Chrysler's New Centralized Business Strategy

In recent years Chrysler has pursued a strategy of building global alliances that its new CEO, Sergio Marchionne, is now scrapping in an effort to trim costs and make the company more competitive.

Since Chrysler’s purchase by Fiat S.p.A. this summer, Chrysler has severed its alliances with German automaker, Daimler AG, which had supplied the company with engine components and its Sprinter commercial van.

Chrysler’s has also called off a planned partnership with Japanese automaker, Nissan Motor Company. Under that agreement, Chrysler would have provided the Japanese automaker with a redesigned version of its Titan pickup in exchange for a Chrysler branded small car based on Nissan’s popular Versa model.

Chrysler is also reportedly considering withdrawing from its Global Engine Manufacturing Alliance partnership with Mitsubishi and Korean automaker, Hyundai. That partnership has produced four-cylinder engines used in a number of Chrysler vehicles including the Jeep Compass and Patriot crossover, Dodge Caliber and Avenger and Chrysler Sebring.

Another strategic move may also include importing diesel engines manufactured by Fiat to replace the Cummins engines that have long been a selling feature of the automaker’s truck line.

Chrysler’s new strategy is designed to streamline processes and lower costs by keeping all future projects within the Fiat and Chrysler corporate family.

Diversification is being replaced by centralization wherever possible. Fiat will develop its product line for wider distribution in North America while adapting Chrysler’s product line for greater acceptance in existing European markets.

The company expects this approach to developing model lines, which Marchionne calls “architectures”, to maximize the sales potentials by building on each company’s strengths. Marchionne is optimistic that, “We will get to the number that I think is important, which has been roughly 1 million vehicles per architecture.”

Chrysler’s North American engineers are already working to create a variety of new vehicles adapted from Fiat models. Chrysler is expected to announce its decision on which vehicles and powertrains will be included in the company’s five-year plan later this month.

Chrysler’s decision to abandon importation of Daimler’s Sprinter commercial van is just one example of how these new measures will benefit the automaker by allowing it to offer more competitively-priced vehicles to cost-conscious auto buyers. The 2009 Dodge Sprinter has a base sticker price of $41,130. Chrysler plans to replace it with either the Fiat Ducato or Iveco Daily with pricing starting around $30,000.

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