets, Chrysler and DaimlerChrysler-Benz have a strategic alliance in 1998, but the good times are not long. The two companies are merging. After the integration and corporate culture encountered problems, in 2007, when Daimler sold 80% of the company's shares to Cerberus, this release and the Chrysler alliance, resulting in DaimlerChrysler-Benz eventually lost $29 billion dollars, this alliance is a major financial setback and mistake for DaimlerChrysler-Benz. In the face of the financial crisis, the global economic recession, high oil prices and the US economic recession, Chrysler, financial problems and huge losses. (Deresky, 2008).In 2009, the bankruptcy process was finally initiated. Although Fiat had problems with the development and survival of technology and quality standards before, it was completely remodeled by repairing its brand portfolio and quality. Fiat is determined to position itself as a leader in the industry to create a global automotive manufacturer, so a strategic alliance with Fiat and Chrysler has provided Chrysler with a lifeline of continued development. In addition, the two sides reached a consensus on the restructuring of the structure, and simplified global operations, reduced costs, and joint product development. As of 2012, the alliance achieved steady growth, expanded management resources and financial resources, continued to expand in North America and other regions, expanded the network of suppliers and dealers, and both of them improved their quality ratings and improved their competitive position. After the alliance, the two sides really have many problems to face, such as structural integration, operational simplification, brand integration, changing market environment of globalization, values of Italy and the United States, and they all deal with it very well. changes in the global market environment, the values of Italy and the United States, the company is well handled, worthy of research and learning, using the advantages of both sides, synergy Complement each other, create more value and face the challenges of the future together. (Deresky, 2008)

1.Analyze the Chrysler-Fiat auto alliance and its situation in 2012.

The merger of Chrysler and Fiat has added human power, material and capital to both companies, thus improving their vehicle production technology. Before the merger, the two automotive companies were different in their areas of expertise. Fiat focused focuses on technology platforms for small cars, environmental protection and two energy-saving engine technologies. Chrysler has technological advantages in large cars, such as SUV and MPV. The two automobile companies have expanded in technology. In the market area, the merger of the two companies has expanded the market for each other. Fiat promotes its products through Chrysler's influence in North America and South America. Chrysler can also continue to expand the European market through Fiat's position in Europe. (Liu, 2011)

The alliance of two automobile companies from different countries is also an expression of friendship between the two countries. The alliance of enterprises is built on the condition of national stability with economic and policy harmony. Chrysler was on the verge of bankruptcy before 2009. Through an alliance of Fiat companies from Italy and additional loans from the U.S. government, Chrysler was able to turn the company into better. Of course, when Fiat bought Chrysler shares, it also received high-volume loans from banks. Thus, at that time, the alliance between the two companies was an opportune time and place. From 2009 to 2012, Fiat's controlling stake in Chrysler ranged from 20% to 52%. In the short run, Chrysler gained more benefits in the early stages of cooperation than Fiat, which saved it from bankruptcy and retained part of its complete system. In 2011, the recession of the European market was caused by the depression of the European economy, while North America was unaffected at the same time. In the long run, Fiat seems get more benefit. Chrysler, as an old American automobile company, has obvious strength in big cars, and Fiat bought the company at a lower price. In fact, Fiat and Chrysler's alliance merger case lasted for five years (2009-2014). During this period, sales were unstable. I think there are several factors: 1. Brand portfolio: because Fiat has been selling small cars, if it is transformed, whether it can retain its customers. Compared with other rivals, the merged technology and brand of the two companies will take some time for consumers to recognize them. 2. Management system: Two countries will surely have two different corporate cultures. How to integrate the management system and penetrate the corporate culture and its value chain operation will directly affect the operational efficiency of a company. All in all, so far we think Fiat has saved Chrysler, and Chrysler has helped Fiat become one of the world's largest auto companies (Liu, 2011).

2．Analysis and evaluate Chrysler and Fiat’s strengths and weaknesses before and after the alliance.

Chrysler’s weakness before the alliance 

Before the alliance, Chrysler had a brand in North America but lacked a dealer network in the European market (Deresky, 2008).

Later, as a result of the economic crisis, a large number of Japanese cars poured into the North American market. In addition, the evolutionary growth and survival of Chrysler had encountered problems in the areas of technology and quality standards (Anwar, 2012). At the same time, high health insurance, benefits and pensions insurance for workers also increased its financial burden. Chrysler was on the verge of bankruptcy.

Last but not least, globalization is a trend now, and it is a major force impacting countries and their industries (Anwar, 2007). It means that culture plays a role in determining the success or failure of an international partnership (Beugelsdijk, Kostova, & Roth, 2017). Hofstede’ country-level culture should be considered in the alliance, and the failure of Chrysler was not only because of its technical flaws and the impact from external competitors, but also because of its own difficult cultural compatibility. The Daimler-Benz merger with Chrysler in 1998 which ended in failure is a famous example in the international mergers. Daimler was a very hierarchical company with respect for authority and a clear chain of command while Chrysler was keener on a team-oriented and egalitarian approach. Cultural factors are probably the most important on a global level, especially not within alliance and acquisitions (Beugelsdijk, Kostova, &Roth, 2017).