Fiat - Chrysler

Group Project

Mergers & Acquisitions

Mario BEER
Shiv BHATIA
Francisco Xavier FERNANDES THOMAZ
Jose Antonio DE MELLO
Francisco Javier LOPERENA MERCHAN
Max VAN DEN BIGGELAAR
Agenda

01 02 03 04
In-depth Analysis In-depth Analysis
Sector Overview Merger Objectives
of Fiat of Chrysler

05 06 07
Post-Acquisition Merger
Deal Analysis
Performance Conclusion
01
Sector
Overview
1.1 Description of the Sector
Automotive industry
The automobile business is a dynamic and highly competitive industry that is vital to worldwide economies. It includes a wide
variety of tasks relating to vehicle design, manufacture, marketing, and distribution.

Manufacturing
Top 5 Largest Automotive producing
China stands as the world's largest automobile manufacturer, producing approximately nationalities and Italy
28% of all automobiles worldwide. Production in million cars in 2019
Economic Value
Italy (0.54)
In 2022, the automotive industry was estimated to be worth $2.7 trillion, highlighting its
substantial contribution to the global GDP. India (4.5)

Employment
Germany (4.6)
With over 15 million people employed in the sector globally, China alone accounts for
more than 8 million automotive industry jobs. Japan (9.6)

Exports USA (10.8)

In 2021, global exports in the automotive industry reached $710.4 billion. Germany,
China (25.7)
renowned for its automotive process, led the way with automotive exports worth $139.1
billion, accounting for 19.6% of the total exports.

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1.2 Other strategic alliances
General Motors (GM) and PSA Group Alliance
› In 2012, GM and PSA Group formed a strategic alliance to strengthen
their positions in the European market.
› Collaboration on vehicle development, shared platforms and
technologies, purchasing and logistics.
› The aim was to achieve cost savings and improved competitiveness.

Renault-Nissan-Mitsubishi Alliance
› Formed in 1999 and expanded in 2014 with Mitsubishi Motors joining, the
Renault-Nissan-Mitsubishi Alliance Collaboration created one of the
world’s largest automotive groups.
› They shared ownership and collaborated in vehicle development,
manufacturing, purchasing, and technology sharing, seeking synergies
and cost savings.

Volkswagen AG and Porsche SE Holding

› In 2005, Porsche acquired a significant stake in Volkswagen, initially
as an investment.
› Due to financial challenges, Volkswagen eventually acquired
Porsche in 2012. This integration strengthened Volkswagen's position
as a leading automotive manufacturer.

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02
In-Depth
Analysis of
Fiat
2.1 Fiat - History

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2.2 Fiat – Product Overview

› Fiat Tipo in 1910: Affordable model in

line with mission of democratizing
mobility.

› Fiat 500: From 1957 until now, the

Cinquecento is one of the iconic
compact models of Fiat. Remodeled
in 2007.

› Fiat Panda: From 1980 until now, this

practical small car gained popularity
for the affordability and durability.

› Fiat Uno: During 1983 and 1995 it was

an important model to stabilize the
recovery during the 80s.

› Fiat Punto: This supermini model

cemented Fiat’s leadership in the
small car market.

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 2.3 Fiat – Previous M&A
Alfa Romeo 1986 deal: Pizza meets Pasta
› Fiat acquired full control of Alfa Romeo in 1986 to get into the
Italian luxury car market.
› Possibility to leverage Alfa Romeo’s brand heritage and
engineering expertise.
› Gain even more control of the Italian market.
Maserati 1993 deal: Fiat increases horsepower
› In 1993 Fiat purchased a controlling stake in the Italian luxury car
manufacturer.
› The goal was to expand Fiat’s product portfolio and strengthen
the presence in the luxury segment.
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Portfolio Technology and Global Reach Synergies and
Expansion Expertise Access cost efficiencies
Other M&A Activity
1925: Acquisition of S.P.A., an Italian automaker, to
gain access to manufacturing and technology.
1967: Acquisition of Autobianchi to diversify into
small and compact car segment.
1969: Acquisition of Lancia, to expand product
portfolio. Lancia makes luxury cars.
1971: Fiat acquired Abarth, an Italian racing car
manufacturer and performance tuning company to
enhance performance in Fiat’s vehicles.
1999: Acquired majority stake in CNH Global NV. To
expand its portfolio in the agricultural and
construction machinery sector, and created CNH
Global, one of the world's largest agricultural and
construction equipment companies.
03
In-Depth
Analysis of
Chrysler
3.1 Chrysler - History

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 3.2 Chrysler – Product Overview

› Chrysler Imperial: car in lesser luxury

field. Produced until 1954.

› Plymouth: introduced in 1928 for low-

end market. Shaped muscle car
industry and one of the most
successful models.

› Chrysler pioneered minivan segment

with Dodge Caravan and Plymouth
Voyager in 1984.

› Under the Dodge brand, the Dodge

Charger and Challenger were the
iconic models.

