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Fiat Chrysler Automobiles: How They'll Make It Work

The 2014 Maserati Ghibli sedan won't put up huge sales numbers, but it's one of the foundations of Fiat and Chrysler's plan to become a global auto giant. Photo credit: Fiat Chrysler Automobiles.

When is it possible for two failing companies to add up to a successful one?

When the combination gives them the economies of scale they need to succeed.

As second-tier, regional automakers, Fiat and Chrysler were doomed to fall far behind bigger rivals. But merge the two as Fiat Chrysler Automobiles  (NASDAQOTH: FIATY  ) , or FCA, and suddenly the combined company has a promising future.

On paper, Chrysler's traditional strengths in trucks and SUVs meshes nicely with Fiat's strengths in small cars and luxury vehicles. And in practice, the two companies have proved that they can work very well together: Since Fiat took control in 2009, Chrysler has launched a string of much-improved products.

With a full merger now essentially complete, FCA can shift into higher gear and begin building out a truly global product portfolio. As Fool contributor John Rosevear explains in this video, there's still a lot of work to be done -- but already, it's possible to see how FCA's product strategy is taking shape.

A transcript follows the video.

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Hey, Fools, it's John Rosevear. So we've talked a bit about this new automaker, FCA, Fiat Chrysler Automobiles -- it's Fiat and Chrysler, but fully merged and building out their portfolio as a global automaker. And I want to talk a little bit about how this is taking shape, because FCA is going to be a big topic for us here at the Fool going forward, the stock is expected to be listed on the New York Stock Exchange sometime this fall, and lots of investors have been interested.

But it's interesting how this is coming together. For a while now we've seen Chrysler's strength in trucks, with the Ram pickups and SUVs with Jeeps, and in larger cars with the Dodge Charger and Chrysler 300, but they've lacked somewhat in smaller cars. They've moved to change that a bit with the Dodge Dart a year ago and now the new Chrysler 200. The 200 is an all-new vehicle that is aimed right at the Ford Fusion, they say; it's a big improvement over the outgoing model. And it's built on a platform that started with Alfa Romeo; it has been enlarged and Americanized, they say, but of course Alfa is a Fiat brand, and it is known for sharp handling, so the 200 should be fun to drive.

With very small cars, Fiat, of course, has the Fiat 500; that has been sold here for a while now. And the company is building out its premium offerings. We've seen the Maseratis, the Ghibli, and the Quattroporte, medium and big sedans, along with a couple of sports cars, but we're also expecting to see some new Alfa Romeos, including probably a compact sedan that will be aimed in the BMW 3-Series neighborhood, whereas the Ghibli is kind of being positioned as an alternative to the 5-Series.

Now, this will take a few years to build out, and really it's something of a gamble as to whether they're going to be able to pull this off. A cynic would say that in the big trend of consolidation of the global auto business, Fiat and Chrysler were both companies that were kind of expected to die off. But instead, they've found their way to a mash-up that has the makings of a thriving global automaker, and while they still have a lot of work to do, we have to give them some benefit of the doubt here, simply because the products so far have been good. The overhauled Grand Cherokee is terrific, the Ram is a very strong contender, the new Chrysler 200 looks promising, the new Maserati sedans have gotten good reviews, and those are just starting points.

But consider that the whole company is going to be built out around these bones -- for instance, the platform that underpins the Maseratis will be used in the next-generation Dodge Charger and Chrysler 300, obviously with lower-cost parts to some extent, but still, if the basic quality and execution is there, it should continue to be there. So I'm optimistic about their chances. We'll see. Thanks for watching, and Fool on.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 16, 2014, at 3:42 PM, SkepikI wrote:

    JR: THANKS FOR THE TRANSCRIPT!! I am very glad to see someone at MF taking this track again. It is a service to your readers, and provides "something for everyone". I suspect I am not the only one critical of videos alone.

    This was/is a subject I am very interested in. But it will take A LOT to get me interested for investment in a "two time loser" (Chrysler).

    While I may be more interested in Chrysler/Fiat as competition for my favorite, F, I won't automatically (ha) exclude them the way I will GM. It would however require a very compelling story, including just how they will guarantee no third bailout. I could not stand the pain or embarrassment of having Chrysler, even with Fiat in the mix fool us all a third time...

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John Rosevear

John Rosevear is the Fool's Senior Auto Specialist. John has been writing about the auto business and investing for over 20 years, and for The Motley Fool since 2007.

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