Volkswagen woes to help Fiat sales, but could also put Italian carmaker on auction block

The problems of German automaker Volkswagen represent a short-term opportunity for Italian rival Fiat to expand the market share. But experts also warned Volkswagen's woes could spark a backlash against European cars internationally, and might lead to a period of consolidation that could make Fiat-Chrysler a takeover target.

Last month, the auto industry was stunned when it was revealed Volkswagen systematically used software to cheat on emissions testing, making its cars seem more environmentally friendly than they were.

Only months earlier, Volkswagen had surpassed Japan's Toyota to become the world's largest automaker -- the first time ever that the top car maker in the world was not from the United States or Japan -- but the scandal has sent Volkswagen reeling, with the resignations of top officers, layoffs, and falling car sales and share prices.

Fiat-Chrysler, formed in 2009 through a merger of Turin-based Fiat and U.S. automaker Chrysler, is among the companies looking to capitalize on Volkswagen's problems. In Italy, the company is offering as much as 1,500 euros (1,680 U.S. dollars) in rebates to customers who trade in their Volkswagen-brand vehicles for a new Fiat.

Fiat is the most successful carmaker in Italy, with about 28 percent of the market, which puts it in the best position to benefit from the troubles from Volkswagen, No. 2 in Italy with a 9.0-percent market share before news of the scandal broke.

Additionally, sales of vehicles with diesel engines -- that is half the vehicles on the road in Europe -- have suffered, Fiat depends less on diesel engines than Volkswagen and Germany's Mercedes Benz or French carmakers Peugeot and Renault.

Some investment advisors have even recommended buying Fiat-Chrysler stock as the best way for investors to profit from Volkswagen's problems.

But the news is not all positive for Fiat, according to Giuseppe Berta, an expert on Fiat and a professor of contemporary history at Bocconi University in Milan.

Berta told Xinhua there is risk of a backlash against all European carmakers as a result of the Volkswagen scandal.

"Car buyers in Asia, the United States, and other markets may decide to look past European cars in general," Berta said. If that happened, it would be a blow to Fiat, which depends heavily on sales outside of Europe.

But the biggest risk for Fiat, is the threat of an accelerated consolidation in the world automobile market. The merger between Fiat and Chrysler, coming only a few years after a failed merger between Detroit-based General Motors and Fiat, is part of that trend.

Many analysts predict the world car market will eventually end up with four or five huge car makers that along the way will absorb or eliminate smaller rivals. Even after the 2009 merger, Fiat-Chrysler is the world's seventh leading carmaker based on the number of vehicles sold, meaning that in a world with four or five dominant players Fiat-Chrysler would be on the outside looking in without a merger or without being acquired.

Speculation on that front has already begun. The most likely partner for Fiat-Chrysler, said ABS Securities auto sector analyst Bernardo Franceschini, is Detroit-based General Motors (GM), even though the two companies failed so miserably that GM paid 2.0 billion U.S. dollars to get out of the partnership ten years ago.

But if that link does not materialize, the next option, Franceschini said, could be beleaguered Volkswagen, years after a merger between a then-autonomous Chrysler and another German automaker, Mercedes Benz, fell flat.

"Both the GM-Fiat merger and the Chrysler-Mercedes merger failed at least in part because of a clash of corporate cultures," Franceschini said in an interview. "But the leadership of those companies may have to push those concerns aside." Endit