As the Chrysler bankruptcy proceeds, the odds are improving that enough of the automaker will survive to consummate a merger with the Italian automaker Fiat. But how, exactly, will the reformulated Chrysler return to profitability?
The company claims that Fiat's innovative small-car technology will fill a gaping hole in Chrysler's product lineup and turn Detroit's No. 3 automaker into a winner. Chrysler desperately needs that kind of help, and Fiat does have some appealing vehicles, like the 500 and Panda, each of which has earned honors as European car of the year. If the Fiat deal flies, such models could be imported to the United States and even built here.
But it's a stretch to believe that a few snazzy little imports are enough to salvage Chrysler. It's not as if American roads are devoid of thrifty runabouts. The Detroit Three clearly have a small-car deficit, but by the time Fiats begin to land on U.S. shores in a couple of years, General Motors (NYSE:GM) and Ford (NYSE:F) will both be rolling out new misermobiles largely patterned after vehicles that have been popular and profitable overseas.
Meanwhile, foreign-based automakers like Toyota, Honda, Volkswagen, and Mazda have been successfully selling small cars in the United States for decades. They're not about to step aside just because the Italians are coming to town. Besides, clever novelties from overseas often land with a splash but struggle to penetrate a crowded market. The Suzuki SX-4, for example, gets good marks for fun, style, and affordability, yet more than a dozen compacts outsell it. Chrysler might want to pay close attention to that mediocre performance—since the SX-4 is a joint venture with Fiat, which sells its own version in Europe as the Sedici.
Here are a dozen vehicles that new Fiat-inspired models will have to outmaneuver in the U.S. market if they're going to help save Chrysler:
Mini Cooper (starting price, $18,550). This is the king of the Eurodarlings, a diminutive if pretentious four-seater that's been a hit since it debuted in 2001. One lesson Chrysler and Fiat could learn from Mini: Small can sell, provided it comes with the added power many American drivers insist upon. Variants like the stretched Clubman ($20,200) and the Crossman (due in 2010), a kind of shrunken SUV, have expanded the brand without diluting it. Oh—it helps that Mini is owned by BMW, a reputational boost that Chrysler may not be able to offer Fiat. Expect the Mini lineup to play aggressive defense if Fiat comes anywhere near its American turf.
Honda Fit ($14,750). It's fun, sporty, and cheap, and somehow the Fit seems to be roomier than a ballpark when the rear seat is folded away. If you're gonna beat that, it'll take more than an Italian accent.
Mazda3 ($15,045). The base model packs about twice the horsepower of the similar-looking Fiat Grande Punto five-door—and costs less. And it offers more style, performance, and practicality than nearly anything else in its price range, from any continent
Scion xB ($15,750). Its hearselike shape isn't quite as interplanetary as the Fiat Qubo, but the xB may be about as radical as a mass-market car can get in America. Plus, it's nearly as roomy as a minivan—and way cooler. And it's backed by parent company Toyota, one of the most reliable manufacturers in the industry.
Nissan Cube ($13,990). If you encounter a cartoonish, neon-colored, brick-shaped buggy this summer, it's not a Fiat Doblo. Not yet, anyway. It's the Cube, aimed at kids who want to lounge, text, and personalize their ride on the cheap. Maybe Fiat will do it better, but the Cube will have a head start.
Kia Soul ($13,300). The funky hatchback impresses reviewers with its spiffy interior, chipper ride, boxy styling, advanced features, and vibrant colors—all for a price that used to be associated more with used cars than new ones. It's taken Korean-based Kia nearly 15 years in the U.S. market to earn those kinds of accolades. Can Fiat do it faster?
VW New Beetle ($18,290). It still looks adorable, even though this modern version of the "people's car" has barely been updated in more than a decade. A brand-new model, due in late 2010 or 2011, could cause competitors headaches for another 10 years.
Chevy Cruze (due in 2010). After lots of talk about how it's now taking small cars seriously, GM's "import fighter" has to succeed. Big. If upbeat styling and perky performance don't win buyers, GM could resort to price-cutting tactics, which will make it even tougher on competitors—especially GM's fellow domestics.
Ford Fiesta (due in 2010). Ford has already launched this "world car" in Europe, where it was designed. That should help work out the kinks before it arrives on U.S. shores. Like GM, Ford needs its newest thriftmobile to be a critical and commercial success, not just an econobox that fills out the lineup. Ford's standing as the only solvent domestic automaker is already helping it gain market share, an advantage Ford is likely to exploit in coming years.
Toyota Prius ($22,000). Remember the Prius? Dealers sold out when gas hit $4 per gallon last year, but sales have dropped as the recession has spooked buyers and driven gas prices back down. Don't expect that to last. Gas prices have started creeping back up, and they could spike again once an economic recovery takes root. Toyota, meanwhile, has added new features to its latest version of this hypermilers' favorite and may introduce a new variant to compete with the lower-priced Honda Insight hybrid.
Fiat, start your engines.