Fiat Wants Larger Share Of Chrysler Pie, Has Difficulties At Home

Bertel Schmitt
by Bertel Schmitt

In June 2009, Fiat was handed 20 percent of a washed and rinsed Chrysler for no cash, and despite protests, the deal was rammed through. The UAW was given 55 percent, the U.S. and Canadian governments controlled 8 and 2 percent, respectively. Often overlooked, or forgotten, the deal came with an option for Fiat to raise its stake to 35 and eventually as high as 51 percent if it meets some rather vague financial and developmental goals, hashed out with the U.S. government.

Sergio Marchionne thinks the goals are met. He plans to increase Fiat’s holdings in Chrysler to 35 percent within two years, says Reuters.

“There are three steps of five percent,” Marchionne told a press conference after the group’s shareholder meeting. “We will add 15 percent within 24 months.”

According to Sergio, the launch of the Fiat 500 in the United States in this year suffices as meeting the goals.

As for Fiat’s own outlook, it’s hazy. After a loss in 2009, they want to be “near breakeven” when the end of 2010 comes around, Marchionne said. In other words: They’ll write another loss.

Fiat is dealing with a difficult 2010 at home and in the near abroad. The Italian government scrapped their cash for clunkers program, which was a shot in the arm of domestic Fiat sales. Fiat was very successful in Germany during the Abwrackprämien heydays, but the party is over and sales are down. Marchionne thinks car sales in Europe will contract by 15 percent this year back to 1994 levels, and will take about four years to get back to their pre-crisis glory. Most market observers will not disagree. Some think, Sergio is an optimist.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Lilpoindexter Lilpoindexter on Mar 27, 2010

    Chrysler + Fiat = Merger of Equals.

  • Geo. Levecque Geo. Levecque on Mar 27, 2010

    Somehow I don't see FIAT vehicles like the 500 making a big strike in North America, so yes then Chrysler and FIAT will be equal- A big Zero!

    • Geozinger Geozinger on Mar 27, 2010

      @Geo.Levecque: I would disagree with you about the 500. I think that there is a market in the States at least, for a small fashionable car. Much like the MINI, if it is promoted well, and sold at a competitive price, It could sell very well. While the entry level MINI is priced to compete, the nicer editions become very pricey very quickly here in the US. If FIAT were to price it's higher contented cars at a position to undercut the sportier MINIs, that could be quite the coup. As evidenced by cmus' post, there's even market for the 500 in pickup truck country - Texas!

  • Geo. Levecque Geo. Levecque on Mar 28, 2010

    I do know that the FIAT 500 in the United Kingdom is a complete mess, from Rusting bodies to bad engines this Car in the UK has a very bad record, at least that's what I was told on my recent trip there, the MINI here in Canada is not very good either, with all the other small cars available with good records, who in there right mind would take on any FIAT product, just go back to when they where last here in North America, ie Fix it again Tony comes to mind!

    • See 1 previous
    • MJC MJC on Apr 06, 2010

      Seriously? I'm in the UK with a 500 and I've not had any issues with it. There's quite a few 500 owners in my area, and the three that I know haven't complained either, at least not to my knowledge. I did do my research beforehand and as far as I understood it, Fiat seemed to have one of the best records with small cars. Obviously, everyone's got different expectations but my 500 has always met mine.

  • Splateagle Splateagle on Mar 29, 2010

    @ Geo. Lecvecque. I don't know who you were talking to on your trip here sir, perhaps you're a time traveller and visited 1970s Britain? Speaking as a life long UK resident living in 2010 I can tell you the FIAT 500 is a roaring success. The 500 has supplanted the MINI as the "it car" in fashionable urban areas, they're selling like hot cakes and getting excellent reviews. It's not just a chic thing either, the volume is there too, for example our largest and most prestigious driving school (BSM) just ditched a 20year long exclusive supply deal with GM/Vauxhall in favour of a new all-FIAT fleet - mostly 500s. Rust and bad engines? not in decades: Alongside VW, FIAT are leading the curve for clean burning small efficient and reliable engines, and they're successfully selling that expertise to other manufacturers (for example Ford's smallest european offering the Ka is developed from the 500's platform licensed from FIAT). Rust hasn't been an issue since the early 80s. So no, in the United Kingdom FIAT and the 500 are far from a "complete mess". If you heard otherwise on your trip, you were misinformed.

    • Tricky Dicky Tricky Dicky on Apr 01, 2010

      Couldn't agree more Splateagle. Fiat has experienced a tremendous product revival for such a tiny amount of R&D invested (their Capex per unit dwarfs all other European and US OEMS) but they make products people want to buy. And the fact that Marchionne is effectively challenging the crippling labour practices and inefficiencies in italy is quite remarkable. It amazes me how many people on this forum seek to criticise a company because of it's reputation 20 or 30 years ago, but are unable to see how much a company has changed and is prepared for the future. The very fact that Fiat are only likely to make a marginal loss this year (with no accounting tricks), on the back of a disastrous italian market just goes to show what good work has been done on cost management. It's the same reason that Chrysler can keep ticking away with really depressed sales. But when the market/ product line pick up, the move into profit making could be pretty sharp.

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