› Chrysler Financial is established in 1961 as a standalone

› Jeep provided SUVs and off-road
company to offer financial services to support Chrysler’s
vehicles. Popular are the Jeep Grand
automotive business. Offering: retail financing, leasing, loans.
Cherokee and Jeep Wrangler.

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3.3 Chrysler – Previous M&A Portfolio Technology and Global Reach Synergies and
Expansion Expertise Access cost efficiencies

Daimler 1998: From Textbook Deal to Fiasco Other M&A Activity

› Daimler-Benz acquired Chrysler for more than $35bn stock swap
1928: Acquisition of Dodge Brothers Inc to
› Deal intention: Scale-enhancing industry consolidation deal strengthen presence in US.
› Reach all principal auto-buyer segments
› $8bn in anticipated cost synergies 1950s: Simca, Rootes Motors Ltd. & Barreiros Diesel ->
› At that time Chrysler was the most profitable auto company Chrysler France, UK and España.
(23% market share in US) and top management
› Integration failure: not merger of equals (as advertised), but 1970: Acquired 24% of Mitsubishi to get access to
takeover. Cultural clash (smoke detector story), failure to retain smaller, more fuel-efficient cars.
top management of Chrysler and unaligned guidance
1985: Acquisition of Gulfstream Aerospace to
diversify product portfolio.
PE firm Cerberus pays $7.4bn for 80% stake 1987: Acquisition of Lamborghini and American
Motors to get into sports car and jeep segment.
› Cerberus Capital Management will contribute $5bn to Chrysler,
which it will now control and only $1bn to Chryslers finance arm.
› Daimler gets $1.4bn.
› With more expenses to cover losses before the deal (since 1983: Joint Venture with Renault and AMC to gain
Cerberus gets Daimler debt-free), Daimler expects to finally pay access to technology.
$650mn to close the deal 1987: 50:50 joint venture with Mitsubishi named
Diamon-Star Motors to produce subcompact cars.
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04
Merger
Objectives
4. Merger Objectives

There is are some important questions to be considered

regarding the merger of Fiat and Chrysler:

“What expectations did they have by entering into a

merger agreement, and more importantly, what were
each of the parties going to get out of this deal?”

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4.1. Why merge? – Fiat’s objectives

Expansion to North Diversification and

America Portfolio Expansion

Technology and
Economies of Scale
Innovation

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4.1. Why merge? – Fiat’s objectives
Expansion to North America
› Prior to gaining a stake in Chrysler, Fiat had limited market
penetration in the region due to its European focus.
› Chrysler’s big dealer networks, production facilities, and
brand awareness made a merger following the acquisition
of a high stake in the company.
› Fiat managed to extend its consumer base and enhance
sales by gaining access to North America.
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Diversification and Portfolio Expansion
› Fiat was able to diversify its portfolio by being able to
compete in the large vehicle segment, while Fiat itself
previously mainly focused on the small vehicle.
› The product portfolio was extended with popular brands
such as Jeep, Dodge, and AM were now part of the
company.
› Competitiveness and market share in the overall industry
improved as the product portfolio was enlarged.
4.1. Why merge? – Fiat’s objectives
Technology and Innovation
› Merging with Chrysler offered Fiat huge opportunities in
capitalizing on its expertise in engine manufacturing,
hybrid systems, and vehicle platforms.
› The technologies and innovations could be incorporated
by Fiat for future models.
› Overall competitiveness in the global automotive business
increased.
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Economies of Scale
› Increased production following the merger would see Fiat
gain better economies of scale, allowing them to become
significantly more competitive.
› Besides production volume, economies of scale would also
be achieved through platform pooling and sharing
capabilities with Chrysler.
4.2. Why merge? – Chrysler’s objectives

Financial Stability International

and Resources Expansion

Technology and Product Portfolio

Efficiency Expansion

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4.2. Why merge? – Chrysler’s objectives

Financial Stability and Resources International Expansion

› Chrysler was in desperate need for financial stability after › In contrast to Fiat, Chrysler’s core market presence was
experiencing financial difficulties because of the financial established in North America, but it was looking to expand
crisis. further globally.

› Merging with Fiat would help Chrysler to benefit from Fiat’s › Fiat established itself in Europe and Latin America, and a
financial support and global resources, allowing them to merger would allow Chrysler to gain easier access to these
better fund its efforts in vehicle development, production markets.
facilities, and innovation.

