GM or Chrysler: Which one is a better option for Fiat?

Filed in archive Market Overview on May 27, 2009

I am sure you have heard about the rumors related to the merger of Fiat with two American auto-makes Chrysler and GM (Opel part). Besides economy of scale and other motivations, I believe Opel option is a better candidate from supply chain point of view. The Opel merger in essence woul be a supply chain merger: There is low degree of overlap between the two as Opel has a strong distribution network in Northern Europe while Fiat is strong in southern and central europe.

After the merger starts and when it's the time to combine and consolidate two supply chains, it's easier to realize the efficiencies in two European companies: The distances are lower, cultural differences are less and overall regulation in EU is roughly the same.

On the other hand, even though Chrysler offers a good platform and distribution network in U.S., it's culturally very different from Fiat; the distance would also add to the problem and there is relatively lower possibility of combining product platform themsleves as the two companies produce two different types of cars.

Analysts still don't know if Fiat is only going for Chrysler of both companies and if the company can handle both mergers, but in any case it's less probable that Fiat would go for an "Opel only" option.