May 5, 2009

What the Fiat-Chrysler alliance teach us

So, like it or not, American car makers will change their basic philosophy of car building as much as Americans will change their lifestyles—way of thinking about cars included, of course. And the change, though inevitable and necessary, won’t likely be painless. That’s just common sense, or, if you prefer, what the Fiat-Chrysler alliance teaches us. But that’s also one of the paradoxes of our time.

“For too long, Chrysler moved too slowly to adapt to the future, designing and building cars that were less popular, less reliable, and less fuel efficient than foreign competitors,” President Obama said. Specifically, “that’s part of what has brought us to a point where they sought taxpayer assistance.” Luckily for Chrysler, he added, “Fiat can build clean, fuel-efficient cars of the future,” and, what’s more, it can “transfer billions of dollars worth of cutting-edge technology” to Chrysler.

It seems like a dream, or a nightmare, depending on the angle from which you’re looking at it: of course Fiat’s tie-up with Chrysler was applauded as a point of national pride in Italy. But, as Fiat CEO Sergio Marchionne puts it, nationality matters only up to a point in an industry in dire need of cost-cuts and scale: “Fiat is Italian-based, but it’s not Italian” and “it’s no use talking about globalisation and then putting up national flags.” And he’s right, but nonetheless it would be rather hypocrite to deny the historical significance of the event for the whole Italian economy and for a country that only a few decades ago would never have imagined such an outcome.

Yet, there are people here in Italy who are skeptical of the whole thing. One of them is right wing journalist Giuliano Ferrara, founder and director of the opinion newspaper Il Foglio. I fête Marchionne, he said, who, like president Obama, is a great tale-teller, able to see “a bright future” even when there is no light, but I just don’t believe in fairy tales anymore, and can’t see the Americans at the wheel of a Fiat 500, nor can I see them driving Alfa Romeos.

Well, not even a jealous German EU commissioner would be so defeatist. So what? Is Ferrara anti-Italian? Not at all (at least I hope so…), he just can’t say goodbye to his “Idea of America.” But Americans can do better. Thanks God they are a pragmatic people, with a philosophy to move forward, not to dwell on the past. That’s why I am “cautiously” optimistic.

However, as Tom put it in a comment to my previous post, “if I were Fiat, I’d be doing a detailed case study of how Daimler-Benz lost their proverbial shirts after they got involved with Chrysler.” In particular, he said, “I’m not sure that outsiders understand the damage the United Auto Workers has done to U.S. auto makers over the years. And you can be sure that whatever they're saying now, the UAW will always carve out a huge chunk of the pie.” But from that point of view I can reassure Tom: we Europeans, and the Italians in particular, are vaccinated…


  1. My sister visiting at present from California has been admiring the style of small cars here including Alfas.She cannot however ever envisage actually owning one...what to do?

  2. Rob, good point about Europeans being vaccinated when it comes to unions. But maybe this is like being vaccinated against the flu...which flu, which region, etc. Sometimes the vaccination isn't valid for another strain.

    As an American, there's nothing I want more (at least in economic terms) than for U.S. automakers to be viable and competitive. But when their long-term financial obligations to unions are taken into account, it's hard to see how that can happen. I hope Fiat has very deep pockets....