Chrysler and Fiat form a global alliance

In the high stakes game of "Bankruptcy or No Bankruptcy," Chrysler Corp. got a lifeline from Fiat. The two automakers have announced a global alliance that provides Chrysler with a much-needed save during desperate times.

The cash-less partnership will give Fiat a 35-percent equity interest in Chrysler. In return, Chrysler gains product, platform, and powertrain sharing, with the promise of fuel-efficient engines. In short, Chrysler gains an imported solution to its home-grown problems.

Chrysler has a product portfolio skewed toward midsize and large vehicles, emphasizing power over fuel efficiency. There simply are no small, truly thrifty vehicles available from Chrysler, Dodge, or Jeep dealerships, leaving the struggling automaker conspicuously absent from vital budget-priced segments. The PT Cruiser is about as close as the company comes, and this merely average, long-running model is overdue for retirement.

The most fuel-efficient current product we have tested from Chrysler is the Dodge Caliber. With a manual transmission, the four-cylinder Caliber average 25 mpg overall in our fuel economy tests—not bad considering it was the supercharged SRT model. However, in most vehicle segments, Chrysler provides middling mileage, at best.

Overall, Chrysler has Detroit's poorest reliability. Almost two-thirds of its models get a below-average reliability Rating. Chrysler as a brand ranks 32nd among 34 brands included in our latest Reliability survey. Among all models, the Sebring Convertible is the worst; it has 283 percent more problems than average.

In the U.S., Fiat has never been a brand that resonated with reliability. Looking back at Reliability ratings from the late 1970s, we found the Fiat 128 and 131 received a "worse" overall Reliability rating for several years. However, overseas data shows that Fiat rates above average in the What Car? Reliability Index in the U.K.

Many Chrysler Corp. models have a lackluster driving experience and subpar fit and finish. Based on our testing, Chrysler needs to give its model line a major overhaul and raise its reliability, interiors, fuel economy, and overall refinement up to the level of its styling. Such work has begun, with positive signs shown in the 2009 Dodge Ram pickup truck, a model currently undergoing testing; so far, we think the Ram has improved. Ultimately, Chrysler’s critical weaknesses speak to areas the new alliance may be able to better address than the company could tackle alone, as history has shown when it was merged with Daimler.  (Read our Detroit Report Card.)

Even with the new partnership, Chrysler continues to seek aid from American taxpayers. (Read Consumer Reports' statement on the emergency aid.) After all, Fiat isn’t investing capital in Chrysler, and it will take money to restructure and develop new models. However, the potential cost savings from product and technology sharing, as well as distribution potential and joint supplier negotiations, could enrich both automakers in the long run.

An interesting footnote, this arrangement will mean the majority of Chrysler Corp. ownership is foreign, with Fiat claiming 35 percent and Daimler retaining almost 20 percent – though Daimler has sought to divest its interests.

A strong, solvent Chrysler with clever, fuel-efficient models inspired by the Fiat 500, Grande Punto, Panda, and Qubo, plus the potential for Alfa Romeo to return to the United States, all sounds good to me.

—Jeff Bartlett

Comments

[sarahsmile90]

While the possibility of the Fiat's sounds amazing to me (I love the 500), I think many will have a problem using US tax dollars to save a company that will be 35% foreign owned.

[ronzoni]

Make that 55% if CR numbers are correct. OTOH, bailout money may be based more on US employee numbers than company ownership, since the auto bailout is basically a jobs program. Employees of suppliers would count toward the total being considered as well. If this is not the way it's done, and they tilt toward US companies, this means it is basically a UAW bailout.

[Bruce Keb]

One of my issues with the Chrysler deal is the bad mix of owners. There is no strong hand except the taxpayers. Fiat is weak, and is the UAW Retiree's Health Care Trust in position to ante up more and more cash to make over the company? If anything, they should be divesting from the company. So then if new stockholders come on board, will Obama swoop in and cancel their shares like he did with Chrysler and maybe GM?

[Leon]

Chrysler needs to emphasize quality, fuel efficiency and solid designs, and abandon that HEMI this and HEMI that crap that was part of the old Damiler Chrysler philosophy. Most people aren't interested in high performance muscle cars; it's purely a fringe, niche market. The 2009 Dodge Challenger is another one of those vehicles to only appeal to a select few. Antiquated styling, overweight and not fuel efficient even with the V6 engine. Those 20th century ideas were fine 40 some years ago but it doesn't mesh too well today. The 60's are dead, gone forever. Big V8 engines and rear wheel drive in passenger cars of the 21st century is absurd! Look at what Ford has done with it's ecotech power plants. GM is able to get V6 motors to out run V8's and achieve 30 MPG Many four cylinder engines that are turbo or supercharged can keep right up with those backward, thirsty V8's and claim great gas mileage to boot.