Fiat and Volvo Partnership a possibility

Reports have come out that Fiat, the Italian automaker and Volvo, the Swedish automaker, might form a partnership and alliance which would strengthen each company.

What most likely spurred these talks seem to be the European auto market currently. It shouldn't come as a surprise to anyone who watches the News regularly that the European economy is in a bad recession. As we know if there is a recession, car buying goes in the toilet. Therefore Fiat wants to find some automaker to share and cut costs with. The solution could be Volvo it seems.

Fiat's CEO, Sergio Marhionne, has reportedly been in talks with Volvo. "I’m interested in talking to everyone that wants to talk to me" said Marchionne when speaking with British automotive magazine Autocar, who initially reported the possibility of the partnership, when asked about a partnership with Volvo during the Geneva Motor Show.

On the Volvo side, “We are open for partners,” said Volvo’s chief executive Stefan Jacoby several months ago. “We are open for collaboration in a win-win situation for sharing platforms, for sharing engines and for a general higher scale of economics.”

Essentially this means that Volvo needs to find a small car platform, which it currently does not have. There is the Volvo V40 in the the lineup, but that doesn't compete with cars in the subcompact market like the Toyota Yaris and Honda Fit. I imagine this is where Vovlo feels it needs a new model range.

Volvo has developed turbocharged four-cylinder engines which are going to be very fuel efficient, so it would just need a platform to employ these engines on.

It seems that Japanese automakers might be open to partnerships as well. Autocar reports that Marchionne has been talking with Mazda and Suzuki, most likely on developing alternative drivetrains to decrease R&D costs.

General Motors (GM) recently turned down an offer by Fiat to buy Opel. GM formed an alliance with PSA Peugeot-Citroen to help the troubled Opel brand in Europe.

Fiat did have talks with GM about purchasing the Opel-Vauxhall and Saab. (Saab filed for bankruptcy due to GM blocking the deal at the last minute.) Fiat's boss feels he would have been able to have “found a solution for the brands.”

It seems clear that Fiat will be strengthened by an alliance with Volvo for R&D costs. Volvo would get access to much needed small car platforms which would speed the development of entering into the subcompact market. Seems like a great alliance and partnership for each company. Of course only time will tell and they are still in talks.