Fiat remakes Chrysler: Is it the end of the 'Big 3?' (+video)
Chrysler is now officially Italian, operating under parent company Fiat Chrysler Automobiles NV. The globalization of automobile manufacturing and sales means Detroit's 'Big 3' may be irrelevant.
Chrysler is officially an Italian company. On Tuesday, the company announced it will operate under the parent company name Fiat Chrysler Automobiles NV, which is Italian-owned but will be headquartered in the Netherlands.
The restructuring, which will be made official by the end of this year, puts into question whether or not Chrysler can be considered a domestic automaker as one of the “Big 3,” a designation that includes General Motors and Ford, or if that term is even relevant in the age of globalization where borders are less important. Certainly the look of Chrysler’s brand will change: The company also unveiled a new logo.
The “Big 3” term once suggested all three companies represented the biggest automakers in the world, which is no longer the case.In that way, it is outdated, says Tom Libby, an analyst with IHS Automotive, an industry analysis firm based in Southfield, Mich.
Mr. Libby also said that “the whole concept of domestics has lost some of its clout” due to globalization, where the supply chain involves manufacturing on different continents, and exporting vehicles has become as important, if not more, than selling to US buyers.
“The term ‘domestics’ is irrelevant,” he says.
Fiat purchased a minority stake in Chrysler following the 2009 bankruptcy and subsequent federal-mandated restructuring, but has slowly gained 100 percent control. On Jan. 1, the company purchased the remaining shares from a United Auto Workers retiree health-care trust in a deal totaling $5.4 billion. Before that, Fiat owned nearly 59 percent of Chrysler shares.
On Tuesday, Sergio Marchionne, CEO of Fiat and Chairman/CEO of Chrysler Group, released a statement saying that Fiat had long planned to unite both companies into one entity that will make it more competitive on the global market.
“Five years ago, we began to cultivate a vision that went beyond industrial cooperation to include full cultural integration at all levels. We have worked tenaciously and single-mindedly to transform differences into strengths and break down barriers of nationalistic or cultural resistance. Today, we can say that we have succeeded,” he said.
Mr. Marchionne downplayed any suggestion that the location of the new company’s headquarters in the Netherlands will impact operations in the US or Italy, the respective headquarters for both Chrysler and Fiat. The Netherlands is considered optimum, analysts say, because of financial and legal ramifications, but its fiscal home will be in Britain for tax purposes. Stock will be traded on both the Milan and New York exchanges.
“Talking about a headquarters is almost an anachronistic term. We live in a world where power travels,” Marchionne told the Detroit Free Press.
Having full control of Chrysler is considered a boon for Fiat, which has struggled in recent years as recession has gripped most of Europe. At the same time, Chrysler has rebounded from its bankruptcy days, thanks to increased sales of its best-selling Jeep and Ram truck brands. Last year, worldwide unit sales reached 2.4 million, a 9 percent gain.
Combining operations means a commitment to the new, emerging model of globalization in auto manufacturing: sharing.
“They are playing catchup,” says Michelle Krebs, an independent auto analyst based in the Detroit area. “They’ll be sharing the architecture of vehicles to get the economies of scale that GM, Volkswagen, and Ford do already.”
The company said it will announce a business plan for the new company in May. Analysts say that they expect Marchionne will talk about how the combined efforts of Fiat and Chrysler will compete with its bigger global rivals, and about efforts to revamp the Alfa Romeo brand, which he said in the past has global potential.
IHS Automotive’s Libby says news that Chrysler is wholly Italian-owned is not likely to negatively affect sales in the US, unlike other foreign-owned automakers like Toyota or Honda that suffered pushback in the 1980s when they were just entering the market.
“Performance of the company will be largely driven on what it was based on before – their products,” he says. “If they build products that the customers want, that will drive everything else, that will be the deciding factor that will create the overall impression of the company.”