I just finished reading the transcript from yesterday’s White House press briefing on the auto industry — namely, Chrysler’s fate. I have my own opinions on the government stepping in to save American car manufacturers, but I’m not going to blog about them.
Instead, I’m going to focus on the “innovation” element of “The Plan.”
The government is forming an alliance with Fiat, under which the Italian carmaker will initially get 20% of Chrysler, then additional 5% increments each if it achieves these milestones:
- It provides distribution for Chrysler cars outside the NAFTA region.
- It brings production of new fuel-efficient engines to a U.S. Chrysler factory.
- It introduces a 40-mile-per-gallon car, also made in a U.S. factory.
Fiat has advanced engine technology, which is what the government is after. Here’s a direct quote from the transcript:
“But it’s Fiat’s technology, which experts value at many billions of dollars, which will enable Chrysler to very quickly move up the curve and introduce these new engines and these new cars, which otherwise Chrysler would not have been able to do without years and years of additional work and billions of dollars of development cost,” said a senior administration official during the press conference call.
Gaining access to that engineering expertise is a nice feather in the cap, for sure. But how is Chrysler going to build an eco-friendly car without also conducting a major overhaul of U.S. factories? One hopes that, too, is part of “The Plan.”
Technology advancements go beyond product R&D. In order to move Chrysler into the competitive category, the government — or Fiat — better be ready to fund some automation and infrastructure upgrades.
One can see the lack of investment by way of companies such as Rockwell, which have deep roots in the U.S. automotive industry — although it and many of its peers have lately moved into process sectors. This group of technology providers has suffered as a consequence of its ties to Detroit.
In fact, when Rockwell announced its Q2 fiscal results earlier this week, chairman and CEO Keith Nosbusch was asked if GM factory shutdowns this summer would impact Rockwell’s numbers further. He replied: “The bigger impact will be how Chrysler and GM come back as entities … That will have a bigger impact than … the shutdowns.”
And, hopefully, a positive impact all around.
—Stephanie Neil, MA senior editor
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