Exhaust Note #20: BMW and Fiat Consider Working Together

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Does Alfa Finally See Their U.S. Dreams Come True?
In another example of automakers looking to partner and share synergies rather than swallow one another whole, Fiat and BMW entered into a memorandum of understanding to evaluation cooperative opportunities. They’ve formally agreed to talk about how, and if, they can help one another.
Alfa Romeo may have the most ego wrapped up into the outcome. Desperate to get back into the U.S. car market, Alfa wants the next-generation of the 147 be the lead volume product. They’ve further announced the intent to start building cars in the States in 2011CY, and have started looking for partners to make that happen as well. Technically they do return this summer with the low-volume 8C Competzione and next year with the convertible 8C, but Alfa’s only building 1000 8Cs, including both bodystyles, for worldwide consumption. With only about 100 8C coupes being offered here, the image-building 8C doesn’t make much of an impact on the market.

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When the Fiat-GM partnership was still alive, there was hope that Alfas could be sold Stateside through premium dealers offering Cadillac, Saab, and Alfa. That plan was scrapped along with the whole relationship a couple of years back. The next step was to sell Alfas through Maserati dealers, starting with the 8C. Selling the 8C through Maserati dealers can work fine, but a small luxury dealer network isn’t quite the right home for a small five-door hatchback like the next generation Alfa 147.
Another path, which Fiat says they want to explore, may be through MINI dealerships. BMW and Fiat have agreed to explore potentials for cooperation on “architectures and components,” specifically looking to share between Alfa Romeo and MINI products. Though BMW’s announcement was intentionally vague, Fiat’s mentioned the potential for BMW to enable a stronger U.S. return.
Major product-sharing options on the table include converging the third-generation MINI and a second-generation of Alfa’s latest project, the Mi.to, and the next generation Fiat Grande Punto. Among the interesting quirks is that the Mi.To was developed specifically as a MINI competitor. BMW and Fiat will also look at engine development and sharing, both on the gasoline and diesel fronts.

In one corner… Alfa Romeo’s new MiTo
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Against wildly successful MINI Cooper…
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Who Gains?
For such a partnership to get off the ground and then thrive, both companies must gain. In this case, BMW needs more economies of scale for the MINI, particularly as upcoming CO2 regulations in Europe and CAFÉ in the States make fuel economy a larger issue. Building the Fiat Grand Punto, Alfa Mi.To, and MINI Cooper family on a shared platform could mean a million units using much of the same components rather than 300,000. MINI has stayed premium by ensuring production is slightly below demand; while that strategy would not likely change, economies of scale should boost profit margins of each.
BMW already works with partners on the MINI, particularly in the engine bay. The current engine is from a BMW-Peugeot agreement and the first generation used a Toyota diesel in Europe and an ill-fated Chrysler-BMW gasoline engine. Not that anyone seemed to really care who made the engine. The MINI sells well because it is distinct, attractive, premium, and handles really, really well.
Sharing the cost burden between the two companies enables BMW to reduce costs and Fiat to gain some better engine technology. Giving Alfa Romeo another potential path for its return to the States may be gravy for this deal. Fiat’s bosses have said they expect Alfa to have some U.S. production in 2011 or 2012, and BMW is not likely the right partner to reach that target. It also remains to be seen if MINI dealers would even be interested in adding Alfa products, particularly the MINI-inspired Mi.To.

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