Chrysler builds cars the Fiat way

There's a new look, commitment and enthusiasm at a refurbished Jeep plant in Detroit and it is a model being replicated across Chrysler Group LLC's 28 North American plants.

Chrysler has spent $700 million on the new Jeep Grand Cherokee and the Jefferson North assembly plant where it is being built. But the investment represents more than the traditional tooling and promises that accompany the launch of a next-generation vehicle.

Cars are now being built the Fiat SpA way. After Chrysler emerged from bankruptcy June 10 and formed a partnership with Fiat, CEO Sergio Marchionne ordered all Chrysler plants to adopt Fiat's World Class Manufacturing system, designed to improve quality and productivity by eliminating waste and bottlenecks.

Fiat’s Compact architecture to underpin 700,000 Chrysler vehicles in the U.S.

Fiat SpA’s new Compact vehicle architecture, which will debut on the new Alfa Romeo Giulietta hatchback, is scheduled to underpin 700,000 Chrysler group vehicles a year in the United States and 300,000 in Europe by 2014. Fiat and Chrysler are currently working on a widened version of the architecture, known as Compact Wide, which will underpin at least seven new models for the Chrysler, Dodge and Jeep brands.

According to Automotive News, the first Chrysler Group vehicles to get the Compact Wide architecture will replace the PT Cruiser and the Dodge Caliber in 2012.

Fiat may get mileage from Chrysler after all

Fiat 500 Fiat

While some analysts think Chrysler is unsalvageable, others are now taking the view that Chrysler is a turnaround story in the

Maybe, just maybe, Fiat Group SpA's link with Chrysler Group LLC will translate into dazzling stock market success.

While some investment analysts think Chrysler is unsalvageable, and therefore of no use to Fiat, others are now taking the view that Chrysler is a turnaround story in the making, one that could lift the Italian auto makers' fortunes.

In a Nov. 20 note, UBS said Fiat's partnership with Chrysler in the near term is worth €1 ($1.49 U.S.) a share to Fiat, equivalent to 10 per cent of the Italian auto maker's latest share price.

"We continue to see value in Fiat as an agent of transformational change and not owning Fiat is akin to a risky bet against structural change in European autos," UBS analyst Philippe Houchois and his colleagues wrote.

The most bullish endorser of the Fiat-Chrysler partnership is Adam Jonas, Morgan Stanley's European auto analyst. In a report published last month, he rated the shares a "buy" because the "current share price massively under-appreciates the substantial call-optionality that Fiat shareholders have with the tie-up with Chrysler."

Fiat, led by Italian-Canadian CEO Sergio Marchionne, owns 20 per cent of Chrysler, for which it paid nothing, and can boost it to 35 per cent under certain conditions, such as producing a car in the United States that achieves 40 miles a gallon. Mr. Marchionne and his team took management control of Chrysler in the summer.

Fiat shares, listed in Milan, have been among the industry's best performers, with one-year return of almost 108 per cent and a 6-month return of 28 per cent. The equivalent figures for France's PSA Peugeot Citroen are 94 per cent and 23 per cent. UBS downgraded Fiat to "neutral" from "buy" on Friday, not long after Fiat shares topped €11, more than three times their 52-week low. They closed the week at €10.

Mr. Marchionne's turnaround plan for Chrysler assumes the U.S. auto market will rebound to 14.5 million sales in 2014 - a figure analysts consider credible - from 10.5 million this year and that Chrysler's market share will rise to about 14 per cent from less than 10 per cent this year. Chrysler will rely on Fiat's small-car platforms to overhaul Chrysler's clapped-out fleet of passenger cars and small SUVs. The first Fiat-inspired cars are to reach Chrysler showrooms in 2011.

Mr. Jonas, of Morgan Stanley, thinks the synergies of combining the Fiat and Chrysler platforms and other business operations, such as purchasing, could average €1.7-billion a year starting in 2011.

In October, he valued Fiat's stake in Chrysler, plus the synergies, at €8.5 a Fiat share, raising his target price for all of Fiat to €16.80 a share.

Fiat Should Add Italian-Made Electric Cars to Plan, Union Says

Italy’s biggest carmaker, should add electric models and hybrids in exchange for continued government incentives, the company’s largest trade union said.

While Fiat is already introducing Multi Air gasoline engines that cut consumption and emissions by at least 10 percent, it could go further, Giorgio Airaudo, a leader of the Fiom CGIL metalworkers’ union, said yesterday in an interview.

