Chrysler-Fiat Deal, You’ve Got to Be Kidding (and what small biz can learn) January 21, 2009
So the Wall Street Journal is reporting today that Chrysler has found an international partner in Fiat. What a sweet deal for Fiat. Put up no money in exchange for 35 percent of Chrysler. What does Chrysler get?
Technology in vehicles that Chrysler could build and sell in the U.S. Then, if things go well, Fiat gets an additional 20 percent of Chrysler for $25 million.
The “catch” that Chrysler gets an additional $3 billion in government loans. What a bunch of fools they must think we Americans are.
Let me get this straight. Chrysler cannot build a product for which there is enough demand to sustain the business. Chrysler may very well have the absolute best vehicles out there (I’m not an expert on that) but having the best product or service (i.e. being the best attorney in your town) is not a marketing advantage. Many lawyers have been tricked into believing the old “do a good job and they will come” form of random chance marketing.
In a capitalistic society it matters not whether your product or service is the best in its market category. What matters is whether there is a starving market for your product or service and whether you can effectively communicate to that market that you are the one to fill that desire.
So Chrysler is failing not because people cannot afford cars and not because people cannot get loans but because before all of the “financial crisis” started it did not have a sufficiently large base of raving fans clamoring for its product.
So let’s look at the Fiat deal. Fiat provides no cash but gives Chrysler technology and vehicles.
Unless the technology is going to create raving fans, it is only of marginal benefit to a dying company. Having Fiat provide vehicles to sell is almost laughable. Where is the huge starving market in America for a Fiat?
A Chrysler executive is quoted in the Wall Street Journal as saying that the Fiat partnership gives Chrysler not only “a lot of solutions to make us viable, but also profitable.” Unless the Fiat solutions drastically increase the demand for what it is that Chrysler has to sell it is a ridiculous statement.
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