By on March 15, 2012

Chrysler’s owner Fiat is in trouble. Fiat has a (declining) market share of 28.3 percent in its home market Italy, a market that had tanked 19 percent in February, and 18 percent in the first two months of the year. Fiat’s sales in Italy, down 20 percent in February, slowed more than the floundering market. Fiat’s southern exposure to the ailing parts of Europe is disproportional. Fiat’s top executives will now have an emergency meeting with Italy’s Prime Minister Mario Monti, Reuters reports. Possibly on the agenda: A closure of another Italian factory, and a cutback on investments in Italy.

Fiat already implemented drastic cutbacks. Fiat has cut new model releases in 2012 from 10 to six. According to Reuters, “new models from Alfa Romeo won’t come until 2013, and its top selling Punto upgrade is on hold until 2014.” This does not make Fiat popular with dealers, unions, and especially customers. Cutting back on new model launches is a short term fix. Inevitably resulting in lower sales, it is a fix that becomes costly in the long term.

Last month, Fiat & Chrysler CEO Sergio Marchionne had made noises about having to close Italian plants unless he can fill them with made-in-Italy Chryslers. Ominously, after the meeting with the Prime Minister, Fiat CEO Sergio Marchionne and boy-wonder Chairman John Elkann will meet Labor Minister Elsa Fornero and Industry Minister Corrado Passera. This could be a tougher meeting than that with Monti. Monti is a friend of the Agnelli family, he served on Fiat’s board from 1988 to 1993, and was a guest at John Elkann’s wedding in 2004.

 

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37 Comments on “Fiat In Distress...”


  • avatar
    VanillaDude

    This is going to get ugly.
    With the Euro in meltdown, there is simply no stability to hold onto when considering a new car purchase. There is simply nothing out there yet to know what will replace the Euro when it needs to go.

    I sincerely hope for the best, because we are all going to need it.

    What an absolute preventable fiscal disaster. The Euro is the Titanic of the 21st Century.

    • 0 avatar
      Oren Weizman

      When your debt is as junkbondalicious as Fiat’s has been for a while, and your boss has been actively alienating the unions and population of a bankrupt country that has been your primary market …

      Well …

      You could have a problem.

      It’s time for what the french call ‘ Operation Charm ‘

    • 0 avatar
      marjanmm

      The biggest difference between US and some Euro countries with big debt is that ECB is not willing (at least publicly) to fund budgets of those countries by buying government bonds.
      The enormous debts are the biggest similarity between US and those countries.

      The markets have dramatically calmed down once ECB started to give out ridiculously large long term credits to European banks with very very low interest rates (~1%). Those banks then went and bought Italian and Spanish bonds with 5+% interest rates. The banksters who were supposedly on the brink of bankruptcy are not only saved but will again gorge in the enormous profits they will make in the difference of these interest rates. These profits of course will be provided by the tax payers of Euro countries who will pay up the interest rates on the 5+% bonds. Just watch Euro Banks balance sheets two or three years from now.

      The whole point is that ECB will through the whole crisis thread the fine line between tough stance urged by Germany and openly printing money and supporting the economies of the southern Euro countries directly. They will never allow a big economy to fail and endanger the Euro or EU. But by not openly helping they are perpetuating the pressure until the austerity measures kick in. Media and the panic helps in that. Of course all the while keeping Euro down which is very good for the German export driven economy – something Bertel likes to point out often.

  • avatar
    ciddyguy

    This does not sound well and I don’t think it’s Fiat’s product per se but more likely the terrible economy in Southern Europe in particular, but in all of Europe in general.

    That said, what they may be doing is a short term fix, but perhaps a strategy to get a foot hold so they CAN update their lines.

    In the end, updating is the way forward, but if you are so strapped due to the sagging economy, sometimes, austerity is the way to go, even if short term to move forward.

    We’ll just have to see what happens in the next few months.

    I hope things improve for Fiat and Europe for that matter.

  • avatar
    marjanmm

    Marchionne is to blame for this. Under his leadership Fiat stopped and postponed almost all new model development. They launched a couple of half baked Alfa Romeo and Lancia models but the bread and butter Fiat cars have been left to languish for way too long.

