Chrysler and Fiat: A Surprisingly Good Match

The Fool's own senior auto analyst John Rosevear sits down with Richard Engdahl for an in-depth look at Tesla  (NASDAQ: TSLA  )  and the electric vehicle market, as well as Chrysler's unique situation with Fiat  (NASDAQOTH: FIATY  ) .

Rosevear looks back at Chrysler's history and downfall, including its attempted relationship with Daimler, and finally its seeming mismatch with Fiat -- which actually resulted in some "shockingly terrific" outcomes.

A full transcript follows the video.

John Rosevear: I think 15 years from now, if you want a cutting-edge car, chances are that it's going to come from a brand that we've heard of today, and that we've talked about today.

Richard Engdahl: Shifting gears, will it be a Chrysler?

Rosevear: Well, that's interesting. Chrysler. Chrysler was always the scrappy little brother of the Big Three, when they were called the "Big Three" in Detroit.

Chrysler was always the one that went through the boom and bust cycles. It was always the one that was having a near-death experience. It was always the one that was sort of flying on masking tape and wishful thinking when Ford (NYSE: F) and GM (NYSE: GM) were moving in more sophisticated directions.

Chrysler's an interesting story.

Engdahl: I felt like Chrysler did a phenomenal job, a couple years back now, with their Super Bowl ad with Eminem, when they came out with their "Imported from Detroit" campaign. I thought that there was really a renaissance.

It might just be my brain playing tricks on me, but I feel like I see them on the road more now. I recognize the Chrysler logo. Is that Chrysler renaissance from the consumer side real?

Rosevear: Yeah. To talk about Chrysler we go back to the 1990s. They had the Dodge Neon, they had the Intrepid, they had the minivans, and they were pretty good cars that had innovative design, and they were selling really well.

Then they ran into Mercedes -- or Daimler, really -- and they became DaimlerChrysler. Daimler had this idea that Mercedes couldn't stand alone as a luxury car brand in the emerging world. They needed scale, so they had this idea that they would mash Chrysler at the low end, and then Mitsubishi eventually, together and they would create this global company that would essentially be run by Daimler.

That didn't work out. They mismanaged Chrysler. A lot of programs got terminated, cars were done on the cheap, cars were phoned in. Whole groups of veteran engineers who should have been retained at any cost were laid off and thrown out because Mercedes, in their arrogant German attitude, came in like, "We don't need those people."

So Chrysler went into a funk. Then the divorced Daimler and got picked up by a private equity group that didn't really have the funds or knowledge or whatever to run them.

They, like General Motors, crashed into bankruptcy court during the economic crisis. But GM was unquestionably worth saving. It had been run poorly on the financial side, but on the engineering side it had actually come a long way in the last 10 years. They had good products in the pipe. Their factories were modern and up to date. There was a lot to build on.

Chrysler was a basket case. Chrysler went to Fiat. Fiat -- a regional automaker looking for global scale, no significant presence in the U.S. market, unless you count a couple thousand Ferraris every year, which is nothing in their revenue stream -- said, "We'll take them."

The world kind of said, "Uh-huh. This is going to be a disaster."

They sent people to Michigan and said, "We're going to overhaul your product line on the fly, and we're going to work with you, and we're going to do this right."

The cultures actually meshed pretty quickly, because the folks who were left at Chrysler had been through all of this wrenching stuff and they were really cynical, and the Italians came in and said, "No, no. We're going to help you do this."

The vehicles that came out were sort of shockingly terrific. They really did take these crappy cars and trucks and SUVs and tighten up the handling and clean up the designs and overhaul the interiors -- which is all relatively on-the-cheap kind of stuff in the auto business. The expensive stuff is engineering the platforms from scratch, and the engines, and the safety stuff and so forth.

The cars started to come out, one by one, through this high-speed refresh process, and they started impressing critics. They were like, "Wait a minute. This is a much better vehicle." They just sort of finished the work that hadn't been done. They lavished it with some attention, and sales started to go way up.

Chrysler and its dealers have always been good at offering the deal, getting the financing for the guy who maybe can't get financing down the street, that kind of thing. That goes back to the 1950s with Chrysler.

In a market where a lot of people couldn't get financing down the street in 2010-2011, they were able to -- with a little more willingness to led subprime and so forth -- they were able to make some gains early on, and the vehicles are a lot better. They are more competitive.

The current Ram pickup truck is very nice, actually, to drive. Sort of shockingly so, if you're used to the old tin-can Chrysler products that looked like they were done quick and dirty by a bunch of farm boys. It's surprisingly sophisticated, and they look a lot nicer.


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  • Report this Comment On October 19, 2013, at 11:21 PM, emjayay wrote:

    This guy's right about everything he said. An example of the new interior and fixing the ride and handling and a restyle, plus changing the name, all on the same basic car, is the Sebring/200. They really turned lemons into lemonade with that one. Still not up with the competition, but no one else has a convertible and hardtop convertible either. And a whole new one is coming next year. And a whole new minivan as well. The current one like the 200 is a done over version of the one from the dark days. But not as done over.

    Now cue the comments about how people had a crappy Aspen or K-Car or whatever and will never buy a Chrysler product again, or how FIAT means fix it again Tony, etc. etc.

    By the way the Fiat 500 and the new 599L mini-minivan are very cool vehicles with nothing like them on the American market. Besides filling unique niches, every square inch inside and out of both of them is fun to look at if you know anything about design and design history.

  • Report this Comment On October 19, 2013, at 11:24 PM, emjayay wrote:

    Ooops, that was supposed to be 500L.

  • Report this Comment On October 20, 2013, at 3:40 AM, PhilLC1 wrote:

    my worry is that Fiat, whilst investing in reviving Chrysler to where it deserves to be in America, is forgetting its home market...

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