Fiat Takes Wheel From Chrysler

Assumes a controlling stake, but what happens now?

Wednesday's announcement that Fiat plans to spend $1.27 billion to increase its share of Chrysler Group—allowing it to reach a controlling stake of 51 percent two years earlier than previously announced—has set the auto world abuzz. Sergio Marchionne, CEO of both brands, has told analysts that the move will "provide a much-needed base for a fuller operational integration of these businesses."

Not that it'll be easy. Fiat is a proud, 112-year-old automaker based in Turin, Italy, whose corporate garage purrs with sexy nameplates like Ferrari and Maserati. Chrysler is a once-proud 86-year-old automaker based in Auburn Hills, Mich., that makes Jeeps and still owes the U.S. and Canadian governments $7.53 billion.

Not exactly a perfect match, is it?

"The verdict is still out as to whether this is going to work," said Chris Cedergren of Los Angeles-based automotive consultancy Iceology.

If it does work, each brand stands to gain something significant. Fiat is salivating over the prospect of broader distribution of its fuel-efficient cars like the Fiat 500 in a U.S. market worried by the price of gas. And Chrysler needs just about everything else—money, manufacturing synergies, and a chance to build sales volume. It could all actually work, Cedergren adds, if the brands find ways to share their platforms. "In theory it all sounds fantastic," he said, "but these things are often difficult to implement."

Meanwhile, as the world waits to see how the deepening Chrysler-Fiat romance turns out, it bears looking back at two other exotic automotive marriages for some pointers on what works—and what clearly does not.

In 1998, Germany's Daimler AG plunked down $37 billion to buy Chrysler—at the time the most profitable car company in the world. Though the move was billed as a "merger of equals," it turned out to be anything but. Daimler built its Mercedes-Benz brand with the ethos of "quality at any cost" while Chrysler had to aim for the value-price bracket. Daimler officials scoffed (sometimes publicly) at Chrysler as a blue-collar brand, then made the added mistake of subjugating Chrysler's swaggering American culture beneath the staid, monolithic management of Stuttgart, prompting mass defections of top talent. They broke up in 2007.

By contrast, the 1999 cross-shareholding alliance between Renault and Nissan has become a textbook case of how to get disparate brands to mesh. In sum: Both companies kept working at what they did best (Nissan tinkered with better gasoline engines while Renault focused on diesel), and nobody tried to cram the two corporate cultures together. "The French and Japanese? Many people thought those two together were a joke," Cedergren recalled. "But [Renault-Nissan CEO] Carlos Ghosn had the last laugh."

Time will tell who'll be laughing once Fiat finishes with its latest overtures, but as Marchionne performs his "operational integration" with Chrysler, he'd probably do well to stop short of compulsory Italian lessons for those in Auburn Hills.