Fiat and Chrysler: Technology Key to Turning Around Business

Chrysler, a company famous for its historic turnaround under Lee Iacocca in the late 1970s and early1980s that involved a federal loan guarantee to stay in business, is once again attempting a turnaround after it filed for bankruptcy protection   

The Fiat 500 will be the first sold under the Fiat name in the United States in more than 20 years. Pictured is the EV version that will be developed by Chrysler and is scheduled for release in 2012. (Photos courtesy of Chrysler)

There are other similarities between the previous turnaround and this attempt as the company has another strong leader in the form of Fiat Chief Executive Officer Sergio Marchionne, who, like Iacocca, has experience in auto company reversals.

While Chrysler was in the midst of its turnaround in the 1980s, Fiat was on the way out of the American car market. The company had expanded its presence in the United States in the 1970s due to the decade’s oil crisis, which caused U.S. consumers to focus on smaller, more fuel-efficient vehicles. Lackluster sales prompted the company’s exit several years later.

Fiat didn’t have such a great time in its home base of Europe during much of the last 30 years as it sank into more than €8 billion (US$10 billion) in debt amid continued quality complaints. The company began a turnaround in 2004 when it hired Marchionne as chief executive. Like Iacocca, Marchionne cut positions and sought new designers to spur growth and reinvigorate the brand.

The big splash for the companies will be the introduction of the Pentastar V6 engine in June in the 2011 Jeep Grand Cherokee, the first all-new vehicle model released since the Fiat partnership was announced…

The 2011 Jeep Grand Cherokee will be the first all new designed vehicle produced by Chrysler since Fiat acquired interest in the company and it emerged from bankruptcy. It will be the first vehicle to feature the Pentastar V6 engine (below).

Pentastar V6 engine

This turnaround culminated with the Fiat 500 winning the 2008 European Car of the Year award at the Geneva Motor Show. While the car’s small, eye-catching body designs caught the public’s imagination, arguably more impressive was its MultiJet 1.3-L diesel engine.

This high-powered fuel-injection system uses common rail technology to allow the vehicle to maintain injection pressure no matter the engine speed or amount of fuel injected into its combustion chamber and can allow up to eight injections per cycle. The engine also improves the fuel consumption and reduces the vehicle’s emissions.

Company officials based in Fiat’s Centro Ricerche Fiat (CRF) research center believe the company’s MultiJet engine technology can lead to virtually zero emissions from an internal combustion engine.

CRF also introduced its MultiAir technology, which is an electro-hydraulic variable valve-control system that allows air to bypass the throttle and instead be drawn directly through the engine’s intake valves. This is designed to increase the maximum power of the engine by 10% and the low-revolutions-per-minute torque by 15% while reducing carbon dioxide (CO2) emissions by 10% and nitrogen oxides emissions by 25%.

Fiat introduced these technologies and experienced its turnaround as gasoline prices rose in the United States and caused auto buyers to once again look for more fuel-efficient vehicles. This gave Fiat a chance to once again enter the U.S. market with a splash.

That entry point is scheduled for later this year courtesy of its 20% ownership, which can increase to 35%, in Chrysler that it acquired following that company’s bankruptcy and government bailout in 2009. This deal seems to be a perfect match as it helped to save Chrysler financially and gave Fiat a more secure U.S. entry point that includes established North American manufacturing plants, along with sales/marketing and dealer networks.

Fiat and Chrysler engines, such as this four-cylinder turbo FIRE, utilize Multiair technology, which improves maximum power by 10% and harmful emissions by 25% by drawing air directly through the intake valves.

One of the first big questions on industry watchers’ minds was, “When is the Fiat 500 coming to North America?” followed quickly by “Will it be re-branded with a Chrysler badge?” The answers are: the end of 2010 and no.

Nick Cappa, a Chrysler spokesman, told FUEL that the Fiat 500 will be just the first vehicle and technology from Fiat that will be sold under the partnership. “Anything and everything has been discussed and is on the table [regarding technology and vehicles],” he said.

