Marchionne Gives Up Italy, Looks To U.S. And Brazil For Salvation

Bertel Schmitt
by Bertel Schmitt
marchionne gives up italy looks to u s and brazil for salvation

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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4 of 16 comments
  • Ciddyguy Ciddyguy on Oct 19, 2011

    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.

  • Eldard Eldard on Oct 19, 2011

    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?

  • VanillaDude VanillaDude on Oct 19, 2011

    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.

  • Fred schumacher Fred schumacher on Oct 20, 2011

    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.