Nov 20, 2020 in Case Studies

Merger Between Fiat and Chrysler




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The Merger of Fiat and Chrysler

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The Merger of Fiat and Chrysler

The world economic crisis made the majority of American car manufacturing companies face the probability of bankruptcy. The sales were have been constantly decreasing in the last years and, therefore, there is no surprise in the fact that a series of the biggest players in the market sought for help from the United States government, the private sector and sometimes even from their competitors. Chrysler, as one of the most well-known car manufacturer, lost a lot of revenues and experienced recession, even though the company received the necessary help from the United States government, which helped the company to stay afloat. In such a way, the merger was inevitable and soon Fiat decided to buy the stake in Chrysler. This merger of the two companies aimed at not only saving Chrysler, but also supporting Fiat that faced the decrease in its sales too. The union aimed at opening new markets to the Italian carmaker and providing it with the necessary financial recourses. The main challenge both companies are going to take within this union is the cross-cultural differences, as the companies are quite similar to each other in terms of systems and programs.

The issue can be studied with regard to the Geert Hofstedes Cultural dimensions theory. These two companies face the great environmental impact and are influenced by stakeholders. Therefore, traditions, corporate culture, internal and external relations and are typical for the region where it does its operations. In this case, Chrysler will face a series of fundamental changes. First of all, the company will face a lot of reforms in the production sector and the financial distribution, as the merger gives it the access to the Fiat fabrics and factories, modern technologies and materials that aim at improving the production process, quality of the cars and general profit. In the cross-cultural dimension, American culture influences the internal relations within Chrysler. It appears like there is low power distance, as the quality of the final product depends on the two-way communication. In addition, the initiatives are appreciated and there is interdependence among all the actors within the company. These are easy to notice, as the company is old and reputable, although it produces cars that meet all the requirements of the contemporary car manufacturing industry and in order to save the company, its directors decided to unite with Fiat Company. In addition, Chrysler is a company with a more individualized policy, which is also efficient due to the fact that employees are used to concentrate on their personal responsibilities and achievements, and particular workers are responsible for the controlling functions and the efficiency of all the companys operations. This is in contrast to the constant attention paid to the coworkers achievements, which is a common practice for the Italian organization. This is due to the fact that there is the large power distance policy. In such a way, the great importance is given to the position of the leader and there is necessity to follow the instructions given by more experienced, skillful and influential organization actors. Italians are more tradition-oriented and this is reflected in the way they run their business. The head office of the Fiat Company is located in Turin, which is not a big financial or business center, but the homeland of the company. Chrysler, on the other hand, gives priority to the actual usefulness of the head office location. That is why its office is not connected to the place for the traditional reason. Another challenge is related with the fact that the American Chrysler corporate environment tends to be more feminine while the Italian Fiat is definitely a masculine type of relation building. While American company employs both male and female workers on the heading positions, and all the employees are treated equally, Italian culture gives the preference to the male headers and male workers are usually regarded as the ones who should deal with more serious issues; although this policy has a series of exclusions and is not applied to the full extent.

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The main reason for the Fiat to merge with Chrysler is that the company also needs changes and it also lost its positions during the crisis. The company is losing its most important markets and, therefore, it needs to shift to new regions. To improve the situation, Chrysler needs to set up a new working order within the organization; the one that will have the clear target to improve the financial situation with the help of employees that strictly follow the plan elaborated by the headers. During recession, there is few time for initiatives and new projects, therefore, the number of innovations will decrease. In addition, the company will need to implement new technologies in order to reduce the fuel consumption and meet the requirements of the European market. In terms of long term strategies, the company needs a lot of financial infusions and to rebuild the economic policy to make it more resistant to the crisis periods and be able to adapt to the changes in the economy and policy of the state; this will also improve its position in the foreign markets. If Chrysler becomes involved in the Fiats agreements with the foreign carmakers, this will beneficial for the newly created merger.

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