The Italian Auto major Fiat is planning to elevate itself from industries No.9 position to No.2 position through the takeover of Chrysler and GM Europe. With the auto world falling apart and Toyota’s awful results proving a point of the genuine crisis, the takeover move looks like a overly optimistic approach.
Interestingly there is another reason for this move. Governments everywhere want the industry to make cleaner, more fuel-efficient cars. It means auto makers will have to find enough money to survive the crisis and fund a radical overhaul of their production systems.
The easiest way to meet carbon dioxide targets is to make sure your fleet is stuffed with small, lean cars. Guess what? Fiat knows a thing or two about small cars. The Fiat small cars are the best-sellers in Europe. The European Federation of Transport and Environment says average emissions of new Fiats are the second-lowest among the 14 top European auto manufacturers.
Fiat has something to offer, and it is not cash but it is access to small-car technology, including the platforms, the four-cylinder engines and a promising new two-cylinder engine. Chrysler would save billions in development costs by taking Fiat's small-car technology and slapping a Chrysler badge on it.
GM Europe, dominated by Germany's Opel brand, has a decent fleet of small cars. In that sense, it doesn't need Fiat. But developing Fiat and Opel models from the same platform, and getting rid of redundancies, would cut down the vast amounts of money required to invent low-emission cars. The idea is to use a merger to ensure platforms are shared on every model.
With governments everywhere want more fuel-efficient cars. The carbon dioxide emission regulations are going to play a critical role. None of these car companies can afford to finance the new technology on their own. And one way to keep going is to go with Fiat.
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