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Fiat to manage Chrysler Europe


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Fiat to manage Chrysler Europe

U.S. automaker to still sell cars through dealers, but Italian partner will handle daily operations

Alisa Priddle / The Detroit News

Chrysler Group LLC is shifting the distribution and daily management of its brands in Europe to partner Fiat SpA -- a move aimed at cutting costs while bolstering sales and helping Chrysler increase its dealer network 25 percent within three years.

The Auburn Hills automaker has struggled for years to achieve an international presence -- even as a division of Germany-based DaimlerChrysler AG until 2007 -- and has never established a strong support system for the cars it exports.

Vehicles in Europe will continue to be sold by Chrysler dealers, but as of April 1, Fiat is taking over daily business duties.

The Fiat Group will determine price, positioning, volume and regional advertising of Chrysler vehicles for each market, ensure new cars meet the specifications of each country and make sales decisions, including the location of new dealerships. Fiat also will provide back office support, such as accounting and legal services, some of which had been contracted to past owner Daimler AG.

"Europe is the most important region, and this is a good solution because Fiat's distribution strength is so good," said Mike Manley, Chrysler's head of international operations.

Chrysler's use of Fiat resources internationally is one of three conditions for the Italian automaker to increase its ownership stake in Chrysler from 20 percent to 35 percent in three increments.

Its stake in the automaker will increase 5 percentage points when Chrysler achieves cumulative revenues of $1.5 billion outside North America.

Chrysler officials will not disclose current revenue, but Sergio Marchionne, CEO of both companies, has provided a timeline. Last month he said Fiat will reach the 35 percent ownership mark within two years.

The other two conditions involve products: Fiat must provide fuel-efficient engines and cars for Chrysler to build in the United States.

A tough order for Fiat

To meet its international obligations to Chrysler, Fiat has its work cut out. Chrysler sold about 10,600 vehicles in Europe in the first quarter, down 17 percent from a year ago.

While Europe is Chrysler's biggest international market, the automaker remains a bit player with less than 1 percent market share since 2005, according to WardsAuto.com.

"Chrysler has to find ways to increase demand for its products outside of North America if the company is going to be viable," said John Sousanis, Ward's director of information content.

"But Chrysler can't really hope for the kind of market share in Europe that would justify investment in an independent network, so using Fiat's existing network is the path of least resistance."

The hope is the new Italian connections will lead to improved fortunes abroad.

Chrysler's almost 700 employees in 13 European markets become Fiat employees as part of the integration that should be completed by the fourth quarter, Manley said."It will be a staggered launch," he said. "We want it to be as smooth as possible."

Assimilating parts distribution into the Fiat logistics system will take longer and will not be completed until 2011, Manley said.

Companies are a better fit

Workers at independent dealers remain Chrysler employees.

And there will be some blending of the brands in Europe, starting with the convergence of Fiat's Lancia with the Chrysler brand. Details of how future products will be co-developed and marketed will be revealed at an analyst meeting in Turin on April 21.

"Fiat is a better fit than Daimler was" for Chrysler in Europe, said Michael Robinet, vice president of global vehicle forecasts for CSM Worldwide in Northville. "Both are mass market brands."

Fiat offers extensive coverage in Europe in dealers but also parts hubs, service depots and transportation networks, Robinet said, areas of potential savings.

"I think they have to do this," Ward's Sousanis said. "But they ultimately have a bigger opportunity to expand in Asia and South America."

Those expansions also are in the works, Manley said, but they are further down the road.

From The Detroit News: http://detnews.com/article/20100408/AUTO01/4080350/1148/auto01/Fiat-to-manage-Chrysler-Europe#ixzz0kVpHg5WM

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