Reborn Fiat confronts a past littered with breakdowns as it prepares for Chrysler alliance

Reborn Fiat shakes up Italian stereotype

MILAN — In a perfect world, so the joke goes, the Germans are the mechanics, the Swiss are the timekeepers and the Italians are the lovers.

With Fiat snapping up a 20 percent stake in Chrysler and bidding for General Motor Corp.’s European car-making business, it seems the Italian will now be the guy who makes the cars.

Italian Premier Silvio Berlusconi says Fiat’s dealmaking is “a dream … for all Italians.” But few Americans have given Fiat much thought since at least the 1980s, when the Italian automaker last did business in North America before pulling up stakes and returning to Italy, reputation for quality in tatters, the brunt of another old joke that Fiat stood for Fix It Again, Tony.

In his past five years as CEO, 56-year-old Sergio Marchionne has engineered a stunning comeback for Fiat. The year after taking over, he posted Fiat’s first net profit in five years, streamlined management, burnished the Fiat brand with the award-winning update of the much-loved Fiat 500 and entered a series of strategic alliances to share costs and enter new markets. He will also head Chrysler when it emerges from bankruptcy.

Analysts warn, however, that the sexy, appealing 500 — Cinquecento in Italian and “Luigi” in the cartoon movie “Cars” — won’t be enough to get Chrysler back on its feet even if it captures the hearts of America’s city drivers. And more than one international hookup has gone sour on cultural differences, as the failed marriage of Germany’s Daimler and Chrysler testifies.

“I think the proof is in the pudding,” said Howard Wheeldon, a senior strategist at BGC Partners. “Americans have no idea who Marchionne is. .. The first thing Marchionne and his team need to do is to command respect that is going to be difficult. It has been doing a lot better in recent times, but Fiat’s history is awful.”

Look no further than Fiat’s 20-year presence in the U.S. The costs of handling warranty repairs to Fiat’s Strada, a mid-size four-door sedan launched in 1974, wiped out any profits on its sale, a Fiat executive confided to Giuseppe Volpato, who has written three books on Fiat.

There were successes, like the Fiat 124 Spider, a convertible two-seater that sold well for over a decade but remained a niche product.

Inauspiciously, Fiat stopped exporting even profitable cars to the U.S. in the early 1980s. The reasons: It lacked the dealer network to properly service its cars, it was having trouble meeting environmental standards and sales were slipping under pressure to Japanese competition, said Volpato, a professor at the Ca’ Foscari University of Venice.

Returning to America confronts Marchionne with one of the world’s toughest and most varied markets.

A citizen of Italy and Canada, Marchionne has focused on bringing out the best of Fiat’s Italian DNA, that sense of style that made the original Cinquecento a raging success.

But even in Marchionne’s world, the Germans are still the mechanics. His chief technology officer is Harald Wester, who came from Volkswagen.

“Everything behind the product — engineering, manufacturing and quality — is managed by leaders who have been trained for the most part by our German competitors. They have the right level of discipline and rigor to properly run the hard factors in this industry,” Marchionne told Automotive News Europe in a 2005 interview.

Marchionne also has made Fiat one of the most environmentally fit automakers — one of the qualities that won the attention of U.S. President Barack Obama, whose auto task force underlined the importance of Fiat’s clean small-car technology to Chrysler’s SUV- and minivan-heavy lineup.

But transnational alliances have often failed. “Cultural differences can never be underestimated,” Wheeldon said, mentioning such unhappy partnerships as Daimler-Chrysler and BMW with Britain’s Rover.

Marchionne was born in central Italy, raised in Canada from age 14 and educated there, returning in his early 40s to Europe where he secured his reputation as a turnaround expert in Switzerland. Many hope that this intercontinental background can help bridge the differences.

“Marchionne has virtues of being Italian in his head but reared in the world, and the challenge is for Fiat to repeat this model,” Giacomo Vaciago, a political economist at Milan’s Catholic University, said recently on il Sole 24 Ore radio.

Fiat’s well-remembered failures aside, Italy boasts high-quality engineering in autos, including Ferrari and Maserati, both owned by Fiat, and Lamborghini, owned by Volkswagen, as well as such design firms as Pininfarina, known primarily for its Ferrari and Alfa Romeo designs.

As Italy’s biggest industrial concern, Fiat’s ambitions to spread into the Americas and redraw the global auto map is a source of great national pride. Italians have a hard time seeing themselves — and certainly their Fiat 500 — as anyone’s savior.

“Our little tin-plated sweetheart arrives in the land of the steel Cyclops to save them from their folly,” marveled La Repubblica’s U.S. correspondent, Vittorio Zucconi .

“A heresy, an impossibility, a cultural revolution. To imagine ‘America in a 500′ seems absurd, an oxymoron, just as not so long ago a black American president would have been unthinkable … Therefore it can happen.”