Commentary: Give Fiat-Chrysler deal a chance

Italian automaker's recovery, lessons drive optimism about how an alliance could work

Josh Whitford and Francesco Zirpoli

Chrysler's fate has been put into Fiat's hands -- to mixed reaction.

Pundits enjoy rehashing the old joke that Fiat stands for "Fix It Again Tony" (a reference to the quality problems that drove the Italian automaker from the American market in 1982), and some analysts fear that the proposed merger would be good money after bad. They point to the failed matches between Daimler and Chrysler, and between Fiat and General Motors.

But we are impressed by the prospect of a marriage between Turin and Detroit. Fiat's recent history gives us three big reasons to think things really could work this time around.

First, this would not be a shotgun marriage. While the deal -- should it come about -- will necessarily be one blessed by the U.S. auto task force, Fiat and Chrysler have been talking for some time. Fiat has been planning to enter the U.S. market since Sergio Marchionne became CEO in 2004.

The Italian automaker sees Chrysler's manufacturing facilities and distribution channels as a chance to speed up a process begun when Fiat, in the wake of its own near-death experience a few years ago, split its alliance with General Motors and convinced its shareholders to invest fresh capital in the auto business.

Those investments have succeeded. Still, while Fiat is healthy today, it remains small by automaker standards and needs to find ways to spread its technologies across more markets.

Second, Fiat's recovery forced the company to learn some relevant things. Fiat's industrial problem then was a lot like Chrysler's industrial problem now. It needed exciting new models, but it had few resources, less time and rough relations with many suppliers.

So Fiat didn't invest just in technologies, but spent a lot of time and effort thinking about how to reshape the organization so it would share key elements of product platforms with third parties. Then it asked engineering suppliers like the Austrian Magna Steyr and the Italian Italdesign and Pininfarina to design cars based on Fiat's platforms.

This process has given Fiat some if its biggest hits, including the Bravo. This is significant because the big thing that Fiat brings to the alliance is not only the technology Chrysler needs to make good small cars, but the promise that Fiat will share it.

Third, there are real complementary elements between Fiat and Chrysler. Fiat has excellent green engine technologies and advanced flexible manufacturing systems, and it developed the compact car platforms that created the Panda and the new 500 -- the European cars of the year in their respective segments in 2004 and 2008.

There might even be at least some cultural fit.

Each automaker has relied on a highly decentralized production network and a similar approach to product development with a tendency toward innovation on both architectures and product concepts.

Given Chrysler's troubles, it is too easy to forget that it did invent the modern minivan when it was a small automaker then.

Will Fiat and Chrysler be able to leverage their virtues and help each other cope with their vices? We think it's worth giving them a chance to try.

Josh Whitford is a Columbia University sociologist and Sloan Industry Studies fellow. Francesco Zirpoli is a management scholar at the University of Salerno. E-mail: letters@detnews.com.