The Fiat 500 will be sold in smaller shops next to Chrysler and Dodge dealers in target markets similar to how Mercedes-Benz sells Smart cars in this country. These smaller dealerships will be adding more Fiat vehicles, and it is rumored that Alfa Romeo vehicles will be added in the coming years with a possible launch in 2012.

Marchionne’s plans for these companies will involve Chrysler/Dodge/Jeep building larger vehicles while Fiat will concentrate on smaller vehicles and crossovers during the coming years.

However, in terms of engines, Chrysler and Fiat are moving just as quick, if not quicker, in their exchanges. While Fiat brings engine technology such as MuliAir and MultiJet to the table, Chrysler brings its ability to make cost-efficient gasoline engines, including V6 engines, as well as hybrid and electric motors.

Indeed, the Fiat 500 will not only feature the 1.4-L 16V FIRE (fully integrated robotized engine) engine that uses MultiAir technology, the company is also planning on introducing an electric version of the car that will be developed by Chrysler and is expected to reach market by 2012.

Chrysler anticipates offering electric battery-powered light commercial vehicles between 2011 and 2012 and a test fleet of plug-in electric hybrid versions of the Ram 1500 pick-up around this same time frame.

Sergio Marchionne oversaw Fiat's return to profitability and hopes to do the same with Chrysler. One of the key factors for the companies is making more fuel-efficient and powerful engines, such as this 1.4-L, 16-valve Turbo FIRE with Multiair engine.

While Chrysler will handle the hybrid and electric motors, Fiat will provide alternative fuel engines such as those powered by compressed natural gas, bi-fuel, Tetrafuel, liquefied petroleum gas, as well as offer start-and-stop and dual clutch transmissions. Applications for these alternative fuel engines have not been announced, but stop-and-start and dual clutch transmissions are set to begin introduction in Chrysler/Dodge/Jeep vehicles by year-end 2010.

Prior to the introduction of the Fiat 500, the big splash for the companies will be the introduction of the Pentastar V6 engine in June in the 2011 Jeep Grand Cherokee, the first all-new vehicle model released since the Fiat partnership was announced and the company emerged from bankruptcy.

This die cast aluminum block engine will provide 280 horsepower while improving fuel efficiency from the vehicle’s previous V6 engine by 11%. The 2010 Grand Cherokee’s fuel mileage rating is listed between 16 city/21 highway mpg for a 4x2 forward wheel drive vehicle and 15/20 mpg for a 4x4 version.

This engine will expand its base to seven vehicles and eventually replace every V6 engine in the Chrysler family vehicles. The engine will expand the usage of E85 Flex Fuel capability already in place in the brand.

This will be followed by the introduction of start-and-stop technology in the diesel version of the Jeep Wrangler by fourth-quarter 2010 for international markets. This technology will shut down the engine when the vehicle is stopped and reduce fuel consumption and CO2 emissions by 3% to 5%,

These moves are just the start of a five-year plan that Marchionne has in place that, he said, will return Chrysler to profitability within five years. He added that while some analysts may have doubts about this strategy, he pointed to his past history with Fiat as reason for believing in it.

“In 2004 when I arrived in Fiat … [the press said] the plan was ‘as impractical as it was optimistic.’ In 2008, Fiat had its highest trading profit in its 111-year history almost $5 billion,” he said at a recent National Automobile Dealers Association conference.

There is additional cause for optimism following Chrysler’s first-quarter 2010 results, which ran ahead of expectations by posting the company’s first operating profit since second-quarter 2006. The $143 million operating profit represented a $410 million swing from fourth-quarter 2009. In addition, net revenue was up 3% to $9.7 billion with liquidity of $9.8 billion, including $2.4 billion in undrawn government loans.

“It is clear that if we continue to perform at this rate we're going to be in excess of the guidance that was provided in 2009,” he said.

Given these figures, Marchionne said that Chrysler may increase its financial targets for 2010 in the second half of the year, and it is targeting an initial public offering as “quickly as possible,” depending on the division’s performance as well as that of the stock market.

Frank Nieto can be reached at
+1 (703) 891-4807 or
fnieto@hartenergy.com