· Case 8 Fiat Chrysler Automobiles N.V. (2015)1: From an Alliance to a Cross-Border Merger · · From an Alliance to a Cross-Border Merger · In 2015, Fiat Chrysler Automobiles N.V. (hereafter FCA) was the seventh-largest manufacturer of automobiles in the world. The company sold passenger and commercial vehicles in global markets. The Group’s automotive brands included Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia, Ram, SRT, Ferrari and Maserati. The Group also managed operations of production systems (Comu), com- ponents (Magneti Marelli), and iron and castings (Teksid). The company was formed in 2014 when Fiat from Italy and Chrysler from the United States sought a cross-border merger and created a new automotive entity.2 Table 1 briefly provides FCA’s history and brand portfolio. · In 2012, Chrysler and Fiat created a successful strategic alliance to share technology, manufacturing platforms, and other corporate resources. Unlike other corporate tie-ups and cooperative links, the Chrysler–Fiat alliance survived because of the companies’ sharing of knowledge and resources. In addi- tion, the two firms enjoyed a solid growth in their post-alliance integration. Chrysler manufactured the Chrysler brand, Jeep, Dodge, Ram, SRT, and other products and was headquar- tered in Auburn Hills, Michigan. Chrysler was founded as Chrysler Corporation in 1925. Fiat, on the other hand, sold a variety of brands that included Fiat, Alfa Romeo, Lancia, Fiat Professional, and Maserati and Ferrari sports cars. Fiat first started manufacturing cars in Turin, Italy, in 1899. After 2012, the two auto companies survived their financial exigencies and operational problems. The whole process forced the companies to go through restructuring and corporate changes that took place on both sides of the Atlantic. Chrysler’s alliance with Fiat initially provided the company with a tangible lifeline by which Fiat initially took 20 percent ownership in Chrysler.3 · · Chrysler in North America Business history reveals that Chrysler was always a marginal player among the three automakers in North America because of its quality problems, weakened market share, and old tech- nology. The company remained behind GM and Ford in its quality rankings and sales. In the area of consumer satisfac- tion, Chrysler had problems making satisfactory scores. Right from its inception, Chrysler concentrated on those segments that required inexpensive autos by middle-income consumers. The company was further left behind in the auto industry with the arrival of Japanese competitors such as Toyota, Honda, and Nissan. No wonder Chrysler remained synonymous with its low quality image and distant competitor. At the same time, in minivans and the Jeep brand, the company was a competitive player and witnessed solid growth in North America. 
 · · Fiat’s Long-Term Plans and Corporate Strategies (2014–2018) 
In May 2014, FCA announced a five-year plan (2014–2018) that aim.

1. · Case 8 Fiat Chrysler Automobiles N.V. (2015)1: From an
Alliance to a Cross-Border Merger
·
· From an Alliance to a Cross-Border Merger
· In 2015, Fiat Chrysler Automobiles N.V. (hereafter FCA) was
the seventh-largest manufacturer of automobiles in the world.
The company sold passenger and commercial vehicles in global
markets. The Group’s automotive brands included Abarth, Alfa
Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia,
Ram, SRT, Ferrari and Maserati. The Group also managed
operations of production systems (Comu), com- ponents
(Magneti Marelli), and iron and castings (Teksid). The company
was formed in 2014 when Fiat from Italy and Chrysler from the
United States sought a cross-border merger and created a new
automotive entity.2 Table 1 briefly provides FCA’s history and
brand portfolio.
· In 2012, Chrysler and Fiat created a successful strategic
alliance to share technology, manufacturing platforms, and
other corporate resources. Unlike other corporate tie-ups and
cooperative links, the Chrysler–Fiat alliance survived because
of the companies’ sharing of knowledge and resources. In addi-
tion, the two firms enjoyed a solid growth in their post-alliance
integration. Chrysler manufactured the Chrysler brand, Jeep,
Dodge, Ram, SRT, and other products and was headquar- tered
in Auburn Hills, Michigan. Chrysler was founded as Chrysler
Corporation in 1925. Fiat, on the other hand, sold a variety of
brands that included Fiat, Alfa Romeo, Lancia, Fiat
Professional, and Maserati and Ferrari sports cars. Fiat first
started manufacturing cars in Turin, Italy, in 1899. After 2012,
the two auto companies survived their financial exigencies and
operational problems. The whole process forced the companies
to go through restructuring and corporate changes that took
place on both sides of the Atlantic. Chrysler’s alliance with Fiat
initially provided the company with a tangible lifeline by which

