FIAT voluntas tua…

Exiting the bankruptcy, reopening factories, getting rid of 789 U.S. Dealerships, being welcomed into the FIAT family. What a great day for Chrysler. Or is it?

There have been excitement and high expectations about what would FIAT’s technologies and their implementations do with Chrysler’s model line-up and general well-being. The focus is on small cars, diesel and petrol engines using turbocharging or supercharging technologies, the latest mantra for power-hungry enthusiasts.

FIAT (and Lancia) left American market in 1984, Alfa Romeo made an exit 1995. The North American notion of FIAT remains associated with Italy’s sports car tradition and design. Then there’s the small car heritage triggered by the Cinquencento, Fiat 500, now represented by the it’s new reincarnation, the new 500 which, while incredibly cute, is also expensive and impractical, very much as the BMW’s Mini, clearly aiming at image-sensitive urbanites. And then there’s Ferrari…

However, having an image and the technology doesn’t necessarily mean that their realization and implementation will work. In case of FIAT, it doesn’t.

Despite recent improvements, FIAT struggles with quality and reliability, as much as Chrysler does. The latest JD Power and Associates 2009 UK Vehicle Ownership Satisfaction Study ranked FIAT 29^th out of 29 brands (101 models were evaluated).

Chrysler ended up 28^th. JD Power’s customer satisfaction studies are deeply flawed as they rely solely on customer’s subjective perception and rather unmeasurable evaluation attitudes. For example, a car owner who expected their car to break down 10 times during the first two years of ownership will be a satisfied one since if the car only broke 7 times. This is further underlined by the fact that Vehicle Appeal constitutes 37% of the overall score while Quality and Reliability make up only 24%. JD Power’s survey is based on mere 15,700 online interviews averaging about 155 responses per a model.

This is in sharp contrast with the traditional annual report conducted by the German industrial audit body TÜV and car magazine Auto Bild. The 2009 report was based on 7.7 million standardized tests. Only models with at least 10,000 tests were included in the result. Average mileage is also taken into the account.

What does it have to with FIAT and Chrysler? Despite radically different and significantly more relevant and scientific method, the best FIAT group’s car in the 2-3 years-old category is the Panda on the 90^th place. The sole Chrysler included in the report is the PT Cruiser on 115^th place.

Hardly a match made in heaven. In the takeover, FIAT may have an upper hand thanks to better technology and more money. But in the automotive world, success always comes down to the product lineup, it’s quality and reliability which, at the moment, neither FIAT nor Chrysler can offer. Adding rather peculiar US customer into the equation makes the whole FIAT-Chrysler marriage look like the world’s greatest automotive adventure. As they say, fiat voluntas tua…. thy will be done….

FIAT voluntas tua

Rover, now a defunct British car manufacturer, was known as an English patient. Chrysler is on its way to be come an American one. The smallest of the Detroit 3 was bailed out in 1979, tried an alliance with Mitsubishi, bought several small European manufacturers such as Rootes and Simca…. and sold them away. In 1998, Chrysler merged with Daimler, to be more precise, it was taken over by the German manufacturer. The marriage felt apart and Daimler sold 80% to Cerberus, a private equity group. The troubled manufacturer then entered into the partnership with Nissan in an attempt to gain access to small and fuel efficient vehicles. Sale of its Jeep division and even merger with General Motors were also on cards.

Finally, Fiat got the scoop. The Italian manufacturer will get a 35% stake in Chrysler and there’s an option for another 20. The deal, however, seems to be rather unbalanced in practical terms. Yes, Fiat will have a share in one of the Detroit 3, essentially for free, but given the fact that Chrysler has been in an automotive hospice for some time now, it doesn’t seem like much. Fiat’s Alfa Romeo has been contemplating return to the US but Alfa is a niche brand. Return of Fiat itself would make little sense given the huge slowdown of the US car market. Even if Fiat’s small cars could have appeal, Asian manufacturers and even Ford and GM are much better positioned as both can rely on its European operations. VW is bringing Polo stateside.

It’s Chrysler that’s apparently going to benefit – it will gain access to Fiat engines, it’s dealer networks and markets, although the question is is, who would be interested in Chrysler/Dodge/Jeep cars. Most crucially, Chrysler gains backing in its bid for the government bailout as it asked for $7 billion and got only $4, and Fiat’s support and expertise in restructuralization. There’s also a usual business of platform sharing too.

How will Fiat and Chrysler partnership work? For start, there are quality and reliability issues. In the German Auto Bildt TUV’s 2009 reliability report based on inspection of more than seven million cars (at least 10,000 of each model), in the 2-3 year-old category, the best Fiat car (Panda) ended up on 90th place, Chrysler PT Cruiser on 115th. And it’s not that the survey is biased to favour German manufacturers, the Top 11 features 7 Japanese cars, two are directly derived from a Japanese car and the other two are Porsches. At the moment, the deal makes more sense for Chrysler than Fiat. In the long term, it doesn’t make sense at all. Fiat voluntas tua. Thy will be done…