Photo credit Familie Gevaerts on Flickr

Auto makers tend to get more focus in strategic management accounting discussions than participants in any other industry.  They also seem to take paths that have led before to failure so it is kind of like watching a slow-motion train wreck at times.  Fiat’s flirting, engagement, and soon-to-be full-fledged marriage to Chrysler could be another disaster in the making…or it could be pure genius as two borderline competitors join forces to latch onto economies of scale currently enjoyed by bigger players.

Returning to a country from which Fiat was driven out by poor quality—Americans used to quip that its name stood for “Fix It Again, Tony”—is a big risk. But the reward is to get back into one of the world’s largest markets and gain the scale that will promote Fiat from a smallish European firm (albeit with a successful business in South America) to the ranks of global carmakers. Its home market in Italy is too small, and its operations there too uncompetitive, to provide the basis for long-term survival. Merging with Chrysler will mean sharing development costs and technology, but will also mean having to turn around an ailing firm with competitiveness problems of its own. In sum, Fiat is playing double or quits.

The Economist has a nice summary of the current position of Fiat and some of the risks involved in the near-term.  With Fiat’s plans to open dealerships (inside existing Chrysler dealers) to sell the Fiat 500 next year, this will be interesting to watch in the next year or two and I’m sure the executives at former Chrysler suitor, Daimler, are scratching their heads (or perhaps laughing).

Read more at the Economist:

Carmakers: Fiat plays double or quits with Chrysler | The Economist.