Fiat's Big Power Grab

Fiat is in one of the biggest power grabs in history in a huge gamble to become a truly global automotive giant. You can't blame them for trying. The time is ripe for a shrewd player to grab huge chunks of the market - especially if it is free, or almost free. Let me explain.

Fiat wants to get a chunk of Chrysler with no money down. Given the synergies here, it is not a bad thing for Fiat to want to do, and for Chrysler it appears that it will save billions in the development of small, trendy vehicles, which Fiat already produces. Fiat is eyeing the Jeep brand which would bring showroom traffic to their dealers worldwide. Rugged SUV's have never been Fiat's forte: at best it has produced some beefed-up versions of its regular lineup, and they are, well, beefed up versions of their regular lineup. Fiat may make a killing selling off the Chrysler and Dodge brands in the future - especially if they come free.

The surprise, announced in Saturday's Wall Street Journal, is that Fiat is now eyeing Opel, GM's German brand. This could become the Buick of Fiat: a soft line of semi-luxurious (and practical) vehicles placed somewhere between the quirky and cute Fiat brand and the raging sports cars of Alfa Romeo, Lancia and Ferrari. Fiat could probably drum up some money from Germany and the EU to make this happen, especially as the alternative is rather more unpleasant.

So a free Chrysler, a subsidized Opel and a company that grows exponentially for very little money down. the only risk for Fiat is hubris: in order to make this work, Fiat must admit that its management may not be up to the task, and may have to call in reinforcements from the long list of consultancies and unemployed executives that are already hovering at the side door.

If You Have a Lemon, Is It You or the Car?

Years ago n Brazil, I had a client who had an Alfa Romeo 164. I questioned him as to whether the car was reliable. He said it was extremely reliable because he said he read the owners manual. By way of explanation, he told me that the owners manual states that you should never drive off until the temperature needle moved off "cold". Few drivers have the patience to do this, so the vehicle broke down, and owners blamed the car, when they should blame themselves.

I have no idea if he was being truthful, but I had a similar experience this week. I own a Land Rover, and the passenger side windshield wiper stopped working in the middle of a rain storm. Cursing the lack of reliability of European vehicles, I took the car into the dealership. the wiper was fixed with the flick of a cover and the turn of a bolt. It seems that this happens in winter sometimes because the wiper sticks with ice accumulation. Rather than break the motor, the wiper is designed to unscrew itself when it encounters too much resistance. It will often loosen over winter but the fix is simple - and free.

You see, we, as a nation, are notorious for not reading the owners manual of our vehicles. When a German buys a car, they read the manual cover to cover. The British are the same. We, on the other hand, just expect everything to be simple and straightforward and project the blame on the car if something unexpected happens. The Europeans make some pretty ingenious cars, often using a design which must be used around the world from Africa to China, Latin America to Alaska. That is a lot of design criteria and it often means that avoiding costly and complicated repairs in the Arctic Circle (as in the case of my Land Rover) is a priority, rather than conforming to rigid American norms and expectations. Sometimes reading the owners manual is pays off.

Chrysler and Fiat - An Opera

Ironically, it may be that the car maker that makes arguably the poorest quality vehicles made in the USA, which is joining Fiat, whose quality has always been suspect, may in fact be the basket case that gets itself out of hot water.

The current owners of Chrysler are resigned to getting nothing at all. They bet big, and lost, just like Daimler did with Chrysler. The difference here is that Fiat is betting nothing, and is understandably reluctant to put any cash in the deal. Given the last two affairs Chrysler has had, who can blame them? Talk from Washington demanding that Fiat put in cash is simply huffing and puffing at a brick house. If Fiat backs out, Chrysler is history and the politicos know that. They must ante up or quit playing, with predictable results.

The good thing is that Fiat may begin importing vehicles to the US soon, and make them here later. This would put foot traffic in Chrysler show rooms, where fresh design is about as prevalent as beef at a vegetarian convention. Fiat is no design wallflower, and their lineup could add some real flavor to Chrysler, and hopefully revive the fortunes of the Chrysler Design Department, which is being held hostage by the bean counters.

Chrysler has a life line, as does GM if it goes into bankruptcy. This should be interesting.