PROJECT: THE MERGER BETWEEN FIAT AND CHRYSLER Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

PROJECT: THE MERGER BETWEEN FIAT AND CHRYSLER

Introduction

The Fiat Chrysler automobile is a multinational car manufacturer also known as FIAT CHRYSLER AUTOMOBILES group. The group was made up of two auto manufacturers, which were having their separate entities.The first group was Fiat and the second group was Chrysler. Both the companies were facing different problems and to resolve those problems, they merged while having similar objectives.

If we see the background of the companies, then we will find that Fiat was an Italian branded car manufacturer working all over the Europe, also it had brand recognition for branded cars in the whole Europe and it was considered as the pioneer name in Italy, whereas Chrysler was a American car maker primarily listed on NYSE.However, it had a slightly different business with Fiat. Fiat was working in household and family cars whereas,Chrysler was working in the segment of sports and luxurious cars as well as prime business cars.

Problem statement and objectives behind the merger

Fiat and Chrysler were working very well and their businesses were profitable although both of the companies were competing in the European region however,they were facing some problems such as increased costs, vigorous competition and the variation in the capital structure. Both of the companies’ top management suggested that it would be a feasible option for both of the companies to merge with each other. There a sons behind the merger were that the company wanted to reduce competition, make synergy, reduce debts and increase profitability.

In this study we will analyze that the above objectives of merger are achieved or not.Moreover,this study will allow the reader to understand the reasons behind this merger, the basis of the merger and the changes, which occurred in the financial position after the merger.In addition to this,the study will analyze the pre and post-merger performance of the companies.
Mergers

The basic objective of any companybehind merger or acquisition is to increase its shareholders’ wealth as well as to achieve quantum gains in its profits, revenues and market value, the mergers can be made on many basis such as combining the total assets, shares and combining their debts as well. The primary target behind the M&A strategy is to reduce competition across industry and to increase the scope of the business, which is also known as the part of horizontal integration. (Roberts, nd)
Basis, legal form and accounting procedures in the process

As we discussed above that the companies were formed a new group by merging themselves into each other by sharing and combining their shares also their assets to form a new entity. The Americans own 55% of the Chrysler group, the government owns 8% Canada has 2% share, Fiat owns 20% of the share and in future it will increase to 35%. (Nicole Barile, 2015)

The shares of Fiat were held by44.31% and the ownership rights were 29.11% by an Italian investors group namely, Angell family who was interested in the Fiat group.They further merged all their rights with Chrysler to form anew and merged entity.

After theFIAT CHRYSLER AUTOMOBILES group formed by merging both of the companies, it is the world’s seventh largest automaker in the world while having its plant in Europe, south and east America. FIAT CHRYSLER AUTOMOBILES’ product line is large enough having working on so many well-known brands such as Fiat, Ferrari, Dodge, Romeo, Fiat professional jeeps etc. All of these brands are well known and customers are well aware about these brands. (Nicole Barile, 2015)

Cost saving or Revenue enhancements

As we discussed earlier the primary objective behind the merger was to increase the company’s market value as well as to decrease the cost to increase revenues as well as the profits, all of these things comes under the idea of synergy and we also know that both of the companies are related diversified in the business, what is synergy and what is related diversification is discussed below.......

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