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How Fiat Became the Savior Of the Auto Industry. Maybe.

The Ticker wondered how it was that small and often-mocked Italian carmaker Fiat came to be a) the savior of Chrysler and b) the force behind the potential creation of the world's second-largest vehicle manufacturer -- the proposed Fiat-Chrysler-Opel European mega-automaker.

After all, it seemed only yesterday that the company was known in America, if at all, for making little gas-sippers so unreliable that Fiat was said to stand for "Fix It Again Tomorrow." (Indeed, it really stands for "Fabbrica Italiana di Automobili Torino," or "Italian Automobile Factory of Turin."

To be fair, Fiat's Alfa Romeo division made a storied little sports car glamorous enough to be driven by Dustin Hoffman in "The Graduate." And it owns the high-end Maserati nameplate, as well.

But as a going concern, business was so bad here that Fiat pulled out of the U.S. market altogether in 1984.

Since then, however, Fiat has turned things around. The Ticker called our reliable auto industry analyst, Dave Cole, chairman of the Center for Automotive Research, to ask him what Fiat has done right.

"They have good technology and they have dramatically improved their cars all the way around," Cole said. The past few years "have been a very positive period for them in their ability to execute," he said.

Cole said Fiat has pioneered modern, fuel-efficient diesel cars, which are nothing at all like the last diesel car you probably remember: a 1982 Chevy Chevette.

Fiat vehicles have won European Car of the Year three times since 2001. The most recent winner was the 2008 Fiat 500, a hugely popular minicar. It looks like this and Fiat chief executive Sergio Marchionne has said the 500 may soon find its way to America, which is beginning to embrace Smart Cars and other micro-vehicles for city driving.

But Cole said that, because of the global auto industry depression -- yes, he used the d-word -- Fiat "is scared to death because it has no scale and no global presence," Cole said.

Enter Chrysler, which presents both scale and global presence -- and at a discount price. Fire sale, even.

The auto industry is on the verge of a wave of consolidation, Cole said, and the Chrysler-Fiat tie-up is only the first to emerge.

Next may be Fiat's other big iron in the fire: Marchionne's Napoleonic idea of creating a pan-European mega-carmaker: a merger of Fiat and Chrysler with General Motors's European division, which is essentially Opel. This would create what some are estimating to be the world's second-largest automaker.

It's far from a done deal. Marchionne needs German help to land the majority stake in Opel, which is one of Germany's biggest private employers.

(GM has already planned to bring over the Opel Insignia as a replacement for the Buick LaCrosse. Right. That's what we thought. Not your father's Opel.)

So, in short, Fiat has been both good and lucky. The company has spent several years improving its product. Now, it is bottom-feeding by buying assets and capacity from massive companies that are down on their luck.

And that's why you're likely to see more Fiat 500s and fewer Chrysler 300s on American streets soon.

-- Frank Ahrens
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By Frank Ahrens  |  May 5, 2009; 1:09 PM ET
Categories:  The Ticker  | Tags: Chrysler, Fiat, GM, Opel  
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