Question

Describe the types of risks that Fiat could have experienced by acquiring Chrysler.

Describe Chrysler’s culture after acquired after Fiat acquired Chrysler.

 

Answer 1

1.
The first risk is fall in market capitalization of Fiat post acquisition in the capital market as stock price will fall sharply. It will put the company into the poor light and investors can be panic. The second risk is related to the huge debt transferred from the Chrysler affecting the profitability of the Fiat as the one organization. It will further reduce the return on equity or earning per share. So, variability in profit will take place. The third risk is the overhead costs of the Chrysler being transferred to the Fiat’s book of account. It will further increase the expenses. Besides, the unionism, employees of the Chrysler and difficulty in assimilation of two cultures, will pose other type of operational risk to the Fiat post acquisition.

2.
Chrysler’s culture will be based upon higher productivity, efficiency and waste management applications. It will be a team culture with initial struggles as it will take the impact of the organizational culture of the Fiat.