By on August 25, 2010

The enthusiasm for the Fiat coming to the market has diminished. At first, it was something that would be mixed in… now [Fiat-Chrysler is] going to have to present a compelling story and product to back me investing at least $1 million to build a new showroom

Everyone loves the Fiat 500, but Chrysler’s dealers aren’t exactly thrilled that they have to build brand new showrooms to sell the Italian (er, Mexican) subcompact, as witnessed by the quote above in the WSJ [sub]. Another dealer adds that he knows enough troubled MINI and Smart stores to be spooked by the prospect of dropping hundreds of thousands of dollars on what will clearly be a niche offering. Yet another calls it an “excellent opportunity,” but Chrysler needs to find 200 qualified dealers to make Fiat’s American adventure a reality. The credit and car markets, gas prices and Fiat’s less-than-stellar American-market legacy all conspire against the scheme. To say nothing of the poor historical precedents for Chrysler’s ballooning brand portfolio. But as usual, CEO Sergio Marchionne has it all figured out…

Marchionne explains:

the multibrand experience is already a way of life in the U.S…. In the case of GM, they had brands that were overlapping. Chrysler doesn’t have that problem. Jeep is unique, Dodge is a widely popular brand and Ram is about truck

See, Dodge builds mass-market cars with a somewhat sporty image, and Fiat builds fashionable niche cars with a somewhat sporty image, while Alfa Romeo builds fashionable sporty versions of mass-market cars, and Chrysler builds mass-market cars with a (allegedly) somewhat luxurious image. Meanwhile, Jeep builds SUVs (along with Dodge) as well as large and small crossovers (along with Dodge, Chrysler and Alfa), while Ram builds trucks. Isn’t it easy to see how overlap won’t be a problem? Oh, and speaking of overlap, there are already plans for four Phoenix, AZ-area Fiat-Alfa dealers, and Chrysler reportedly wants two dealers in Las Vegas. Haven’t we seen this movie before?

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35 Comments on “Topolino Trouble: Chrysler Dealers Losing Interest In Italian Brands...”


  • avatar
    findude

    This spells trouble for Fiat.

    As the owner of a MINI, I highly recommend them to anybody who asks with one caveat: only buy a MINI if there is a dealer conveniently located to where you live or work. Seriously. Don’t go there otherwise. Like it or not, your lovely new MINI will need warranty work at some point (sorry, just telling it like it is). I seriously doubt Fiat can do better.

    Count me among the people who would like to see less marble and glass at dealerships. Please, just a big logo sign is enough–the buildings don’t all have to evoke the same presence the way McDonald’s does.

    It would be wise for Fiat to minimize the cost of entry for dealers. The new Fiat will have to compete directly against the MINI and if Chrysler/Fiat can start on day one with twice as many dealers as MINI, they will have a huge market advantage.

    We love our MINI enough to buy another new one when the time comes, but we won’t unless there is a new dealer closer to where we live and work. That leaves us with buying a used one that we can just take to an independent mechanic.

  • avatar
    Ryan

    Chrysler losing interest in Italian Brands? Hmm, well… Americans lost interest in Chrysler a decade ago.

  • avatar
    chuckR

    A megabuck showroom for a brand that left more than 30 years ago in disgrace?

    This is why dealers fought the bankrupt duo’s closures so hard. Up until 1975, my uncle had a farm and orchard country Cadillac/Pontiac dealership. It was a gloomy old warehouse with oiled heart pine floors. As far as I know, the cars bought there were just as reliable (or not) as if they’d been sold out of the Taj Mahal.

    Wonder how many Mexican 500s you need to sell to pay back that nut? Maybe you make it up on service, frequent service that is.

  • avatar

    I’d be happy with having a dealer in an low overhead industrial park warehouse. Purchasing real estate on a busy street and having to spend $1M+ on a brand specific facade is just $ down the rat hole.

  • avatar
    portico

    Fiat has one shot to get their branding image right or they will spend the next 20 years trying to change minds just as Hyundai was forced to do. The problem for Fiat is that they want to be seen as the hip, sexy, fun car maker. Dodge and Chrysler are none of these things and never have tried to be so. The merger between these two companies is a classic case of opposites attracting. Of course Chrysler had no choice in this arranged marriage. The two companies trying to sell cars together will more than likely create tension among management and dealers. The real quesiton is wheter or not they can turn that tension into a positive or end up like so many other marriages that have completely different partners and completely different value systems. The outcome is yet to be determined. My best guess is that Fiat cars will have difficulty finding buyers beyond value and price minded shoppers if this at all.