    Punto is now seven years old (Evo has been just a refresh and a very unsuccessful one).
    New Panda is out this year after more than 7 years of the previous generation and it is heavily based on the old car.
    Fiat 500 is almost 6 years old now and nobody even mentions the update.
    The same for Bravo.
    Idea is 9 years old, I guess the new 500L can be called a replacement but that one is not yet out.
    Chroma died without replacement.

    Marchionne was very successful in reviving Chrysler but in the process he has consciously destroyed Fiat’s European market share. So what’s his fix now? Cutting even more on new product development! VW and the others will eat them alive.

    • 0 avatar
      Joe McKinney

      Marchionne is not even responsible for the Chrysler revival. Chrysler’s debts were wiped clean in bankruptcy and Chrysler received a significant infusion of operating capital from the U.S. Government.

      Also, all the new and updated Chrysler, Dodge and Jeep vehicles that have gone on sale since Chrysler’s bankruptcy were developed while Chrysler was owned by Cerberus. Marchionne just had the good fortune to be CEO when things finally turned around at Chrysler.

      What Marchionne does own in North America is the botched Fiat 500 launch. Only time will tell if his upcoming Dodge Dart is a success.

      • 0 avatar
        George B

        Not so sure you can blame Marchionne for poor Fiat 500 sales. I think it’s just not a very good product for the US and better marketing wouldn’t fix the car itself. The Dart is a better test.

    • 0 avatar
      Pch101

      “he has consciously destroyed Fiat’s European market share.”

      There isn’t that much market share to get. Between VAG’s dominance, Ford’s financial stability and Hyundai’s drive to dominate the Asian import market, there isn’t much room for Fiat.

      If I was in his position, then I would reduce the lineup and try to generate more volume with a limited number of models that remain. More defense than offense; they can’t afford the cost of an offensive-driven strategy.

      • 0 avatar
        marjanmm

        I am sure general neglect of the lineup has contributed greatly to the falling market share. As far as I can find, three years ago Fiat’s European market share stood at 9.1%, now it’s 7.3%, a big fall.
        It sounds as if you are arguing that Fiat would not have maintained the market share even if they continued the model development at a normal pace. That is probable due to the great strength of the competitors you enumerate as well as the exposure to the southern Euro markers. However I don’t think the fall would be this disastrous.
        PSA group is in a somewhat similar position and from what sources I can find seems to have remained almost flat market share wise.

      • 0 avatar
        Fusion

        Well, I am not sure if its possible to reduce the lineup even more. Alfa now offers a staggering 2 (in words: two) different cars, Fiat already is far behind every competitor in terms of niche models (and, more importantly, volume models that aren’t at the end of their life cycle).

        And I would guess that VW’s strong performance (not to take anything away from them) is also partly because some of the competing companies just dropped the ball. Fiat among them. Fiat isn’t just in trouble because the countries they are strong in are declining. Fiat is losing market share, i.e. performing worse than the overall market in basically every european country. And that is even though they are now counting Chrysler and Jeep Sales…

        BTW: The “asian” marketshare (Japanese+Korean) in Europe was quite constant in the last couple of years. In 2011 was 17.5%, while it was 17.2% in 2006. Nissan, Hyundai and Kia got bigger, but Toyota lost a lot of marketshare (almost 2%) in teh last couple of years, and I think Hyundai and Mazda didn’t perform well either.

      • 0 avatar
        Pch101

        “As far as I can find, three years ago Fiat’s European market share stood at 9.1%, now it’s 7.3%, a big fall”

        About half of Fiat’s sales in Europe are in Italy. Its sales volumes in Brazil are considerably higher than they are in Europe outside of Italy.

        Fiat is not a strong player in Europe. It is being squeezed by tough competitors and its overweighted market position in a PIIGS country, as well as labor laws that make streamlining difficult. Investments aren’t justified if they can’t be profitable.