2. Fiat initially took 20 percent ownership in Chrysler.3
·
· Chrysler in North America
Business history reveals that Chrysler was always a marginal
player among the three automakers in North America because of
its quality problems, weakened market share, and old tech-
nology. The company remained behind GM and Ford in its
quality rankings and sales. In the area of consumer satisfac-
tion, Chrysler had problems making satisfactory scores. Right
from its inception, Chrysler concentrated on those segments that
required inexpensive autos by middle-income consumers. The
company was further left behind in the auto industry with the
arrival of Japanese competitors such as Toyota, Honda, and
Nissan. No wonder Chrysler remained synonymous with its low
quality image and distant competitor. At the same time, in
minivans and the Jeep brand, the company was a competitive
player and witnessed solid growth in North America.
·
·
Fiat’s Long-Term Plans and Corporate Strategies (2014–2018)
In May 2014, FCA announced a five-year plan (2014–2018)
that aimed at reinvigorating the company in the global auto
industry. FCA projected that its sales would surpass seven mil-
lion vehicles, eventually reaching revenues of 132 billion euro.
The company planned to use its Jeep brand as the main growth
vehicle because of its visibility and market share. FCA plans to
use its Alfa Romeo brand to compete with Mercedes-Benz,
BMW, and other luxury automotive manufacturers. Fiat is a
visible automotive brand from Italy and carries a rich history in
global business regarding its brand portfolio, business model,
and growth. The company had survived cor- porate disruptions,
labor crises, and new competitors. Most of Fiat’s problems
arose from Italian labor laws, weakened business environment,
and cost issues. From business history perspectives, Fiat had
come a long way in the European mar- ket regarding dealing
with quality areas and reputation.4 The company reinvented

3. itself by fixing its brand portfolio and quality areas.
Like Chrysler, Fiat’s evolutionary growth and survival en-
countered problems in the areas of technology and quality
standards. The company history has been unique and reflects
Italy’s industry-specific problems and rigid labor laws. Fiat was
founded in 1899 and employed 35 workers in 1900. Between
1980 and 1985, the company reduced its labor force by cutting
100,000 jobs. In 1986, Fiat acquired Alfa Romeo from the
Italian government and became the largest automaker in Europe.
In 2004, Fiat recruited a well-known turnaround executive
Sergio Marchionne to become its CEO. In 2005, Fiat and GM
dissolved their five-year partnership when GM paid Fiat $2
billion in cash to get out of the partnership.5 In 2007, Fiat
introduced its iconic Cinquecento 500 model after 32 years. In
early 2009, Fiat announced a deal to acquire 20 percent of
Chrysler in exchange for a technology-sharing pact and
distribution networks in Europe and North America. During the
same period, Marchionne also showed interest in acquiring
GM’s Opel and Vauxhall brands in Germany and the U.K.
Global Auto Industry in 2015
The global auto industry has been one of the largest industries
in the world that affects countries, regions, cities, and
businesses in every major nation and emerging market. In
the United States, Japan, and Europe, auto companies often
became part of their country-specific policies and national
prides.6 The global auto market is somewhat uneven regard-
cost issues, diverse markets, new technologies, and supplier-
related issues.8 The auto industry is also an amalgam of
complex and modular technologies and assembly-line opera-
tions that includes suppliers/parts manufacturers, raw material
providers, and outsourcing firms. At the global level, these
entities are highly diverse, intertwined, and dynamic. Small
disruptions in the industry can cause major delays in the
industry’s value chains and technology platforms.9
The auto industry has witnessed cross-border alliances, joint

4. ventures, and other corporate tie-ups that mostly aimed at
economies of scale and market expansion.10 In 2015, only three
American auto manufacturers prevailed in North America
(General Motors, Ford, and Chrysler), and Japan had three
major firms: Toyota, Honda, and Nissan. Europe has been left
with four large auto companies (Daimler, Volkswagen, Fiat, and
Renault–Nissan). The auto industry has witnessed major
structural changes in the forms of strategic alliances and col-
laborative activities, R&D networks, distribution agreements,
joint ventures, and equity stakes. The reasons behind these
changes are the industry’s evolutionary processes, revenues, net
profit, and economies of scale in manufacturing. As of 2015, the
auto industry is in the process of reaching out to Silicon Valley
regarding sharing mobile technologies from the smartphone in-
dustry and its related areas.11 Table 2 and Table 3 compare and
contrast this data from 2014 to 2016 and provide industry-level
rankings on seven auto manufacturers in the industry.
Changing demographics and rising costs have compelled
large-scale auto manufacturers to move assembly plants to low
cost economies. In addition, consumer demand in emerg- ing
markets has forced large auto manufacturers to move fa- cilities
abroad to take advantage of cheaper labor and market
opportunities. Auto analysts believe that in the coming years,
only a small number of auto manufacturers will be left at the
global level because of consolidations and mergers. Companies
maintaining strong quality standards and competitive technolo-
gies will be able to compete and survive. At the same time, the
global auto industry will continue to see consolidation in its
major markets.
Synergies and Challenges Faced by Fiat Chrysler Automobiles
Since 2013, Fiat and Chrysler have made major structural
changes to meet their integration goals. Academic and practitio-
ner studies authenticate that strategic alliances link two or more
companies’ operations by combining manufacturing resources
and knowledge.12 These tie-ups combine R&D, produce devel-