  • avatar

    Funny that you’re running this today. Yesterday, riding my bike through Royal Oak, I noticed a Fiat 500 being repeatedly stalled by the driver, trying to get going at a stop sign in a residential neighborhood.

    It had manufacturer’s plates so I asked if she worked for Fiat or Chrysler. She was an intern for Chrysler. This was maybe 10 miles south of Auburn Hills. She said it wasn’t a US spec car.

    I would have gotten a better photo, but I first asked if she minded, and she said yeah. If she was older and actually working for the car company, I would have taken it anyway. Instead I told her that I’d shoot it as she drove away and wouldn’t get her in trouble.

    http://www.autothreads.com/images/fiat500royaloak.jpg

    • 0 avatar
      tced2

      “repeatedly stalled by the driver”
      Manual tranny?
      They let interns drive un-released vehicles? I would guess most interns (20-somethings) probably don’t know how to operate a manual tranny (and the clutch) – explaining the stalling.

    • 0 avatar
      pgcooldad

      Yup, that’s a European one based on the license plate placement. Unless they have come up with a different way since then, I was told the US model’s plate will have to be bumper mounted since our plate’s width makes it too big for the back hatch.

      I can see why they are letting the intern drive it around town but can someone jump in the car and teach her how to drive a stick first? Oh well … company car, we have lots of them.

    • 0 avatar
      ciddyguy

      pgcooldad,
      I have not heard that the US cars will have the plates relocated. There was talk of the hatch being modified curvature wise to accommodate our plates, which are smaller than the Euro plates, look closely, they are wider and I don’t think quite as tall than ours.
      If you’ve seen images/videos of the vintage 500′s, they accommodate our plates just fine, and some Euro countries had huge square plates that were bent to accommodate these taller plates, and they were fitted to the vintage 500′s as well.
      But we’ll see soon enough, the US specifications will be released once they unveil the US car at the LA auto show in late Nov.
       

  • avatar
    Robert Schwartz

    bet a million dollars that the FIAT thing will work. I don’t think so.

  • avatar
    TokyoPlumber

    I can see why Chrysler dealerships would be concerned about spending money on showroom / facility refurbishments related to the introduction of the Fiat brand.

    Smart USA sells somewhere around 15,000 cars a year. Mini USA has annual sales of around 50,000 units. If the Fiat 500 sells as a niche vehicle (ie, based on where it is priced and what happens with fuel prices) perhaps sales could be around 25,000 to 30,000 units for the first few years.

    With annual sales of around 30,000 units and a base of 200 dealers each dealer would be selling only around 150 Fiat 500′s a year. I don’t know what each dealer would have to spend on Fiat related showroom and facility refurbishments. However, suppose it is a couple of hundred thousand dollars per dealer (ie, as suggested in the article). Recovering the investment over say five (5) years (ie, 750 cars) works out to around $300 per car (ie, if the dealer borrowed at around 5% to pay for the upgrades). If the Fiat 500 is priced as a niche vehicle (ie, like the MINI) it will probably sell on average for somewhere around $20,000. So, $300 per car would be around 1.5% of the average purchase price. Unless the Fiat 500 commands a premium above sticker dealers are going to have to find a way to absorb this added cost. $300 doesn’t sound like much, but it is significant when you consider this is only to recover the “re-decorating” expense.

    Clearly, I’ve made a lot of assumptions. The refurbishment costs per car could be much lower or much higher depending on how well the Fiat 500 sells (and whether additional Fiat models are added to the line up). If the 500 sells at or above the level of the MINI the dealers may not be so concerned about their investment. However, if it sells like the Smart car Chrysler will have a lot of unhappy dealers to contend with (ie, assuming Chrysler still exists in five years, of course!).

  • avatar
    gslippy

    My local mega-dealer is stuck with a beautiful Hummer building, whose product was always niche. I can see why Chrysler dealers are sweating.

    Even Ferrari has about 36 US dealers. If Fiat only starts with 200, it may not have enough critical mass to make things work.

    Erasing the bad Fiat taste from the US market will be an uphill battle; making the dealers angry won’t help. Maybe there should be a prenuptual agreement to reimburse the dealers if Fiat leaves again. Then again, if Fiat departs, Chrysler may also.

  • avatar
    lilpoindexter

    The only question is what the excuse will be when this nightmare blows up. Maybe something like…

    “The 500 was never intended to be a runaway sales success. The intent of the 500 was to successfully merge Fiat’s advanced technology in a US market vehicle. The vast amount of knowledge gained will improve all small chrysler vehicles for years to come…based on this, we qualify the 500 as a runaway success…”

    DIE CHRYSLER SCUM

  • avatar

    “at least $1 million” for a showroom?! Surely the dealer quoted is exaggerating?

