Strategic Alliances, Collaboration and Joint Ventures Case Study

Strategic Alliances in the Automobile Industry (B): The Fiat-GM Alliance

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Abstract:
This is the second in the 3 part case series on strategic alliances in automobile industry. This case exemplifies how alliances can break up even when they are achieving the desired objectives. The Fiat-GM alliance was focused on cost minimization, by reducing redundancies in primary cost components vis-à-vis purchases and manufacturing processes. The alliance was doing well to this end and it resulted in more-than-perceived savings for both the companies. However, negative developments in both the companies – independent to the alliance - have unfortunately resulted in a situation, where neither Fiat nor GM was willing to carry forward the alliance. This case study helps a debate if the companies were correct in terminating the properly functioning alliance. Did the companies end up taking an emotional call over a business decision? Was there no way that the companies could keep the alliance alive? If that was the case, was entering into the alliance itself a mistake? If so, who was at fault – GM or Fiat?

Pedagogical Objectives:

• The case study is meant to help analyse the developments in the partnering companies that could result in calling off even the well-working alliances, even when such developments have nothing to do with the functioning of the alliance.

Keywords : Alliances in global automobile industry; Fiat-GM Alliance; Cross-border consolidation; Agnelli Family; Mergers,Acquisitions,Alliances Case Study; Fiat restructuring; put option; GM in Europe; Fiat in Europe; Big Three of Detroit; US automobile industry; Strategic Inflection Points in automotive industry; Negotiations in automotive industry

Contents : 
The Agnelli Family was reluctant to sell the ailing automobile
GM breathed a sigh of relief when Umberto denounced all speculations
Fiat’s efforts to turn around faced staunch resistance by the labour unions