FiatChrysler

By:NateBlumenthal
MattMcCluskey
MichelleMoran
Abstract

Introduction
Intoday'srealmofmodernbusiness,thereareamultitudeofinternationalbusinessstrategies
thatcanbeutilized.Anythingfromasimpleacquisitiontohowandwhentoentercertainmarketscan
dictatefirmsuccess.FiatChryslergroup,withitsrecentfinancialtroublesin2009,hasbeenkeento
comebackinameaningfulandprofitableway.SinceitsbailoutdealwithFiat,Chryslerhasstarted
postinglargeprofits,tohelpcoveroperatinglossesofFiat.Thecompanyislookingtowardsnew
productsinnewmarketsaswellasarelyingonChryslersbackboneinAmericatolaunchbackto
success.Byanalyzingthecompanyintermsofcertaininternationalbusinessconcepts,onecanbetter
understandthefirmsbehaviorandoutcomes.
PoliticalandLegalIssues
OneofthebiggestobstaclesFiatChryslerfaceisnavigatingthepoliticalandlegalframeworkit
isthesechallengethathelptodictatethebehaviorofthecompany.Fiatsbiggestlegalandpolitical
issuesarelaborunionsthatblockplantclosingsandthepoliticianswhosupportthem.Sergio
Marchionne,CEO,wastesnoopportunitytochallengethem,andhedidsoagainattheopeningofa
new$1billionplantinItaly.HehasthreatenedtomoveproductionofnewAlfaRomeomodelsoutof
Italyunlesshegetsclarityonunionworkrules.AsstatedinanarticlebyBloomberg,Therelaunchof
AlfaRomeowillcontinueforsure.Italyshoulddecideiftheywantittohappeninthisenvironmentor
notasFiatandChryslerhaveseveralalternatives(5,6).
Inarecentruling,Italy'sConstitutionalCourtsaidaunionhadtherighttobepresentinthe
workplaceevenifithadn'tsignedthelaborcontract.FiomCgil,anoutspokenunion,hastakenfull
advantageoftherulingbyfilingnumerouslawsuitsagainsttheautomaker.TheunionaccusesFiatof
violatingworkers'rightsunderthelaborcontractimplementedatitsplantsinItaly.Fiathaspreviously
deniedthesecharges.FiomCgilhasbeenbannedbyFiatfrombeingintheirplantssincetheyrefusedto
signcontracts.FiomdidnotagreewithFiat'snewlaborcontract,whichincludeslongershiftsand
shorterbreaks.Thosecontractsincludeanincreaseinnightworkingandovertime.Theyalsomakeit
easiertodismissworkers.Theseunionsareunwillingtoevenminorworkplacechanges,suchasa
recentplantocutworkers'coffeebreaksbythreeminutes.Adjustmentssuchasshiftingworkerson
productionlinesforpoorlysellingcarstonewoperationscantakeawhiletofindacompromise.The
1970laborlawsallowedtheideaofthe"postofisso,"orlifetimejob.Thisisaninstitutionthathasbeen
blamedrecentlyfordiscouragingbusinessinvestmentandhurtingproductivitygrowth.Whenyouare
sureyouarenotgoingtoloseyourjob,itmakesiteasytosettleandnotcontinuebeingmotivated.
Governmentsandpowerfullaborunionshaveworkedtostopplantclosingstosavejobs,delay
automotivereform,andmakeitharderforFiattoreturntoprofit.Thiswouldbetheperfecttimefor
formalinstitutionstoreduceuncertainty.WhilekeepingjobsisdefinitelyintheinterestoftheItalian
workers,thiswayhasunfortunatelycontributedtocontinuouslosses.Sowhethertheydecidetoclose
plantsornot,someoneisgoingtobeunhappy.IfFiatstandsachancetosucceedtheymustdecodeand
adapttotherulesofthegame(5,6,7).
BeforegoingaheadwithanyotherinitiativeinItaly,weneedtobeabletocountonaclearand
reliableregulatoryframework.Everyperiodofinstability,inmanagingacountryoracompany,creates
doubtsandweaknessamongconsumers,saysSergioMarchionneinanarticlewithTheWallStreet
Journal.FiomCgil'scampaignagainstFiathasoftenprovokedMr.Marchionnetothreatentostop
investinginItaly.IftheykeeppushingitisgoingtocostItalytremendously.Theywantsomeonelike
Marchionneontheirsideespeciallywithhisexpertiseinturningthingsfromnothingtogreatness.
