Case Study——The 2009 Chrysler-Fiat Strategic Alliance
Chrysler LLC witnessed difficulty in establishing its financial stability in the spring of 2007. In which, Daimler completely traded its 80 percent ownership to Cerberus Capital Management LP. Daimler was shortchanged in the stake tradeoff. Unfortunately, Daimler loss $29 billion of its previously made investment to acquire Chrysler. However, Cerberus’ repurchase deal was seemingly foolish. The miscalculation of the profitability in the automobile industry caused Cerberus great frustration. No tangible benefits were available to the company because of its role in the global financial crisis in 2008-09.
Cost problems, high oil prices, and the recession aided Chrysler’s ruin. Soon after, Chrysler partnered with Fabbrica Italiana Automobili Torino or FIAT SPA (henceforth FIAT). The alliance with FIAT looked more stable regarding the companies’ global operations, corporate compatibility, and long-term synergies. FIAT as well as, other European automobile makers saw Chrysler as a great market asset and opportunity. Undervalued stocks were sold under distress from the financial crisis of 2008-09.
After the formation of Chrysler and FIAT’s strategic alliance, new ownership restructuring plans were enforced for Chrysler. Also, FIAT made alterations to fit Italian labor laws, change negative perceptions, and solve market share problems. During World War II, FIAT manufactured military equipment and vehicles for the government. Subsequent to the death of its founder, FIAT was the largest automobile firm in Italy. But, Chrysler was lower on the “food chain” after the introduction of Japanese companies
in North America. FIAT’s cruelty of workers caused massive strikes and labor disruptions. General Motors (GM) acquired 20 percent of FIAT. However, the affiliation was short lived. Since, Chrysler and FIAT adjusted its structure, leadership, cost, target market, strategies to remain a relevant in the automobile...