    • 0 avatar
      TokyoPlumber

      The dealer probably is exaggerating. However, it depends what Fiat / Chrysler are asking of him. If dealers are being told to build separate showrooms just for Fiat the cost could be well over $1 million.

      An investment of this amount will never work. If Fiat outsold MINI by a factor of 2 to 1 (ie, 100,000 Fiat 500′s sold per year) a five year payback on a $1 million investment (including interest paid) works out to more than $450 per car.

      My expectation is that most of the selected (200) Chrysler dealers will simply tart up their existing showrooms and hang a big Fiat sign out front.

    • 0 avatar
      Rod Panhard

      For those of you who are trying to make back-of-the-envelope calculations as to whether or not this will work, you have to factor in quite a few things besides the potential profit of each individual sale. Other factors for a stand-a-lone dealership include:
      - profit from the F&I side of each deal
      - sales of parts & accessories
      - sales of service and installation of accessories
      - payment for warranty work
      - depreciation on assets
      - obviously … sales and F&I of used cars

      Even with all that, it’s tough. I really don’t think Fiat has much of a chance in this scenario. I believe that Fiat’s U.S. managers are smart enough to know that captive imports have never sold well in U.S. dealerships. An incomplete list includes:
      - Hillman at Chrysler dealers
      - Mitsubishi at Dodge and Plymouth dealers
      - European Fords at Lincoln-Mercury dealers
      - European Fords at Ford dealers
      - Panteras at Ford dealers
      - Isuzu-made Opels at Buick dealers
      - Opel-made Opels at Buick dealers
      - Daewoo-made Opels, sold under iconic American names at Pontiac dealers
      - Merkurs (European Fords) sold under the same roof as Mercurys.
      - Korean-made Mazdas sold at Ford dealers
      - Korean-made whatevers sold at Chevrolet dealers
      - Isuzu-made pickups and Mazda-made pickups sold at Chevy and Ford dealers respectively
      -LEST WE FORGET … Alfa-Romeos sold at Chrysler dealers in a last-gasp, last-ditch effort …

      Fiat’s masters know this. They know they absolutely have to separate Fiat from Chrysler products. They know that a RAM truck can’t be located ANYWHERE near a Fiat 500, as this juxtaposition resembles the iconic film “Bambi Meets Godzilla.”

      So, for “Fiat to Save Chrysler,” the 500 has to come in. It has to have it’s own showroom because the white-belt-and-shoes guys can’t sell imports. It has to buy time as Chrysler bleeds red ink until some Fiat buys enough time to successfully control the whole Chrysler kit-and-kaboodle. So if they lose money over time, and eventually control the company, and turn it into a channel to sell American-ized Fiats then it could turn out as a win-win. Just because Chrysler couldn’t do it before with Renault’s help doesn’t mean that Fiat can’t do it with Chrysler’s help, right?

      By the way…I hope I’m wrong. I really do like Fiats. They’re spunky. The Suzuki SX4 is an interesting car, and that it’s a Fiat made by Suzuki means it’s probably a pretty decent car. Suzuki makes great stuff.

    • 0 avatar
      th009

      $1M for a new dealership facility (showroom, parts, service) is by no means extravagant — for pretty much any level of brand standards, and to handle 200-300 car volume per year, you’ll be spending money in that ballpark.

    • 0 avatar
      M 1

      You’ve clearly never priced commercially-zoned high-traffic property.

      A half-acre with a run-down convenience store easily goes for $1mm in any area with a high-six- or seven-figure population.

  • avatar
    daviel

    These dealers could just send me the money.

  • avatar
    Morea

    I think most of the comments are missing the big picture. What Sergio is essentially saying is that if you want an Alfa dealership then you gotta pony up the cash now for a Fiat dealership. Also, I don’t know what the expansion plans are for Ferrari/Maserati but if you really want to run with the big dogs then paying to play with a Fiat dealership is what’s expected.

    (I am not suggesting selling the whole portfolio in one place. The dealer would have seperate locations, perhaps not even in the same state.)

    • 0 avatar
      TokyoPlumber

      I think the big picture is that Sergio Marchionne is not really in a position to make long term commitments to Chrysler dealers about other Fiat models or other vehicle lines (ie, like Alfa). I’m sure that dealers are being told they’ll have more vehicles to sell if they upgrade or add to their existing facilities. However, without a firm commitment from Chrysler any dealers spending money on new showrooms for new brands are taking a HUGE risk.

      Consider how many brands have been cut from the North American market over the past few years. Couple this with Chrysler’s precarious position and a weak US economy. Count the tumbleweeds blowing through the lots of dealerships that were cut loose and closed. Any Chrysler dealer thinking about investing in the Fiat brand must be considering all these things.