HopefullythelawwillclarifythingsforFiatastheydontwanttocloseplantsanddonotwanttoleave
Italy.Fromanethicalstanceitmaynotbeinthecompanysbestinterest.Whileitmaybeeasiertojust
relocate,itmaycostthecompanytheirreputationwhichwillbetarnishediftheyleavetheiroriginal
homeland(5,8).
MarketEntry&ModeofChoice
InthefewyearssinceFiatsacquisitionofChryslerin2009,Fiatholdsastrongambitionto
enteritsItaliancarsintoforeignmarkets,suchastheUSA.AtfirstithasbeentheentranceoftheFiat
500modelandthelesserknownMaseratibrand,butnowtheTurinbasedcompanyisplanningforan
entranceofAlfaRomeotoUSmarketsin2014.Atthesametime,Fiatiseyeingarevitalizationofsorts
withtheirMaseraticompanybringingitfromanichebrandtomainstreamluxuryandperformance.
LikewiseintheUS,Chryslerhasbeenequallyasbusy.Withverysuccessfulproductlinessuchasthe
GrandCherokeeoftheJeepbrandandtheireffortstopromoteanddeveloptheirSRTbrand,anewer
brandcreatedtosegmenttheirperformancecarsfromluxuryandeconomyvehicles.Carssuchasthe
DodgeViperorCharger,andeventhesportandracingversionoftheGrandCherokeehaveallbeen
strippedoftheirformerbadgingandarenowallapartoftheSRTperformancefamily.
Intermsofluxuryandsportvehicles,theUSmarketisteemingwithlife.YouhaveUS,
European,andJapanesecompaniesallvyingforthemarketsharesohowjustwillFiatbeableto
introduceAlfaRomeoorwinovertheheartsofdissuadedMaseratifans?Theanswercanbequite
simple:amarketseekingstrategicgoal.Firmsthatutilizethismethodofwheretoenterforeignmarkets
isthatofchoosingcountrieswithstrongdemandfortheirproducts.IntheUSyounotonlyhavehighper
capitaincome,butalsoagrowingdemandforluxuryandperformancecars.WhileFiathasbeenquite
successfulatintroducingtheFiat500tomiddleclassconsumerswhowantacompactcar,Fiatis
hopingthatAlfaRomeocanfillinthegaps,sotospeak,ofpeoplewhowantasedan,SUV,or
performancecaratareasonableprice.Ontheotherhand,FiatistryingtoboostMaseratifromaniche
brandtoamorebroadbasedluxurynameplatebyloweringthepricepointtositlevelwith
performancecarssuchasBMWM3sandMercedesC63AMGmodelsthatrununderandaround
$80,000.Before,thecompanyproducedperformancecars,butatapriceinwhichmostUSconsumers
couldnotafford,orwouldchooseanothercompetitor.Bybringingtheirpricepointdownandchanging
demographicsslightly,Maseratiishopingtoattractmorecustomersthaneverbefore(1).
