Tuesday, January 20, 2009

Fiat and Chrysler

Fiat's Chairman Sergio Marchionne has already said that he doesn't believe that an automaker can survive unless it produces 5 million units a year. Add Chrysler's output onto that of Fiat and you come up with a number of 3.5-4.0 million - a figure much closer to commercial critical mass than either achieves at the moment. Strategically,the proposed deal makes sense but it faces three obstacles :
  • Can Chrysler cut it's current estimated burn rate of $50m a day and hold out until the new models arrive ?
  • Will Congress continue to allocate funds to a Chrysler that is manufacturing a foreign designed product ?
  • Can consumers afford new cars in the absence of credit in the general economy? They may like the product but not be able to afford it.

Good to see positive thinking on the part of Fiat's top team.

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