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Chrysler is key to Fiat's future


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Chrysler is key to Fiat's future

Back in the Golden Age of the 1960s, they cast a huge shadow over the global auto industry -- Henry Ford II and Giovanni Agnelli, patriarch of the powerful family that still controls Fiat SpA of Italy.

They mulled business tie-ups and foiled others. They fought over Alfa Romeo. Hank the Deuce tried to buy Ferrari in the early '60s, an Italian gem that would peddle a 50-percent stake to Fiat in '69. Agnelli even negotiated to sell Fiat to Ford Motor Co., a prospect he abandoned.

They're gone, but their automotive legacies stubbornly endure, despite the most punishing economic shakeout since the Great Depression, despite widespread predictions that scions of the Ford and Fiat fortunes (or what's left of them) would bail out and disappear. Not yet, anyway.

Unspoken but clearly present in Fiat CEO Sergio Marchionne's sweeping five-year plan for Fiat's diverse holdings and what it means for Chrysler Group LLC is the simple fact that a founding family, among Europe's most influential, is backing a bold bid for the big time -- and betting on Chrysler to help it get there.

The Agnelli family -- which through its investment arm, Exor SpA, holds a controlling 30.5 percent stake in Fiat -- is poised to double down on its conglomerate's unorthodox CEO. His ambitious plan: Divide Fiat's industrial empire, renegotiate contentious labor tradition in Italy and craft a "pure automotive play" to compete with the biggest in the business.

Sounds sort of familiar, doesn't it? Ford, whose founding family controls 40 percent of the voting shares, hires Boeing Co.'s Alan Mulally. He dumps ancillary brands, globalizes crucial functions and runs the automaker according to the simplest principle -- the company is in business to make money for investors and employees by building and selling cars and trucks around the world.

The Fiat plan? Simplify the business structure. Integrate purchasing, product development and manufacturing. Use complementary distribution networks, the better to sell Alfas in the States and Chryslers in Europe. And drive it all with fresh, unafraid leadership wooed from outside the insular auto industry.

"The level of arrogance in this industry is beyond belief," Marchionne, a lawyer-turned-accountant trained outside the auto business, told investors in Italy this week. "There's nothing to be proud of. Unless it changes the rules of engagement, this can't continue. You guys won't fund it. You tanked two companies in the United States."

He's right, of course, about the arrogance. He's right that capital-market investors are out of broken-business investing, as Chrysler and General Motors Co. can attest. He's right to insist (and others say it's true) that Chrysler and Fiat are becoming "fully integrated," something nine years of German ownership failed miserably to produce.

Is that good news for Chrysler, its employees and dealers, its hometown of Auburn Hills and plant cities from Windsor and Brampton, Ontario, to Toledo and Belvidere, Ill.? Absolutely.

Not because Marchionne's ambitious five-year plan is guaranteed to succeed, because it isn't. In the span of a single product program, he proposes to deliver a multibrand, integrated automaker producing vehicles with sharply improved quality to North America, Europe, China, Russia, India and Brazil.

The encouraging part is the unvarnished vision. He contends that too many auto execs don't grasp the capital-destroying flaws of the way they do business. He understands that Chrysler's talent in pickups, Jeeps, minivans and larger sedans can help Fiat become competitive in the midsize segments it has for too long ceded to the Germans, especially in Europe.

He understands, in ways the Germans of Daimler AG refused to accept, that well-engineered vehicle architectures coupled with fuel-efficient engines and the right styling are what can resonate with customers -- not worrying whether a Chrysler sedan shares a transmission with a Mercedes-Benz E-Class.

The tendency in this town, even now, is to focus on Fiat's plans for Chrysler and pay less attention to Fiat's plans for Fiat. Big mistake. For Marchionne didn't work the halls of Washington and audition in front of the White House's auto task force just so he could have his way with Chrysler.

He did it because Chrysler represented a credible partner to help create the global automaker that Fiat's founding family still appears intent to realize.

From The Detroit News: http://detnews.com/article/20100423/OPINION03/4230337/1148/AUTO01/Chrysler-is-key-to-Fiat-s-future#ixzz0lvaJB5v0

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