Fiat Weighs Making Chryslers In Italy, Ending Magna Deal

By Gilles Castonguay
Of DOW JONES NEWSWIRES
LA SPEZIA, Italy (Dow Jones)--Fiat SpA (F.MI) will let expire Magna International Inc.'s (MGA) contract to build Chrysler Group LLC vehicles in Europe and move their production to a manufacturing site in Italy that the Italian group bought at auction this summer.

"Absolutely," Fiat Chief Executive Sergio Marchionne told Dow Jones Newswires at a company event when asked if he would let expire the contract that has seen Magna build Chrysler vehicles at its Austria plant for years.

Fiat plans to invest EUR150 million during the next three years to convert the site of niche manufacturer Carrozzeria Bertone for Chrysler product assembly. The Italian group bought the defunct car plant, which has production capacity of 70,000 cars a year, at auction in August.

Magna currently builds the Chrysler 300C and the Jeep Grand Cherokee.

The move would be a continuation of Fiat's strategy to take control of Chrysler's manufacturing. Fiat has pulled Chrysler out of a number of partnerships with the likes of Japanese auto makers Nissan Motor Co. (7201.TO) and Mitsubishi Motors Corp. (7211.TO) as it sets about restructuring the third-biggest U.S. car maker, in which it owns a 20% stake.

It is unclear whether Fiat's decision was influenced by Magna's agreement earlier this month to acquire a majority stake in General Motors Co.'s European operations, which produce the Opel and Vauxhall brands. The deal has raised fears among customers of the Canadian auto-parts maker: Germany auto makers Volkswagen AG (VOW.XE) and BMW AG (BMW.XE) have expressed concern about sharing technical secrets with a supplier that now stands to become a direct competitor in making cars....More

Chryslers New Ram Plan Poses Brand Jam

Chrysler is potentially headed for a brand problem that will rival the pickle that GM is trying to extricate itself from.

Here is the deal. Chrysler has three main brands at the moment: Chrysler, Dodge and Jeep. But it has made it clear to the ad agencies pitching its ad account that it is splitting off its pickup truck and commercial vehicle business off to a new brand?Ram.

That?s right. Going forward, and as soon as Chrysler has the idea to run with, the pickup it sells now won?t be sold as Dodge Ram, but rather?.Ram. Other vehicles that will come from the Fiat-Chrysler tie up in the commercial segment will also be called Ram.

So, now we are up to four brands to support. Now, add the Fiat 500, which will be sold as a Fiat when it arrives in Chrysler showrooms in 2011. And, don?t forget Alfa Romeo, which Fiat will sell through Chrysler distribution in key markets that make sense for the Italian sport car maker.

This seems like a lot of brand differentiation to manage and support by a company that has been poor at both.

As I look at auto sales numbers through August, I see a 9.2% market share for Chrysler spread among the three brands it has. That share is inevitably going to go down as the company pares models. Indeed, Merrill Lynch projects that Chrysler loses a whopping five to six points of share in the next four years unless it comes up with some product surprises from the Fiat alliance.--...More