    • 0 avatar
      Morea

      I 100% agree. The question for each dealer is, “Am I a gambling man?” Or, more prosaically, how much risk I am willing to tolerate. I’m sure they are all dreaming about the stories of getting in on the ground floor of owning a franchise of an obscure-at-the-time make (Toyota, Honda, Subaru in the 1960s) in a big (LA, NYC, Houston) market. If you can get the franchise and get it up and running the profits can be enormous. Do they have confidence in Sergio?

  • avatar
    carcurmudgeon

    If I were a Chrysler dealer I’d be very eager to become a FIAT dealer. Fiat makes good small cars with cutting edge technology. Yes, it’s a gamble, but one with a real potential pay off. Dodge? How could selling Dodges be a good long-term bet? The question is whether FIAT has the smarts to enter the market correctly and make the necessary first impression.

  • avatar
    mjz

    I think they are making a big mistake not using the current dealer network. Having the new 500 in all Chrysler showrooms would create a lot of traffic that the current dealerships could really use, and create a halo effect for Chrysler’s more mundane offerings. Let them set up a separate AREA of the showroom, not entirely separate building. It’s no wonder the dealers are balking, this isn’t the time to spend a million bucks to sell a few boutique cars, even if they add Alfa later.

  • avatar
    V572625694

    There are probably some cultural issues with Chrysler dealers used to hawking big, crude cars and trucks, or brutally ugly compacts like the Caliber. Latte-sipping Europhiles aren’t going to be comfortable in those stores, which may be why Fiat wants a makeover. Likewise, the salesmen used to pitching hemis and gun sight grilles to NASCAR fans will have trouble explaining the appeal of driving an Alfa on a winding road.

    • 0 avatar
      joeaverage

      V572625694 – BINGO!

      I drive a VW. I don’t even bother trying to explain to my monster truck coworkers why. On the other hand I don’t ask why they need a 4×4 turbo diesel F-250 to go grocery shopping. I SERIOUSLY haul more with my four banger CUV than they haul with that truck. Whatever makes them happy.

  • avatar

    One of the three Subaru dealers in our area has the Subie showroom (small display area, some cubes around the outside, an enclosed office, restrooms and small waiting area and an enclosed delivery bay) on the same lot as their Hyundai building and both brands use the same service shop and finance guy and share the lot. If that stand alone building cost $1M, I’ll eat it (I work in commercial proeperty insurance so I know a bit about building values). Same setup could work for a Fiat building at a dealership(?).

  • avatar
    Lokki

    A mixed Chrysler/Fiat dealership just isn’t going to work. I vividly remember the time I tried to buy a Chevy NovaCorolla.

    I went in and ASKED the salesman to show me one. Instead he walked me over to a Chevy ?Celebrity? et al. I told him I wasn’t interested and wanted a Nova. His reply, “Son, there just ain’t no room to move on them little cars”. Meaning, he couldn’t dance around with the deal.

    The same thing would happen at a Chrysler dealership – “Son, buy ya a Sebring. I can DEAL on them.”

    One thing that has been bothering me about the Fiat 500: who is the potential buyer and more importantly, if there were no Fiat 500′s, what would those buyers purchase? Who is going to lose sales to Fiat after these hit the street?

    Finally, people who have never seen a Fiat know “Fix It Again Tony”.
    It’s part of our culture. THAT my friends is going to be a very large rock in Fiat’s path.

  • avatar
    Buckshot

    Well, they cant sell Fiats from a hole in the wall.
    Fiat does not want to be the new Yugo, but a competititor to Mini.
    Fiat should start with a few chosen dealers in big cities, and go from there.

  • avatar
    undata

    The replies are all over the place for this thread. The real problem is that people will believe anything, as long as it’s not true. Look at the way people drive in this country, that is the real problem. How can anyone in their right mind still believe an SUV is cool?

  • avatar
    ciddyguy

    Ed,

    I think you need to do a bit more research, the latest scheme is NOT to build an actual separate building right now, but to carve out a separate showroom area in the existing building and have a separate service area for the car(s) initially to get started and as the brand grows (hopefully), THEN they can build the all new franchise shop, this came about through confusion when the announcement was first brought up.

    I saw the list and noted some markets will get more than a couple of dealers, now they may NOT get all of those off the bat, it all largely depends on if the dealers can cough up the money to get things started and we’ll know soon enough which dealers will sell the Fiat/Alfa Romeo brands in Oct.

    Also, they choose markets that have a high likely potential growth for small cars and Seattle/Tacoma is on that list and that’s where I live.


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