“It makes no sense for us to confirm production of old products,” Airaudo said by phone from Turin, where Fiat is based. “The government needs to link incentives to innovation.”

Unions are concerned Fiat may shift production of new models to North America following its alliance with Chrysler Group LLC. Chief Executive Officer Sergio Marchionne has urged Italy to retain payments for scrapping older cars and buying more efficient ones to buoy sales amid the economic slump.

Airaudo, whose union is the country’s biggest, with 370,000 members, said that while Industry Minister Claudio Scajola is right to say Fiat’s plant in Termini Imerese, Sicily, should stay open, the site could be put to better use.

The carmaker said in June it plans to continue production of the Lancia Ypsilon at the factory through 2011 and then use it for “other, non-automotive, production.” The plant is Fiat’s smallest in Italy and employs 1,400 people.

“Over time a lot of investment has been made in that factory and I’m told the quality of production is good,” Scajola said yesterday in Dubai.

Workers from Termini Imerese occupied the town’s city hall on Nov. 18. Scajola visted them the next day and said he’ll take up their concerns when he meets with Marchionne on Dec. 1. to review Fiat’s production plan.

Five Plants

Fiat, Italy’s largest manufacturer and biggest private employer, runs five auto plants in the country, with the workforce totaling 31,000. Marchionne plans to cut production in line with shrinking demand. Fiat says it loses 1,000 euros ($1,493) on every vehicle produced at Termini Imerese.

The company should bring electric-car technology to Italy through its link with Chrysler, Airaudo said.

“There’s no reason to limit the development of electric cars to the U.S.,” he said. “We should be developing new technology that we can sell in Europe.

Fiat already uses electric technology for its delivery vans, a segment where it sees the most demand. Lou Rhodes, who heads Chrysler’s electric vehicle development, has been charged with overseeing the same segment at Fiat, a Fiat spokesman said.

Fiat cars amongst the greenest in Australia

Italian motoring giants Fiat has become the first car maker to have its entire range represented in the top five greenest cars available in Australia.

The popular Fiat 500 offers Australia's best fuel economy in one version and the second highest green rating in another version, followed by the Fiat Punto in third spot and the Fiat Ritmo rounding out the top five 'Top Performers' in the Australian Government's Green Vehicle Guide with its newly launched Fiat Ritmo Dynamic 1.4.

Fiat's performance in the Australian Green Vehicle Guide mirrors the marque's performance in Europe - it has been the number one performer in having the lowest range average for carbon dioxide emissions across its range based on total sales for the second year running.

Andrei Zaitzev, General Manager for Fiat in Australia said: "Fiat's belief is that to make a real impact on Carbon Dioxide emissions, every model in the range has to be pulling its weight and making a real contribution,"

"It is simply not good enough to have one model in the range that has good emissions and fuel economy covering for other poorly performing models. This is why at Fiat we have choice of the benchmark JTD-Multijet diesels and the remarkable, compact Fire and T-Jet petrol engines in all our cars, so which ever Fiat a customer chooses, whether its petrol or diesel, they will be driving a car that makes the best possible contribution to cutting carbon dioxide emissions."

It is safe to say that Fiat has set the new benchmark for green vehicles in Europe and Australia.

Fiat cheers Italy's readiness to extend incentives

Fiat (FIA.MI) CEO Sergio Marchionne said on Wednesday that Italian Prime Minister Silvio Berlusconi's apparent readiness to extend state incentives to the auto industry beyond the end of this year was "encouraging".

Marchionne said on the sidelines of an industry seminar he was "ready to work with the system to find a solution for incentives in 2010 and 2011". The Fiat boss has previously said that he favours phasing out incentives over two years.

Speculation Abounds Around Fiat-Run Chrysler

As we near the anticipated early November announcement about the future of Chrysler, news agencies are already speculating about its plans. Today, Reuters reported that Fiat will spin off Ram into its own brand and new, jointly designed Chrysler models won’t arrive until late 2011.

Publications such as Car & Driver magazine have suggested the new models will include a midsize sedan based on a Fiat and branded as the Dodge Avenger and Chrysler 200, which was shown as a concept car at last year’s Detroit auto show.

The redesigned Chrysler 300 and Jeep Grand Cherokee have already been announced and will go on sale at some point in 2010, as will the Fiat 500.

As to the Ram brand rumor, Reuters says its to serve as an umbrella for all of the Dodge trucks. However, with weakening demand for small trucks like the Dakota and sales of the Ram falling behind its Detroit rivals, we’re not sure there is any reason to change the way Dodge sells trucks.