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4.2. Why merge? – Chrysler’s objectives
Technology and Efficiency
› Through the merger, Chrysler would be able to boost its
technological skills and efficiency.
› Chrysler would be able to build more environmentally
friendly and economical vehicles to better meet changing
consumer preferences, as Fiat had experience in smaller,
fuel-efficient engines.
› The pooling of platforms, manufacturing processes, and
R&D would result in operational improvements, and thus
cost reductions.
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Product Portfolio Expansion
› While Fiat was more focused on the smaller vehicle market,
Chrysler was specialized in serving the SUV segment.
› Improvement overall market competitiveness through
diversification to other automotive segments.
› Chrysler aimed to serve emerging markets by selling
smaller vehicles, which the merger would allow them to
do.
05
Deal
Analysis
 5.1. Deal analysis: Timeline

Chrysler files for Fiat raises its

Deal finalized
bankruptcy stake to 58.5%

June 2009 January 2014

April 2009 2012 October 2014

Fiat acquires Merger

20% in Chrysler announced

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5.2. Deal process: Numbers behind the merger
› Following the acquisition of the first stake of 20% with no
cash, Fiat was able to gain additional stakes in Chrysler if it
reached the following milestones:
› Collaborative production of engines in the US
› Revenue targets outside of North America
› Commitment to production of highly fuel-efficient
cars in the US

› The remaining stake to be acquired as part of the merger

was a stake of 41.5%. Fiat acquired this last stake for $3.65
billion. Chrysler’s implied enterprise value would therefore
be $8.80 billion.

› The merger can be considered as a friendly deal: both

parties had various incentives to do a merger. From the first
moment that Fiat acquired stakes of Chrysler, there was a
non-hostile relationship between them.

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06
Post
Acquisition
Performance
6.1. Financial Performance & Cultural Integration
Financial Side Corporate Culture

Benefits of Fiat's Acquisition of Chrysler Cultural Integration

Enhanced Global Reach and Market Share

Leadership and Alignment
› The acquisition allowed Fiat to expand its global presence and
› Under CEO Sergio Marchionne's leadership, the merged company
increase market share, especially in the US.
gradually aligned their cultures.
Economies of Scale and Cost Savings
Cultural Differences
› The combined company achieved economies of scale and cost
› Clashes between centralized decision-making (Fiat) and decentralized
savings through shared platforms, technologies, and supply chains.
collaboration (Chrysler) have been observed.
Improved Profitability
Integration Challenges
› The acquisition improved the profitability of Fiat by capitalizing on
› Cultural differences led to challenges in areas like IT system
synergies and optimizing resources.
compatibility and global operations management.
Access to Chrysler's Expertise
› Fiat gained access to Chrysler's expertise in producing larger vehicles,
enhancing its product offerings, particularly in the United States.

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6.2. Consequences & Future Developments
Success of the Deal Future of Fiat-Chrysler (Stellantis)

Revitalizing Chrysler Scale and Synergies

› Fiat's investment and strategic partnership helped Chrysler survive the › Stellantis, created by the merger of FCA and PSA Group, becomes one
financial crisis and achieve profitability. of the world's largest automakers.
› Introduction of new models, streamlined product lineup, and improved › Increased scale enhances the company's competitiveness and
manufacturing processes contributed to Chrysler's revival. generates significant cost savings through synergies in manufacturing,
Expanding Global Presence purchasing, and R&D.
› The acquisition facilitated Fiat's expansion in the North American Diversified Portfolio
market, which had previously been challenging for the company. › Stellantis possesses a diverse brand portfolio, including Fiat, Chrysler,
› Chrysler's strong presence in the US provided a platform for further Dodge, Jeep, Ram, Peugeot, Citroën, DS Automobiles, Opel, and
growth and market penetration. Vauxhall.
Synergies and Cost Savings › Stellantis focuses on investing in electric vehicles (EVs) and advanced
› Merger enabled both companies to leverage their expertise in different technologies like autonomous driving.
areas. › The combined resources and expertise of FCA and PSA Group
› Fiat's small car development and Chrysler's expertise in trucks and SUVs accelerate the company's efforts in these areas, ensuring
resulted in cost savings and optimal resource utilization. competitiveness in the evolving industry.

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07
Merger
Conclusion
7. Merger Conclusions: Comparison to Daimler-Chrysler

What makes the Fiat-Chrysler deal a success in comparison to the

failed Daimler-Chrysler deal?
› Sergio Marchionne emphasized the importance of the deal for both parties. Synergies were clearly
laid out, which showed both parties how beneficial this deal would be. Both sides were in for a good
deal, while this was not the case with Daimler-Chrysler. Also, the relationship between Daimler and
Chrysler was not good.

› The integration of corporate culture was very important for the merger to succeed. Fiat and Chrysler
understood each other very well and were able to cooperate to the best of their abilities. On the
other hand, Daimler and Chrysler experienced a cultural mismatch, due to different organizational
structures and insufficient coordination.

› Daimler had a “consolidation mindset”, meaning that they did not attempt to focus on preserving
and leveraging Chrysler’s unique competitive advantages, while Fiat managed to do so.

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Team – We are here for your Questions

Max – will work in Consulting to Mario – prefers taking the Shiv – currently practicing
buy a Ferrari as soon as possible train to Sant Cugat to get his driver’s license

Francisco – will buy a Fiat Francisco – will buy a Chrysler José – plans to buy a 3rd car
after working on this merger after working on this merger this summer

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