Why Fiat Chrysler Shareholders Should Watch the Google Deal Carefully – Motley Fool


Google and Fiat Chrysler will certainly collaborate on self-driving versions of FCA’s brand-new Chrysler Pacifica minivan. However what’s in it for FCA? That’s not a basic question. Image source: Fiat Chrysler Automobiles.

It’s official: Alphabet‘s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google Self-Driving Vehicle Project will certainly job along with Fiat Chrysler Automobiles (NYSE:FCAU) on self-driving minivans, the partners said last week.

But just what specifically is this deal? Does it put FCA in the forefront of self-driving efforts, or is FCA merely supplying the sheetmetal to home Google’s technological wizardry? 

What FCA and Google said: In a joint statement, the companies said they “will certainly incorporate Google’s self-driving technology into all-brand-new 2017 Chrysler Pacifica Hybrid minivans to expand Google’s existing self-driving test program.”

The Chrysler Pacifica Hybrid minivans will certainly be used later this year for Google’s self-driving testing, a lot more compared to doubling Google’s current fleet of self-driving test vehicles. Engineering responsibilities will certainly be shared based on each company’s respective expertise. FCA will certainly initially design and engineer about 100 vehicles uniquely built for Google’s self-driving technology. Google will certainly incorporate the suite of sensors and computers that the vehicles will certainly rely on to navigate roads autonomously.

Both companies will certainly co-locate portion of their engineering groups at a facility in southeastern Michigan to accelerate the design, testing and manufacturing of the self-driving Chrysler Pacifica.

What it means for FCA: Despite reports that Google’s deal along with FCA could be a sweeping long term effort, the actual deal as announced appears — right now, at least — to be fairly limited. Despite the fact that the deal could well expand as the partners get hold of a lot more comfortable along with one another, FCA isn’t close to having a self-driving Vehicle (or minivan) for sale to the public. 

“The very first phase of the operation is fairly targeted. It’s made to take Google technology in to the minivan. It’s very, fairly focused,” said FCA CEO Sergio Marchionne to reporters last week, as reported by Automotive News

Marchionne emphasized that the tie-up isn’t exclusive for either party. He said FCA is determined to preserve its selections open and not “pre-empt just what I think about to be a natural evolution of choices.” FCA is exploring, he said, devoid of a clear (and potentially limiting) outcome in mind.

Why collaboration along with Google could be troubling
Of course, Marchionne (adore executives at every one of the significant global automakers) is mindful of the painful example of Google’s domination in the cell phone space. While a variety of companies make Android phones, the Android operating system allows Google (and only Google) to collect the helpful data generated by the phone’s users. 

FCA, adore others automakers, doesn’t hope to end up in the low-margin firm of making the hardware for Google’s helpful (and value-creating) software. On the others hand, FCA — unlike most of its global rivals — doesn’t have actually a substantial self-driving research-and-progression routine of its own.

While General Motors (NYSE:GM) is expected to put self-driving Chevy Bolts on public roads in a test along with Lyft later this year, and Ford (NYSE:F) showed off its fleet of self-driving Fusions in cold-weather examinations in Michigan last winter, FCA has actually been understandably preoccupied along with obtaining its global home in order. Unlike its old Detroit rivals, FCA has actually a sizable net debt placement and is in the midst of multiple local overhauls. It hasn’t had the time, or the cash, to spare for technological moonshots adore a self-driving program.

That’s probably why Google chose FCA as its very first auto-making partner. However it’s likewise why FCA shareholders will certainly have to preserve a close eye on this deal as it develops. 

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Alphabet (A and C shares) and Ford. The Motley Fool recommends General Motors. Attempt any kind of of our Foolish newsletter services free for 30 days. We Fools might not every one of hold the very same opinions, However we every one of believe that considering a diverse range of insights makes us much better investors. The Motley Fool has actually a disclosure policy.