        My guess is that Fiat originally acquired Chrysler in order to turn Fiat into a global player, but that the euro crisis has caused a strategic shift toward Chrysler and away from Europe. Ironically, the US beachhead is becoming the center of operations, not just a spoke on the wheel. It’s not a particularly inspired strategy, but Marchionne has no choice.

      • 0 avatar
        analoca

        Fiat market share in Europe (total market incl. commercial vehicles): 2010 6.13%, 2011 5.27%, Jan 2012 4.85%

      • 0 avatar
        Fusion

        @PCH101: Probably true regarding the possibilities as of now. If Fiat/Chrysler doesn’t have the possibility (either not enough liquidity or not willing to take on the costs) to do everything, concentrating on the American market (North and South America) is the better choice.

        However, I do disagree that that was the same situation ~3-4 years ago, when in thefinancial crisis R&D was decreased sharply. That was a choice – even without the declining EU market, Fiat would have to face homemade problems now, due to an overaged and too small model range. Alfa is symbolic of that. Even with booming EU market, the potential for a two-car brand is limited…

        And I fear that they are basically doing the same thing now (whether or not they have a choice), which will leave the group further back, with little chance to regain position when the market rebounds.

      • 0 avatar
        Pch101

        “I do disagree that that was the same situation ~3-4 years ago, when in thefinancial crisis R&D was decreased sharply”

        They couldn’t afford it.

        For a mainstream automaker to be successful, it needs to have a combination of high-volume cars that can generate high total revenues and provide a base over which costs can be amortized, along with luxury brands that can extend that mainstream R&D spending into higher margin products.

        Fiat lacks the latter, and this is a problem. Ultimately, the European version of Fiat needs to build common platforms that can sell as high volume Fiats, with bits shared with Alfas that generate margin. But Alfa is not in a good position to provide that margin, and Fiat probably can’t afford to make that happen. That leaves Fiat with the job of trying to find another approach to amortizing costs, which brings us to the US market and South America offering brighter prospects.

    • 0 avatar
      blowfish

      then again when u dont have any mulla how else can u borrow to do research & Dev ? Especially if 30 days from u even be here?

      is easy for us to criticize from the comforts of our armed rocking chair.

  • avatar
    Robert.Walter

    Fiat’s chairboy looks like he hasn’t even entered puberty yet!

    • 0 avatar
      Robert Schwartz

      Fiat’s chairboy is 35 and will be 36 in a couple of weeks. There is a backstory.

      FIAT was founded in 1899 by a group of investors including Giovanni Agnelli, who became its first CEO. In 1966 his grandson, Gianni Agnelli, became the CEO. Gianni died in 2003. Gianni’s only living child is his daughter, Margherita Agnelli de Pahlen. John Elkann is her oldest child, born 4/1/1976 at New York.

      Gianni had originally planned to designate his nephew Umberto as his successor, but Umberto died in 1997 from cancer, and Gianni designated John Elkann (then 22) as his successor. John was named Chairman of FIAT in 2010, and chairman of the Agnelli family holding companies in 2011.

      An article about the Agnelli Family:

      http://www.vanityfair.com/style/features/2008/08/agnelli200808.print

      The lawsuit mentioned in the Article was decided against the plaintiff in 2010:

      http://online.wsj.com/article/SB10001424052748704743404575127621738313064.html

  • avatar
    zerofoo

    Sergio should have known about the “Jeep Curse”.

  • avatar
    hreardon

    The big problem is that FIAT is a very southern European brand, similar to SEAT. Unfortunately for FIAT the economies of Italy, Spain, Portugal and Greece are in the toilet right now.

    FIAT never really succeeded in breaking out and gaining significant traction in northern Europe and while it has enjoyed more success in Latin America, it still pales in comparison with the likes of Volkswagen.

    Unfortunately, FIAT is caught in a bad situation right now: shrinking domestic consumption, which drove the majority of their profits, and insufficient revenue from the rest of their markets to make up the difference. New endeavors (ie: the 500 in America) are costly, long-term projects that will take years before they may become profitable. Combine this with the byantine European labor laws and the Italian propensity to force employers to unprofitably maintain employment and factories and you’ve got some serious issues.

