Fiat amy be overextedning itself AP Photo/Luca Bruno
I cannot seem to find any reference of success when a government steps in and replaces the free will of a privately held company. It now appears that the Obama administration forcing Chrysler into bankruptcy court and into the ownership by Italian automaker Fiat is going to be a complete disaster.
Fiat is a car company in a lot of finical trouble already. Through the first quarter of 2009 they lost 547 million dollars, all of that while they are bidding two billion dollars for Chrysler’s assets and a 25% ownership stake in the troubled company.
They are also trying to absorb GM European division, Opal, and Gm’s Latin American operation. Essentially they are looking to replace failing GM with another doomed worldwide auto company.
There are so many examples of why this is a failing strategy. The Daimler Chrysler marriage of 1998 never worked out. GM has run a global car empire for the last 50 years and is left teetering on the brink of bankruptcy.
The only car company that has seemed to figure this out is the Ford Motor Company. Since 2005 Ford has been doing whatever it can to become a smaller company. Currently they are the only American car company not to take any federal tax dollars to keep it going and appear to be the only American company that is going to survive, at least under its current configuration.
The people over at Fiat seem to think that they need to produce at least 6six million cars per year to stay viable. Japanese automaker Toyota leads the world’s car production producing nine million units per year.
When Ford had 200 factories producing cars worldwide they could produce between eight and ten thousand cars per day. That works out to around three million cars per year. Since they have made major cuts to their factories and staff that number is surely much lower now, probably somewhere between two and two and a half million units per year. That is less than half the number Fiat plans to crank out each year.
On top of that the man plan to save Chrysler and its dealer network is to import Fiat’s small car technology and make it available to the U.S. consumers. I hate to break it to everyone but small cars are not what the American car buyer is looking to buy.
I have seen some of these cars and my family would not fit in them, and I only have one child. What about the folks that have two or more children, or a child and a dog? Is it Fiat’s plan to exclude themselves from this demographic?
All the economic indicators for the automobile industry seem to be indicating that smaller companies are the way to go. Fiat plan to build another global car empire, even as the current global car empire cannot compete and loses millions of dollars every day.
More Auto Industry Crisis Coverage:
• Chrysler heads to bankruptcy court
• Ford loses another 1.4 billion
• How many more billions does GM need?
• Can Ford use the “B” word to increase its market share?
• Obama’s auto plan doesn’t make any sense
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