Resisting China

The (auto) world is indeed full of surprises, and the latest shopping spree of Fiat to acquire Chrysler and part of GM has undeniably shown this. What a bold move! It is not long ago that Fiat itself was on the brink of collapse and only saved by a remake of its popular Fiat Cinquecento model.

Now, the Italian car maker goes after Chrysler, primarily to obtain again access to the US car market. Fiat has had a long lasting love affair with the United States, and business activities there date back a hundred years, when the first Fiat cars where exported in 1908. Fiat left the market 25 years ago, mostly because the business success could not really meet the expectations. Should this be different now? In the current circumstances, the US market may be ready for smaller cars, but the question remains whether this will be the same after the economic recovery. As we understand, Fiat won't produce any model in the US within the next 3 years, and at that time the state of the American economy will have changed. In the meantime, Fiat has to deal with Chrysler's operations, and we may suppose that cultural challenges will be an obstacle to overcome. Chryslers ' cooperation with French car maker Simca in the 1970s wasn't too successful, and its marriage with Germany's Daimler in the 1990s did not work out either, precisely because of integration issues. All in all, there are some question marks regarding how Fiat wants to make the collaboration with Chrysler succeed.

In a parallel move, Fiat also wants to reinforce its position in Europe. Never really strong in the major West-European markets (except Italy, of course), the acquisition of GM Europe, and in particular Opel would propel the company to the position of a major player. Quite a reversal to the strategic partnership with GM when Fiat tried to sell its auto business to the American car maker just a few years ago! If it goes through, the Opel deal will be accompanied with some tough management decisions, and the cultural differences between the Italians and the Germans are certainly not less of an issue. In any case, the integration will take time, and the question is whether Fiat and Opel will have this time.

It seems that the US and Europe are tempting for Fiat, but China is no longer in their immediate focus. With an acquisition of Chrysler, Fiat does not come one step closer to the China market as the Americans have ceased their production in the mainland. In addition, Opel is an imported brand, and doesn't play a significant role in China. Fiat itself has departed from the mainland a couple of years ago, and its attempts to find a local partner in Chery or Guangzhou Automotive are apparently on hold. However, there is some talk that Fiat may eye the GM operations in China. Although such an option seems rather unlikely at this point, such a deal would put Fiat in a difficult position. Shanghai Automotive is a strong and self-confident business partner, and would absorb much of Fiat's energy to make the cooperation work efficiently. The juicy part of this deal would be the fact that Shanghai- and Nanjing Automotive's operations were consolidated, and that Nanjing Automotive was Fiat's partner in their failed previous cooperation.

All in all, it seems that Fiat's commitment to China at this point is not clearly pronounced. The Italian car maker was one of the few international players not present at this year's Shanghai Autoshow. While all other car makers showed their confidence and faith in the potential of the Chinese car market, Fiat made a clear statement by choosing to stay away. A pity, in fact! It is worth mentioning that Fiat was one of the first players in the China car market (who remembers the Fiat 126p as one of the first registered private cars), and might have been able to benefit from its early engagement and experiences in the mainland. But it chose to disinvest over time.

There is no doubt, that China's auto market has a bright future ahead, and it remains Fiat's secret, why they are resisting China.

See Chinese version: http://auto.gasgoo.com/news/2009/05/1409051651671110347.shtml

About the authour: Klaus Paur, Gasgoo's  columnist, is Regional Director Automotive for North Asia at TNS China who has over 20 years of experience in marketing and market research, 13 of which have been spent specialising in the automotive industry.