  • avatar
    gslippy

    I hope this won’t threaten the Dodge Dart.

  • avatar
    alan996

    He is not going to sell many new cars when a great part of his export market consisted of Libya, Egypt, Syria and Greece. At least Spain and Portugal have a captured home car manufacturer. And just wait until Greece goes back to the bankruptcy trough and the Euro tanks again.

  • avatar
    seanx37

    So how soon til they sell Chrysler(or parts of it…Jeep and Ram) to the Chinese? 6 months? A year?

  • avatar
    getacargetacheck

    Time to take Ferdinand Piëch up on his offer to buy Alfa Romeo. Fiat should make the sale contingent upon VW taking a Fiat plant even if that means giving AR away. That’s a quick way to get rid of a high-cost Italian plant while keeping the unions at bay. This, plus VW’s commitment to buy the historic Arese facility should satisfy the Italian government. Chrysler is not out of the woods yet either. It’s hard to see how the upcoming Chryslers are going to beat the Camrys and Corollas of the world when the Fiats they’re based on cannot even hold market share in Europe and are always at the bottom of every quality study.

    • 0 avatar
      Lampredi

      This is exactly what I’m worried will happen, even as I hope and pray that it won’t. If by any chance Marchionne would decide to do the unthinkable (nay, *unforgivable*) and sell Alfa Romeo to the Germans, then Fiat Group will have permanently lost me as a customer, and I don’t mean to Volkswagen…

      • 0 avatar
        Morea

        Selling Alfa to the Germans at least gives it a fighting chance for survival.

        • 0 avatar
          Lampredi

          It would give *Fiat* a fighting chance for survival, sure, but not Alfa Romeo, which would de facto become Audi Romeo before you could say “Schnell!”. Being an Alfista myself, I realize that it would be the death of Alfa Romeo, even as the brand name would live on. And therefore I think it’s better for Fiat to close down Alfa than to sell it.

      • 0 avatar
        th009

        As I have posted before, how could VW ownership be any worse for Alfa than the current starvation diet? Not many people complain about Lamborghni’s experience under the VW umbrella.

        Whether you like their current cars or not, at least Lamborghini, Bentley, Bugatti and Skoda are now all successful businesses that offer a variety of different cars to their customers. Alfa Romeo, Maserati and Lancia? Not so much.

        The 8C is gone, all that is left are the MiTo and Giulietta for Alfa Romeo. Or Lancia, with two rebadged compact Fiats, and two rebadged Chryslers.

      • 0 avatar
        getacargetacheck

        Lampredi, it’s just not rational or healthy for any of us to tie our emotions or our self-images to the economic workings of industrial business. Alfa, like Saab, died a long time ago. The great men who built its reputation have long passed. It’s really just a name and a styling exercise now (like a lot of the great brands of the past still in existence). Marchionne does not have the time nor the capital to turn Alfa into what he says he intends. Piech does — and he’s competent. What’s worse? “Losing” Alfa to the Germans or losing all of Fiat?

        • 0 avatar
          Lampredi

          getacargetacheck: Of course it’s not rational at all. But remember, we’re talking about Alfa Romeo, which is a brand that does tend to evoke emotions among its fans (i.e. people like myself).

      • 0 avatar
        Lampredi

        It depends on what you mean by “worse”. If you’re thinking in terms of the size of the model lineup, then yes, *Audi* Romeo would probably have a more complete lineup than *Alfa* Romeo’s current 2-model one. And yes, Volkswagen would probably make *Audi* Romeo a successful business in a sense that Fiat has never managed to create (and perhaps never will) with *Alfa* Romeo, so in that sense VW ownership would not be “worse”, either.

        But if you’re actually looking for an alternative to run-of-the-mill Teutonic transportation, then it *would* be worse, because *Audi* Romeo would just be yet another iteration of “Modularer Querbaukasten” and “Modularer Lngsbaukasten” vehicles. And while Volkswagen would laugh all the way to the bank selling rebodied Golfs, Alfisti like myself would mourn the de facto loss of a historic Italian brand.

