By on October 19, 2011

Chrysler-Fiat’s Sergio Marchionne is joining the chorus of doomsday CEOs. “2012 will not be a great year for the European market,” Marchionne told Reuters. He is looking to the U.S. and to Brazil for salvation – despite GM’s Akerson having made equally dire forecasts for America.

Fiat is doing so badly at home in Europe that the U.S. and Brazilian markets are now the biggest contributors to the combined group’s profit. As of September, Fiat had lost 12 percent of its not so glorious prior year sales in the EU. Its market share in Europe dwindled from 8.2 to 7.3 percent for the first nine months of 2011. The bloodletting quickens: In September, Fiat’s market share stood at 6.6 percent. Small BMW is only 0.3 percent behind – with cars that are the ultimate profit machine.

Marchionne blames Fiat’s poor showing in Europe on the weak Italian market:

“Italy has lost 700,000 cars (since 2008), which for Fiat means a loss of 210,000 cars. There is no point in looking for new models.”

In this business, stopping the development of new models means suicide. Volkswagen, which never stopped developing new cars and technologies, expanded its market share in Europe from 20.7 percent in September 2010 to 23.1 percent in September 2011. Fiat’s biggest problem is that it missed the boat on the booming Asian markets, major profit machines for Fiat’s peers in Europe’s north.

Isn’t it strange that the savior of Chrysler needs to be saved by Chrysler?

 

 

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16 Comments on “Marchionne Gives Up Italy, Looks To U.S. And Brazil For Salvation...”


  • avatar
    Volt 230

    I guess Sergio ran out of suckers in Europe to fall for his “passionate cars” so now he turns to the “passionate” Americans and Brazilians to buy his crappy cars!

    • 0 avatar
      eldard

      That’s why the 500 is selling quite well. Politically-correct (and highly passionate) lesbians and/or hippies from the Tri-state area and Kalifornia snap them up like hotcakes.

      • 0 avatar
        srogers

        I’ve heard that even some right wing and coldly analytical hermaphrodites from Possumtown, New Dumpshire are wisely negotiating to purchase 500s.

      • 0 avatar
        CJinSD

        A Keynesian Rhode Island married couple I know that has no problem paying $29K a year in property taxes to live on an unplowed dirt road with no trash pickup or kids in school and that blissfully spends thousands a year in upkeep for their frangible Mini Cooper S, GTI MK5, and previous Jetta VR6 was early to jump on the 500 waitlist and talked about their future Fiat to everyone…until the dealer had a demo they could actually sit in and drive. No sale.

      • 0 avatar
        mazder3

        @srogers

        Is Possumtown a neighbor to Swillsboro?

      • 0 avatar
        Volt 230

        Well, there are quite a few Smarts around these parts and I remember seeing quite a few Yugos back when, not to mention Pintos, Vegas, et al. So there will always be gullible people to buy all this crap and I’m sure quite a few Chinese cars will be sold when they come over here also.

    • 0 avatar
      bobman

      Sergio is on the right track here. He’s going to use the freshly renovated Chryslers to enhance his sales in Europe. Remember that currently it has no offerings in the space that the Chrysler/Lancias and Fremonts are in. All activity in that space will be a huge gain. He’s just stated that the Alpha development push will focus on US market first. This is brilliant, as it again will utilize the best of Chrysler’s revamped line. These are getting excellent reviews and will be even better when brought to the standards required to be called Alphas.

      I’m looking forward to se how the next few years work out for Sergio. I think he will succeed and Chrysler and Fiat will become a major player as he has predicted. I hope he makes it.

  • avatar
    Lampredi

    In this business, stopping the development of new models means suicide.

    Exactly. So why did Fiat still do this? Because it cannot afford to develop new models? It certainly cannot afford not to, as is becoming increasingly evident as time passes.

  • avatar
    rpol35

    “Isn’t it strange that the savior of Chrysler needs to be saved by Chrysler?”

    Honestly, no, the same thing happened with Diamler/Chrysler in the early 2000’s. Chrysler almost sank D/C with huge opeating losses in the early years of their awkward marriage but they slowly pulled out of the nose dive. Chrysler started making a contribution to the Daimler side of the house and kept MB afloat when intractable electronics/warranty problems with their infinitely complicated cars almost scotched them.

    History repeating itself? I hope not, it didn’t end so well!

