What Fiat Could Do for Chrysler (and Vice Versa)

What Fiat Could Do for Chrysler (and Vice Versa)

The reorganized Chrysler Group LLC postponed the annual press preview of
new cars at its proving ground near Chelsea, Mich. — all part of the production
stoppage while the company waited out bankruptcy proceedings. But even
during that downtime, Chrysler’s American engineers and designers were busily
exchanging notes with their counterparts at Fiat, just as they have been
doing for the past six months.

What will come of all this cross-fertilization With the Supreme Court
blessing of the deal that released Chrysler from bankruptcy, the
discussions and note exchanges are quickly shifting into high-powered design
collaboration that will soon reshape the beleaguered automaker’s future
product plans, including a big, new emphasis on smaller vehicles with
spiffy little engines.

Think Chrysler Lite. “Fiat already has the lowest C02-emitting engines in
Europe,” says a Chrysler official privy to the product discussions, who
asked not to be identified. “Their strength is our opportunity,” he gushes.
Chrysler is eager to get new vehicles on the road adapting subcompact and
compact car architecture, he adds. “We might not sell a minicar in the U.S.,
but we could sell it somewhere else.” But there’s a big potential U.S.
play too: “We also have to worry about the new [fuel-economy] standards,”
he says.

Fiat CEO Sergio Marchionne wants to use the Italian carmaker’s technology to
sharpen the focus of the Chrysler brands, insiders say. For example,
Fiat’s technology could allow Chrysler to build a reputation for high
performance — not something it’s known for today. The new technology could
also augment Chrysler’s traditional strength in four-wheel-drive, sport
utility and truck segments, which are under pressure from rising fuel

Perhaps most important, Fiat gives Chrysler access to up-to-date small
engines, says Jim Hall of 2953 Analytics in Birmingham, Mich., which keeps
tabs on technical developments in the automotive business. The technology
package from Fiat might include an experimental two-cylinder engine of less
1-liter displacement, which has more than enough horsepower to drive a
small car, says Hall. The engine is about half the size of the smallest
engines now sold in the U.S.

In return, Fiat gets access to Chrysler’s new V6, which could open up new
upper-tier segments in Europe. Fiat doesn’t have a competitive V6 now.

Suppliers also hope that Fiat will transfer some of its well-honed
diesel technology to Chrysler. Chrysler buys diesel engines for vehicles it
sells in Europe, but it withdrew a diesel-powered Jeep Liberty from the U.S.
market last year because the European-made engine didn’t seem to
meet the expectations of American consumers. Also, Chrysler needs a new
diesel engine for export markets in Latin America and the Middle East.

The hope is that a Chrysler-Fiat alliance will make small, fuel-efficient
diesel more acceptable to American consumers, according to a major
European-based supplier of engine technology that works with Fiat. Fiat’s
new diesel, a generation ahead, is quieter and cleaner and burns
low-sulfur fuel that would enable it to meet stringent new emissions
regulations, he says.

Fiat also offers Chrysler very competent small cars that could put
Chrysler fairly quickly in segments like the fast-growing subcompact
market, where sales could grow by a third in the next four years, says Hall.
Chrysler’s smallest car is the compact Dodge Caliber, which has enjoyed limited
success. In addition, the Fiat platforms are flexible enough to accommodate
different body styles, from two doors to four doors to hatchbacks and small
wagons, he says.

Finally, the alliance could bolster Chrysler’s presence in the highly
competitive midsize market. Fiat has an excellent midsize
chassis/platform, which serves as the basis for the Alfa Romeo 159.
“Chrysler could certainly use that,” says Hall, since the struggling
American automaker doesn’t have the money to develop its own.
Hall adds that the Chrysler-Fiat alliance is very likely to expedite
Fiat’s own plans to reintroduce the Alfa Romeo brand into the U.S. market.
Fiat has been eager to bring Alfa Romeo, which now has nine
models selling in more than three dozen countries, to the U.S. but has been
because it lacked a distribution network. “Now it has a distribution
network,” Hall notes. “It’s called Chrysler.”

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