        One has to give credit to Volkswagen for not making the potentially fatal mistake that Fiat’s currently making by delaying and cancelling new models. On the contrary, Volkswagen has a pretty rich model lineup spanning several brands. Which means that those who actually *want* an “Alfa” based on Volkswagens can probably find the car they want already in VW’s existing lineup. The Alfa badge, if needed, can be purchased cheap on eBay. :P

      • 0 avatar
        th009

        @Lampredi, the current Alfa models are on Fiat platforms: MiTo is on the Fiat Small platform, and the Giulietta on the Fiat Compact platform. How is this worse than using the MQB or MLB architecture?

        Let’s face it, Alfa is no longer independent, and its glory days are long past. Alfas are far closer to Fiats than Audis are to VWs.

  • avatar
    Fusion

    Taking the Alfa Logo and putting it on every Seat would basically be a better place for Alfa Romeo to be as of now. While Alfa still has a lot of brand cachet (interestingly, especially to Americans who haven’t been able to buy one in decades), their current offerings are just plain sorry.

    As of now, AR offers two models – a compact, and a sub-compact. A brand that has repeatedly stated they want to take on Audi and BMW, yet offers just two cars that are positioned at the lowest end of the competitors range. Even Mini – which should be a brand with a far smaller range of vehicles offers more different models than Alfa. And listening to Marhcionne, its not going to change soon – the oh so important midsize sedan and small SUV are being pushed further and further away, and by the time they do arrive, the Mito will be an old car itself. And somehow, the 4C sports car was missing from this years Geneva show…

    It’s always amazing to see Alfisti (usually driving cars at least a generation old) talking about the brand dying when sold to VW, when the brand is already on its way to dying anyway…

    EDIT: Regarding the “brand identity” – that might suffer when sold to VW. On the other hand, thats usually something that people driving 10-20 year old cars talk about, people that will hardly every buy a new one anyway. Lamborghini Owners and buyers aren’t complaining about Lambo becoming “teutonic”, 25 year old people on message boards are.

    Is a real Alfisti really happy with being able to buy a Mito or Giulietta? Didn’t Alfa lose its true identity back when it was sold to Fiat in the first place? a true Alfisti might ask himself if he’d rather want a “teutonic Alfa” or none at all. As of now, Alfa Romeo is selling as many cars, as Saab was back in ~2005. How did that turn out?

    • 0 avatar
      Lampredi

      Of course there’s no guarantee that Alfa Romeo won’t die under Fiat ownership. But I think it’s better after all for Alfa Romeo to be on perpetual life support under Fiat than to be sold, killed and reincarnated as Audi Romeo.

      I do agree that Alfa Romeo lost quite a bit of its identity after the Fiat takeover in 1986. I’d prefer not to have to witness the rest of it disappear as a result of a VW takeover.

      • 0 avatar
        Morea

        Lampredi, how would you feel about the sale of Alfa to, say, Tata Motors?

        Audi is trying to jump in and buy Ducati ahead of Hero MotorCorp (also of India).

        Are Indians more or less like Italians than Germans? (I’ll leave that one to the philosophers!)

  • avatar
    tparkit

    No surprise that Marchionne is visiting the Italian government for help. Next stop may be the White House. After all, what else are cronies for, and how else could a parasitic ward-of-the-state survive?

  • avatar
    elwesingollo

    Strange that all the articles from Bertel are pro-VW and anti-Fiat :D
    All the brands in Europe market are loosing, in fact in this article, still from Bertel, http://www.thetruthaboutcars.com/2012/03/european-new-car-sales-worst-february-of-the-millennium/ you can see that the only groups with plus signs are Hiunday, Kia, Daimler and Jaguar.
    Even VW gets a -2,6%. Globally there are -100k car sales in Europe.
    For the financial problems, it seems that we can see the light at the end of the tunnel, in fact our 10 years Bond interest is 4,8% and the current situation in Italy is a lot better than in Greece, as long as we keep our politicians away from government
    What really Fiat needs is to sell cars all over the world, they are in South America but they have to improve sales in Asia, possibly in partnersihp with Suzuky.


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