As part of the plan, Chrysler would begin making about 500,000 Fiat-based vehicles and engines in North America. Other parts of the Fiat group also stand to benefit:
-- Fiats Comau product equipment subsidiary is struggling to fill its order book. Retooling Chrysler plants to build models on Fiat platforms would help.
-- Fiats Teksid metallurgical subsidiary, which already has a strong footprint in North America, has the capacity for an additional 500,000 castings a year for engines and gearboxes
-- Fiat groups components division, Magneti Marelli, which is strong in Europe, but not yet a mayor player in North America, could benefit in several of its operating sectors, from engine management systems to lighting and from Brazilian-built shock-absorbers to telematic systems.
However, the expected savings, both on the purchasing and manufacturing side, are not on the immediate horizon: Production of the first Fiat-based vehicles in the US will start not sooner than 2011.
Morgan Stanley auto analyst Adam Jonas in London calls the alliance a deal born of weakness on both sides, matching the fourth biggest European carmaker by volume in Europe with the fourth biggest in US.
Both companies need a partner to survive this crisis, Jonas said. But it is unclear that partnering with each other is the solution.
Paolo Mosole, auto analyst at Intermonte in Milan, has a more positive view on the potential Fiat-Chrysler deal, but is expecting more developments to take place.
We do not consider Chrysler the final answer for Fiat, as we expect a more important deal to be reached, Mosole said. The best candidate could be Frances PSA/Peugeot-Citroen, although some political issues could prevent an agreement in the short term.
But even with their combined volumes, the proposed alliance does not fully correspond to Marchionnes blueprint to fix Fiat.
The Fiat CEO believes annual volume of 5.5 million to 6 million units based on common vehicle architectures is crucial for survival in todays market. The 2007 combined volume of Fiat and Chrysler, about 4.5 million units, is a misleading number: only about 1.5 million units of Fiat-Alfa-Lancia passenger cars were based on common architectures.
By 2015, if Fiat could confirm the viability of its long-term plan, the Italian automaker would be building about 2.5 million units based on common vehicle architectures, to which the US side could add another 500,000 units.
Getting to 3 million units would be encouraging progress, but the proposed Fiat-Chrysler joint production would still lag at least 2.5 million units a year behind the 5.5 million units Marchionne believes is a safe level. If the proposed alliance is finalized, both companies would be stronger, but still require further and broader steps as part of the ongoing world automaker consolidation process.