Recently Fiat-Chrysler (FCA) CEO, Sergio Marchionne, announced a partnership with the world’s most valuable company and Silicon Valley giant Alphabet Inc. FCA will provide Alphabet with 100 self-driving Pacifica minivans that Alphabet will outfit with sensors and cameras to test its self-driving software on. The two companies will also have a conjoint team of engineers that will team up and be located in Detroit. This group was designed with the hope of helping improve the self-driving technology. Mr. Marchionne, when talking about the partnership and the technology, said that he believes that self-driving technology will be available in five years. It is conventionally believed that this technology will not be available for another fifteen or twenty years at the least. An analyst at Kelley Blue Book is skeptical of the partnership because there does not seem to be much collaboration between the two, ‘“So it remains to be seen how much work they actually do together.”’ This recent development seems like a continuation of the trend of Chrysler being third in terms of the Detroit 3, as Ford and GM have already invested money into autonomous vehicle technology. Going back to when we met with Mr. Thai-Tang he mentioned in his presentation that Ford is trying to rebrand itself as something more than just a manufacturer of cars. He felt that there were many technological aspects of car-making that will added in the future that traditional manufacturers may miss out on. The articles say that Mr. Marchionne thinks that this is too lofty a goal, however perhaps it is this line of thinking that consistently makes Chrysler the perpetual “Number 3.” Mr. Thai-Tang also mentioned that he was worried about the SV giants like Apple and Alphabet because of the amount
of 
cash they have. This is pertinent because Mr. Marchionne doesn’t think that a merger between FCA and Alphabet will occur, however given this huge stockpile of cash Alphabet may make an attractive enough offer that would lead to a merger. Who knows, perhaps a merger with the most valuable company in the world will help pull FCA out from its third place position and help inspire a brand renaissance! Any thoughts on this partnership and prospects on a potential merger?
Sources:
www.nytimes.com/2016/05/07/business/fiat-chrysler-chief-sees-self-driving-technology-in-five-years.html?ref=automobiles
http://www.bloomberg.com/news/articles/2016-05-03/fiat-google-said-to-plan-partnership-on-self-driving-minivans
I think this is really interesting that a tech company and car company are now deciding to team up together to provide the market with a self-driving automobile. For awhile, tech companies such as Apple and Alphabet have been doing their own testing of automobiles with their technological background, but their main difficulty has been having to buy cars from a second party, automotive company. Therefore, this partnership with Fiat Chrysler will not only give them the cars and their expertise, but also will benefit Fiat Chrysler with the technological knowledge that Alphabet and Apple’s employees have. In all, this will further the chances of creating a self-driving automobile, but unlike the article, I don’t think it occur in the next five years (I’m a little pessimistic).
Mr. Cosgrove also touched on this topic earlier in the week: he explained that Apple and Alphabet and other Silicon Valley companies are faced with a dilemma. They specialize in software and technology, not making cars. If autonomous cars ended up being their main line of business or even a significant portion of income, then M/A would make a good business choice. However, Mr. Cosgrove also brought up the possibility of tech companies choosing to expand their scope and build plants themselves, a strategy similar to Tesla’s. I think this a pretty big reason why all eyes are on Elon Musk, in addition to the fact that he is trying to change the structure and feel of the industry and the way it works. Even Mr. Thai-Teng explained that sometimes 100 years worth of experience can be a bad thing. Thus, Tesla, Alphabet, and other tech companies thinking of joining the auto industry could potentially pose a huge threat to the way the auto industry and the economy of the US looks.
I think this partnership demonstrates that Chrysler, and other automakers for that matter, are afraid of getting left behind in the push for autonomous vehicles and losing market share to Apple, Google and others. Additionally, this also indicates that SV is starting to understand the limitations of designing their own cars and that high tech firms are looking to traditional automakers to benefit from their economies of scale. I am quite skeptical of Marchionne’s timeline but only time will tell if this partnership will pay off.
The partnership greater decreases Alphabet’s issue with economies of scale. Because they do not have the infrastructure to manufacture a car, the process would be very costly in the beginning. By partnering with Chrysler, the preexisting infrastructure can be used to manufacture car with less capital costs in the beginning. Also, Chrysler is a well-known and trusted brand, giving consumers the idea that autonomous vehicles can also be trusted on a similar level.
I agree with Michael’s point about the fear of getting left behind in this industry. The technological innovations are moving fast and the Detroit 3 are attempting to keep pace with the cash-rich companies such as Google and Alphabet. I think that right now, the money should be invested in autonomous driving cars because, although it may not be for a decade or so, that is where the industry will be centered in the future.
The old adage, “If you can’t beat ’em, join ’em” holds true. OEMs are not leaders in the software and technology market. When faced with a future driven literally and figuratively by technology, if you aren’t the best in that area, join someone who is and mutually benefit! Silicon Valley Companies have the technology, OEMs have the cars, why is anyone even waiting?