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A part from auto parts, they were providing R&D support to Chrysler not very long ago. Now all that French auto parts supplier Faurecia is providing Chrysler is legal headaches to add to its financial ones. Faurecia claims that Chrysler had promised to pay R&D costs in addition to the parts costs for the Chrysler PT Cruiser and Sebring, Dodge Avenger and Nitro and Jeep Liberty; costs amounting to some $110 million. Fancy those misleading names by the way. Chrysler is neither ‘cruis’ing in the market, nor is it in a position to ‘avenge’ the competition, ‘dodge’ trouble or, for that matter, at ‘liberty’ to dictate terms with its suppliers!
It isn’t new for Chrysler to fall in trouble with alliances or mergers. Interestingly, it seems to be getting into another big one - with Italy-based Fiat Auto. Apparently, Chrysler is coxing Fiat to supply much needed small car technology; in return the Italian can have access to a 35% stake (through an unbinding agreement of course) in whatever it can salvage. All the best with that!
More seriously, though, Chrysler needs all the support it can get, even if it means going back the dreaded alliance route, else it may not even be able to survive an alliance with itself now. In this downturn hit economy, the big three are under state obligation to turn ‘consumer pocket friendly’ – a thought that they had banished from their cerebral cortex for almost fifty years. If not, the Detroit majors might not get the federal bailout package, that’s apparently helping their CEOs sleep well at night. However, out of the earmarked $12 billion, Chrysler is eligible for less than $4 billion with the rest going to bigger brother GM. In order to meet the incumbency, Chrysler now desperately wants to churn out small cars that will appeal to ‘poorer’ customers, who may have had enough of ‘big on engine-big on size-low on quality’ American cars. Fuel guzzling is not in fashion anymore and Fiat is the best fit at this time. The Turin-based manufacturer supposedly has the world’s foremost repertoire of small car making techniques and offers cutting edge designs. Fiat also holds the patent for the class leading CRDi diesel technology that’s taking the world by storm. Through a significant stake in Chrysler, Fiat on its part can have access to the larger American market and can market its lesser known brands like Lancia and Alfa Romeo to the affluent Americans. Also, there now appears to be a possibility where American customers will start looking beyond the fuel guzzling v8s and seriously consider the next generation diesels from Fiat’s stable. Convincingly, there now appears to be a great deal of synergies between the two partners and finally some rationale in the relationship will prevail.
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Source : IIPM Editorial, 2009
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