What Fiat Brings to Chrysler

Turin, Italy— When it became clear that Fiat (FIA.MI) would take over Chrysler, many Americans wondered what the Italian automaker brings to the table. After all, Fiat hasn't sold vehicles in the U.S. since 1983—and those were widely deemed unreliable. (Wags referred to Fiat as "Fix It Again, Tony.") Today, that reputation is out of date. In recent years, Fiat, though still not tops in quality, has emerged as a technology leader, especially in the kind of small, fuel-efficient cars that Chrysler needs.

Before CEO Sergio Marchionne took over in 2004, Fiat often let promising inventions languish in its research centers—or even sold them to raise cash. Marchionne cut costs and boosted productivity, freeing up billions to get new technologies, including cleaner, more efficient engines and transmissions, into the market more quickly. He also pushed the company to engineer small cars that are among the best in the world. Now he aims to merge that expertise with Chrysler's nascent electric-car program to make the combined company a global force to be reckoned with.

Those fancy new diesel models from Mercedes (DAI) and Volkswagen (VOWG)? The underlying technology, which makes diesels peppier, less polluting, and more efficient, was developed by Fiat. Introduced on the Continent in 1997, it sent diesel sales soaring from less than 20% to almost half of Europe's auto market. But Fiat reaped little financial benefit: The company was so strapped for cash in the 1990s that it sold the license for the technology, known as common rail, to German auto parts maker Bosch. Marchionne is determined not to let such a thing happen on his watch.

For gasoline-powered cars, Fiat has developed a new technology called Multiair that it says will cut fuel consumption by up to 25% while boosting power and reducing harmful emissions by 10% or more. It will be launched this fall on Fiat's Alfa Romeo MiTo models and eventually the Fiat 500 minicar. Coming technologies include an automatic transmission that reduces fuel requirements by 10% and "flex" engines that switch between gasoline, methane, and other biofuels.

Marchionne told Chrysler staffers in June that over the next several months the newly combined company would begin "the process of transferring Fiat's technology into Chrysler's manufacturing facilities." The CEO vowed that Fiat innovations would give Chrysler "a strategic advantage around the world."

Business Exchange: Read, save, and add content on BW's new Web 2.0 topic networkIt's Not About the Big GuyIn an essay for the Harvard Business Review, Sergio Marchionne says that one of his main goals upon landing at Fiat in 2004 was to demolish "the Great Man model of leadership." To do that he promoted a new generation of managers and assigned them tough targets. "Being a leader at Fiat is a lifestyle decision," he writes. "It's not the Buena Vista Social Club."To view the article, go to bx.businessweek.com/chrysler-llc/reference/

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