Withoutasenseofwhentoenteraforeignmarket,afirmsstrategyisofnoimportance.While
Fiathasfocusedonmarketseekingcountriesforitsproducts,ithasalsochosenalatemovertimingon
entrance.Inmostcasesforfirmsusingthisstrategy,thefirmgainscertainadvantagesforenteringlate
intoamarket.Inthiscase,becauseFiathasalreadyenteredtheUSmarketwithMaseratiandowns
Chrysleraswell,thefirmhashadtimeandresourcestoanalyzetheUScarmarket.Ononehandthe
marketuncertaintiesareveryminimalwithbothItalianandUScarsonthemarkettodetermine
consumerbehaviorandcompanyreputationandreception.SuchcanbeseenbyMaseratiproducingan
SUVindetroitbasedontheJeepGrandCherokeeorAlfaRomeoutilizingtheDodgeDartasplatform
fortheirnewcartheGiulia.Ontheotherhand,Fiathasenjoyedlatemoverbenefitsintermsofadapting
tomarketchanges.Thiscanbeseeninmultiplefacetsofthecompany.Forone,theintroductionofthe
Fiat500LandCabrio,orconvertible,hasutilizedthechangingbehaviorofconsumerswhowanta
compactcarthatcandomore.AnotherexampleisagainseeninMaseratisplansfortheirnewSUV
calledtheLevanteinwhichthepositivereceptionoftheGrandCherokeeintheUShasleadMaseratito
useitasaplatformfortheirupcomingSUV.AsstatedinTheDetroitNewsTheJeepbrandhas
shownasteadyrecoveryfromthedepthsoftheGreatRecession,andweexpectthenewJeep
CherokeetobeastrongentrantintheveryhotcompactSUV/CUVclass...Finally,afterasomewhat
stumblingbeginning,theFiatbrandisgettingsometractionhereintheUnitedStates,and[they]predict
the500Lwillimprovethebrandsprospectsmarkedly.Soasyoucansee,byFiatChryslerusing
certainbrandstotestthewatersofthecarmarket,theyareabletomakebetterentrancesintothe
marketwithAlfaRomeoandnewMaseratimodels.Intheend,therearealwaysbenefitsintermsof
timing,andFiathasbeenabletousetheirresourcesacrossdifferentbrandstomakethemostbenefit
fromit(1,3).
LastbutnotleastintermsofFiatandtheiroverallmarketselectionandentrymethods,themost
importantpartintheschemewouldbetheactualmodeofentry.Inthiscase,FiatChryslerhasoperated
uponanequitymodeofwhollyownedsubsidiaries,orWOS,andinparticularwithanacquisitiontype
ofequity.Asstatedpreviously,Fiatgained58.5%Chryslerownershipin2009aspartofabankruptcy
deal,andhassincebeengaining3.3%ownershipabouteverysixmonthsduetoacontractual
agreementwithitsacquisition.Thebenefitsofusinganequitysubsidiaryacquisitioninmostcasesisthat
ofoperationalcontrol,protectionofknowhow,abilitytocoordinateglobally,andfastentryspeeds.In
FiatChryslerscase,thecompanyhasbeenabletobothcontroloperationsandcoordinategloballyin
termsofbuildingnewfactoriesinItaly,usingUScarsasbuildingplatformsfornewerprojects,and
planningnewmarketentrantssuchasAlfaRomeoandrevitalizationoftheMaseratibrandintheUS.In
addition,aftertheacquisitionofChryslerintotheFiatfamily,therehasbeenrelativelyfastentryspeeds
forcertainproductssuchastheFiat500andChrysler300sedan,tonewerentrantssuchasthenewer
andpopularGrandCherokeebyJeepandtheViperintroductionintotheSRTperformancelineof
Chrysler.Inconclusion,thestrategyandfirmbehaviorofFiatChryslerprovidesagreatexampleof
foreignmarketsandwaystogoaboutenteringthem(4).
ConclusionandRecommendations
Afteranalyzingthecompanyanditssubsequentbehavior,whatdoesitmeanfortheoutsetof
thecompanyanditsfuture?Inthecaseofthethepoliticalandlegalframeworksurrounding
FiatChrysler,manyoftheformalinstitutionsinItalyareinhibitingtheirproductionandprofitabilitysoit
isrecommendedthattheynotonlycontinuethepursuitoftherestofChrysler,butalsotolooktomove
productionoutofItaly.Onthehand,intermsofmarketentryandnewproductlines,FiatChrysler
shouldcontinueasplannedwiththeirUSintroductionofAlfaRomeoandnewMaseratimodels
becauseofthegrowingdemandinAmerica.Likewise,thefirmshouldalsocontinuetoutilizeits
multinationalresourcessuchasusingexistingsuccessfulmodelsofUSvehiclesasaplatformfornew
Italiancars.ByanalyzingthebehaviorsofFiatChrysleronecanunderstandtheconceptsof
internationalbusiness.