    • 0 avatar
      Lorenzo

      I think you need to reread your auto history. When Chrysler “merged” with Daimler, it had made a $2.8 Billion profit its last year as an independent, and had the lowest development costs of the big three, shifting it’s component design to its suppliers, just like Toyota.

      Daimler grabbed Chrysler’s $7.5 billion nest egg, and imposed its top-down management style, driving out the innovators and destroying Chrysler’s profitable business plan. Daimler’s electronics/warranty problems were already in evidence, caused by Jurgen Schrempp, who thought Chrysler’s state of the art cad/cam system would save him and Daimler.

      Chrysler’s new models were repeatedly delayed and raked by cost cutting, with Daimler actually charging Chrysler for interminable meetings. Schrempp did to Chrysler what he did to Daimler’s aerospace division – ran it into the ground.

      As for Sergio, he had to have seen Fiat’s future and bought Chrysler to serve as his lifeboat. Say what you want about the UAW, but working with a failing union in America is child’s play compared to advance planning with Italian labor Unions, European labor laws and the shaky Euro system. Don’t be surprised if Chrysler-Fiat returns to being a de facto American company with most European production shut down, selling vehicles in Europe that were made in America and Brazil.

  • avatar
    getacargetacheck

    I can’t wait for 2014 when we can supposedly look back at Marchionne’s brilliance and know for sure that all the doomsayers were idiots and that he is the smartest man in the room. Because, I don’t understand his plan at all. The small cars and technologies that are supposedly Chrysler’s saving grace cannot even maintain share for Fiat in Europe let alone take on the Japanese and Koreans in the US market. And what about his branding strategy: add brands (Ram), cut up Dodge (no Grand Caravan, its biggest seller) into the maker of muscle cars, CUVs, and a compact sedan (!?!?!?), while overstating his plans for Fiat in the US leaving dealers dry for product. While Ford, Chevrolet, Toyota, Hyundai, Honda, Nissan and Volkswagen are going global with their names, Marchionne seems to be all about regional branding. Surely he knows we live in a globalized economy? The Fiat brand should be on the upcoming vans (not Ram), on the compact sedan (not Dodge), and on the upcoming midsized sedan and CUV (not Chrysler and Dodge respectively).

  • avatar
    ciddyguy

    That’s odd as they’ve been developing some fantastic technologies such as the MultiAir and the TwinAir motors of late.

    I hope they don’t just stop making new models or unless there was a misunderstanding of some sort of the original source?

    That said, with Europe faltering, what seems to be more so than the US right now, this isn’t looking good for ANYONE, let alone Chrysler and FIAT.

  • avatar
    eldard

    I’ve said it before and I’ll say it again: the Fiat-Chrysler union is a marriage between two losers.

    Fiat (the Chrysler of Europe) + Chrysler (the Fiat of America) = self-destructing paradox/temporal loop?

  • avatar
    VanillaDude

    Italy is going down.
    Fiat is being threatened along with it.
    So, it is possible that we are seeing that the auto bailouts of GM and Chrysler as ending up as a needed Fiat bailout.

    Depending on the US market?
    With what?
    The 500 isn’t going to do it. Are there new Chrysler products online to save Fiat next years?

    Have they reduced production costs enough to earn any money from Chrysler?

    Europe is going over the edge next year.
    The US is going to be where Europe is next year.
    I just don’t see much sunshine in this fiscal weather report.

  • avatar
    fred schumacher

    VW’s market is primarily northern Europe, which is doing comparatively well. Fiat’s primary market has been southern Europe, which is in great distress, Portugal, Spain, Greece and Italy especially. Years ago, Marchionne said he expected only five international auto manufacturers to survive the coming shake out. Fiat, as a regional company, wasn’t going to be one of those. The Chrysler bailout was a godsend, providing production capability and a new market at very low cost to Fiat.

    It wouldn’t make sense for Marchionne to invest heavily in east Asia, which is a saturated market from a production standpoint. His focus on Brazil, one of the BRIC countries, is spot on. In spite of the Great Recession, America is still a plum market, and Chrysler’s previous ability to have a significant share of that market as well as having been profitable, prior to Daimler’s ill-conceived takeover, means that this is where Marchionne has to focus.

    The Fiat 500 is only a test product. It’s much like the Mini and the New Beetle, which occupy niche markets. It takes time to ramp up a product line left bare by Daimler. The fact that Marchionne is not at all willing to sell Fiat’s agricultural/industrial division means that Fiat-Chrysler is not desperate for cash. It will take time for all this to play out.

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