Fiat’s purchase of Chrysler was a bit of a surprise. It was no secret that the Italian automaker had been looking at other car companies.
But they had never seemed like they were really interested in the U.S. company. So, why did they buy it? Look what I found out!
Why Did Fiat Buy Chrysler?
The obvious reasons for Fiat’s acquisition of Chrysler are that they needed more time to build their brand in a new generation and that the US market is massive and ready for expansion. In addition, Fiat wanted to penetrate the American car industry, and buying Chrysler is one of the opportunities Fiat recognized.
Learn more about why Fiat bought Chrysler. Here are nine reasons why. Keep reading for more information!
1. The U.S. Market Is Huge And Ripe For Expansion
Fiat sees a huge opportunity in the U.S., especially since it is one of the largest countries in terms of its population size and GDP per capita.
By acquiring Chrysler, they hope to be able to expand their presence here while also making money on their investment (which will likely be made up by selling cars).
Although America has traditionally been known as an auto market where consumers have few options when it comes to buying cars.
This is changing rapidly due to technology and innovation—and Fiat is well aware of this trend. By purchasing Chrysler, they can help provide more innovative vehicles.
2. Production Equipment Ability Of Chrysler
Chrysler had a lot of experience in building vehicles and Fiat saw this as an opportunity to improve their own operations.
Fiat has been steadily increasing its presence in the American market, and this deal was just the next step in that growth.
Fiat could also take advantage of Chrysler’s existing customer base by selling more vehicles through their dealerships.
It would help them increase sales overall as well as provide Fiat with more money from each sale that goes through their network of dealerships instead of through independent salespeople.
3. Fiat Wanted Increased Access To Low-Cost Financing From Chrysler
This was a key reason why Fiat agreed to buy Chrysler, and this is the reason why it was such a good deal for Fiat.
Fiat would have been able to sell their cars at a lower price and make more money, which would have helped them expand their market share.
4. Fiat Saw A Chance For Synergies Between Their Products
A lot of people think that Fiat’s buying of Chrysler was an attempt to boost sales of its cars. But it is not totally the case.
Fiat has been steadily losing market share in the U.S, and the company decided to buy Chrysler because it saw a chance for synergy between its existing products and those of Chrysler.
Fiat was interested in expanding into the United States market, but it didn’t want to invest heavily in new plants and equipment.
It feared that its investment would be wasted on less profitable models.
Buying Chrysler would allow Fiat to expand its presence without having to go through all of those costs, which is why it bought this company rather than another one.
5. Shared Technology
Fiat has been looking for a way to get more of its technology into other vehicles, and it recently announced plans to do this with Tesla.
The two companies already share some technology, but they want to expand that even further by sharing more components and even entire engines.
This would give Fiat access to Tesla’s electric powertrain technology, which could make driving cars even more fuel-efficient while also reducing emissions.
6. The Branding
Fiat doesn’t have much experience building cars on its own—but it does have experience selling them under its brand name (and as part of European car company PSA Group).
With Chrysler, they would have access not only to all of their other brands’ names but also their entire distribution channels across the U.S., Europe, and Asia Pacific regions where they currently sell many different models under those brands.
7. Fiat Wanted To Cut Costs And Become More Competitive
Fiat’s CEO, Sergio Marchionne, has a vision for the company: he wants to cut costs and become more competitive in the automotive market.
He believes that if Fiat can accomplish this, it will be able to thrive in a changing industry where new players are emerging.
Marchionne knows that Fiat needs to make changes to stay relevant in an industry where new models come out every month and consumers’ tastes change quickly.
To do this, Fiat is investing in plant upgrades and making changes to its product line.
8. The Company Is In The Midst Of A Turnaround
The company is in the midst of a turnaround and has been working to improve its quality and customer service.
This acquisition will give them more resources to continue that process and help them focus on their target market, which is young people who are looking for value and style.
It will also give Fiat access to an entire line of vehicles that have proven their dependability in the United States market.
9. Chrysler May Have More Room To Grow Than Some Other Automakers
It’s no secret that Fiat has been looking to expand its business for years.
The Italian automaker spends billions of dollars each year on research and development, and it plans to diversify its product offerings in order to appeal more broadly to consumers.
One of the biggest areas where it hopes to grow is the American market, which is currently dominated by foreign automakers like Ford, Toyota and Honda.
Fiat has already shown some interest in this space—it bought a minority stake in Daimler AG last and now joined by Chrysler that has lots of experience in auto making.
We’ve known for years that Chrysler was an aging business. However, it is precisely because of its age that Fiat can make use of Chrysler’s unique assets and find new growth opportunities.
And while it may not be the most profitable business in the world, it has the potential to make everyone a little more money, especially if Fiat is able to realize those opportunities.
It’s safe to say that it isn’t a risk-free move for Fiat, but there are many reasons why the company could benefit from this acquisition. It will be exciting to see what happens in the future.