5. opment, distribution networks, and other areas in knowledge
sharing. Strategic alliances mostly aim at seeking economies of
scale and improving productivity.13 Interorganizational coop-
eration is a unique competitive weapon that helps companies to
expand their managerial and financial resources.14 This was the
same situation with the Chrysler–Fiat strategic alliance in 2012
that brought changes to the companies. The alliance allowed
Chrysler and Fiat not only to survive in the auto industry but
also to expand in global markets. In its initial phase in 2009,
Fiat owned 20 percent of Chrysler and later raised its stake to
58.6 percent in 2011. Table 4 provides information on the
Chrysler–Fiat alliance, which saw a diverse array of changes
and developments between 2010 and 2013.
The Chrysler–Fiat strategic alliance was heavily influenced by
competition in the auto industry, which had witnessed down-
sizing, massive losses, and weak consumer demand. The auto
manufacturers from North America have been heavily burdened
with debt and expensive labor union contracts. Chrysler was in
a dire situation and saw Fiat as the only available partner for
survival. Other factors that helped form the alliance were R&D
opportunities, access to markets, and long-term rationalization
in manufacturing. Within the global auto industry, we now dis-
cuss the status of FCA and its alliance and future developments
as follows.
1. What went well in the alliance? After the alliance, the top
managers of Chrysler and Fiat planned and came up with major
synergies that aimed at a common R&D platform, restructuring,
streamlining global operations, and image building in both
companies (see Table 2). Both Chrysler and Fiat raised their
quality ratings and established dealer networks in Europe and
the United States. Although downsizing was pursued to cut cost
and operations, this did not cause the companies to lose sales.
Both firms developed common assembly platforms in those
sectors where technologies were similar. By 2014, the alliance
had brought major cost savings and simplified R&D-related

6. activities that helped suppliers and dealers (see Table 4).
· 2.Problems that surfaced in the post-alliance integration In
the post-alliance integration, Fiat’s sales declined in the
European markets in 2011 because of the economic down- turn.
Dealing with labor unions in Italy and their work ethic–related
issues also hampered corporate efficiencies in the alliance.
Chrysler’s U.S. operations mostly went well because of stable
financial resources and sales (see Table 4).
· 3.Globalization and the changing global auto industry
Globalization is a major force affecting countries and their
industries.15 The same applies to the global auto industry that
continues to be dynamic yet highly competitive in sales and
market shares. Regardless of the auto industry’s consolidations
and mergers and acquisitions, opportunities are available to
those companies that bring new technolo- gies and auto models.
After the merger, both companies have the potential to target
new markets in North America, Europe, and emerging markets
(see Table 4).
· 4.Leadership of Sergio Marchionne As of 2015, Marchionne
enjoys a great reputation in Italy and North America because of
his turnaround and managerial quali- ties. Under his leadership,
the alliance worked well and helped the two companies merge.
Originally trained as a chartered accountant and solicitor,
Marchionne joined Fiat in 2004 and was able to convince the
board to seek major changes in difficult times.16 Marchionne
sought a planned and systematic restructuring of Fiat by
concentrating on new technologies and models. Fiat
successfully realigned its management structure and was able to
show profit (see Table 4).
5.Brand portfolio and new models In 2015, FCA’s brand
portfolio seems compatible within the global auto industry.
Both companies manufacture small cars that are in demand
because of high gasoline prices and cost issues. In their
alliance, the companies have successfully pooled their resources
to consolidate brand portfolios that aim at significant cost
savings in R&D and technology platforms. The companies’ joint

7. dealer networks have brought required savings and efficiencies
as well
6. Issues related to the new company History books tell
us that Fiat left the North American market in the eighties
because of its weakened market share, quality problems, and
mismanagement. To reenter the North American market, Fiat
needed a well-established auto manufacturer that knew the
market and had the technology to compete. Chrysler was the
only choice available for this growth plan. As we evaluate the
alliance and the companies’ merger, it is evident that the tie-up
was a logical choice on the part of Fiat, which desperately
wanted to come back to North America for future expansion and
growth (see Table 4).
7. Status of Fiat Chrysler automobiles in 2015 Table 4 provides
information on the status of FCA since 2013. In 2014, the new
company listed its shares on the New York Stock Exchange and
plans to list on the Milan Stock Exchange (Borsa Italiana) as
well. Although complex in its form and structure because of
Italian and American corporate cultures, the cross-border
merger has stood well in the industry and will continue to grow
in com- ing years. FCA was incorporated in the Netherlands,
domiciled in the U.K., and listed its shares on the New York
Stock Exchange. The company is slowly reducing its Italian
heritage and would like to grow as a global player that operates
like a multinational corporation. At the same time in the United
States and emerging markets, FCA has had to deal with its aging
brand portfolio and weakened quality standards.17 This may
lead to addi- tional alliances and possibly another merger with
an auto manufacturer.18 In March 2015, Marchionne proposed a
mega merger to General Motors executives but was de-
clined.19 The company plans to sell five million vehicles by
2018 and would have new automotive models.20 This is an
ambitious plan that could see competitive headwind because of
the overcrowded markets and cost efficiencies (see Table 4).

8. ·
·