WorksCited
(1)http://content.usatoday.com/communities/driveon/post/2011/08/fiatplansjeepbasedmaseratisuvt
obebuiltindetroit/1#.UfhnCI3VCSp
(2)http://jalopnik.com/5945710/chryslerzeroesinon2015srtbarracudamaseratigoestoplessand
fiateyesexportingmorefromitaly
(3)http://www.detroitnews.com/article/20130730/AUTO0101/307300029/1361/Chryslerearns$507
MnetprofitforQ2
(4)http://www.bloomberg.com/news/20130708/fiatexercisesoptiontobuyadditional33ofchrysl
ershares.html
(5)http://online.wsj.com/article/BTCO20130709702320.html
(6)http://www.bloomberg.com/news/20130403/fiatturnstogermanyasitalysalesseenworstsince
66.html
(7)http://online.wsj.com/article/SB10000872396390444549204578022190603216224.html
(8)http://money.cnn.com/2013/07/12/autos/marchionnechryslerfiat.fortune/index.html

FiatChryslerPaper(Outline)

Abstract
Intro
Overviewofthecompanyandcontextofanalyst.
Body
Links
Videolinks
https://www.youtube.com/watch?v=3ycMcAHPX34
https://www.youtube.com/watch?v=Sv5qIBDPQ0A

http://jalopnik.com/5945710/chryslerzeroesinon2015srtbarracudama
seratigoestoplessandfiateyesexportingmorefromitaly
http://www.caradvice.com.au/241730/fiatchryslerceoputsitalianalfaro
meomaseratiproductionindoubt/
http://content.usatoday.com/communities/driveon/post/2011/08/fiatplansj
eepbasedmaseratisuvtobebuiltindetroit/1#.Ue7yvsu9KSM
http://washpost.bloomberg.com/Story?docId=1376MPOJXC6K50YK012
RGAMK6HAVL1BIGF0PLUQFHOG3
http://www.bloomberg.com/news/20110818/marchionnemaseratimade
inmichiganletschryslerdriveluxurysuvcars.html
http://www.bloomberg.com/news/20130708/fiatexercisesoptiontobuy
additional33ofchryslershares.html
http://www.bloomberg.com/news/20130529/fiatsaidtoready10billioni
nfinancingforchrysler.html
http://money.cnn.com/2013/07/12/autos/marchionnechryslerfiat.fortune/i
ndex.html
http://www.caranddriver.com/news/alfaromeosproductplanfortheusfo
rnowanywaynews
http://latimesblogs.latimes.com/money_co/2011/12/chryslerdodgedartfi
atalfaromeo.html
http://www.detroitnews.com/article/20130730/AUTO0101/307300029/1361
/Chryslerearns$507MnetprofitforQ2
Premise1
Marketselection&entrymodechoice
Marketseekingstrategicgoal
latemoverentry
equitymodeofentry,w/Whollyownedsubsidiaries(WOS)w/
Acquisitions
Chrysler
SRTIntroduction/Movement
2015SRTBarracuda
neededtoslimdownChallengerto4cyl,6in
shorterwheelbase,widthshrinkby2in
Fiatlookingforreardriveplatformfor
Lancia,AlfaRomeo,Maseratilookingto
DodgeChallenger/ChargerSRT8,Chrysler300C
SRT8,JeepGrandCherokeeSRT8,SRT
Viper(SRT10)
Fiat
IncreaseinternationalFiatsales,new500Land500
Cabrio(Ramacotti),Plantoreusevacantfactories
inItaly,andmakeMaseratiinUS,suchasthenew
Levante
Maseratifacelift,NewGhibliatBMWprice,
StradaleMC,Levante(SUV,builtfromJeepGC)
CompetewithBMW,Audi,BMWinluxury/sportcar
market(lowerpriceptanddemographic)
LorenzoRamacotti
AlfaRomeorebirth,andintroductiontoUSmarkets
4C,8C,Giulia,Dartplatform,introductionto
USin2014
Premise2
Mergersandacquisitions
FiattoputmoremoneyintoChrysler
http://www.thetruthaboutcars.com/2013/04/fiatmaysoonbeablet
odrainchryslerscashraisethecashforchrysler/
http://www.thetruthaboutcars.com/2013/07/fiatowns6849ofchry
slerwillsoonownmore/
http://money.cnn.com/2013/05/02/autos/chryslerfiatfinances.fortu
ne/index.html(overviewandmanagment)
Premise3
Conclusion
Info