By on July 26, 2012

Sergio  Marchionne accuses Volkswagen of exploiting the European crisis to gain market share by offering aggressive discounts, the New York Times writes.  “It’s a bloodbath of pricing and it’s a bloodbath on margins,” the Fiat and Chrysler CEO told the paper.

Indeed, the European market share of all Volkswagen Group brands climbed from 22.6 percent in the first half year of 2011 to 23.9 percent in the same period this year – unavoidable when groupwide sales dropped only 1.5 percent while the market sunk 6.8 percent.

If you want a car at discount in Europe, now is the time.  “Never were there bigger discounts than now,” reports Germany’s BILD Zeitung.  However, when looking for the biggest discounts, the paper finds someone else than Volkswagen:

“The biggest discounts can be had for Fiat Punto (30.6 percent), Opel Corsa (31.3 percent) and Opel Astra (30.9 percent.)”

Current ACEA president Marchionne wants the EU to help:

“What they should do is coordinate a rationalization of the industry across the producing companies. The ones that really have not acted on this are the French and the Germans, who have not taken out any capacity at all.”

That won’t fly with the French who call a PSA CEO on the carpet when he closes a plant, and especially not with the Germans who have to farm out car production to Finland because they can’t keep up with the demand.

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16 Comments on “Marchionne Accuses Volkswagen of Dumping...”

  • avatar

    So tired of this guy’s bloviations. Shut up and manage your company.

  • avatar
    “Mr. Marchionne AND OTHER AUTO EXECUTIVES accuse Volkswagen of exploiting the crisis to gain market share by offering aggressive discounts.”

  • avatar

    I don’t think you’ll get any complaints about discounts from consumers.

  • avatar

    30% discount on the Punto, and $3500 rebate on the Chrysler 200. And Marchionne complains that other manufacturers dare to discount!

    Part of the reason for the extra VW discounts will be to keep the sales going for the Golf, which is getting replaced in six months’ time. In the meantime, the planned 2013 launch of the Fiat Punto is postponed again by Marchionne.

    One key difference is that Marchionne is essentially a finance guy, whereas companies like VW, BMW and Daimler are run by engineers, who have all invested in new product through the downturn.

    • 0 avatar

      “One key difference is that Marchionne is essentially a finance guy, whereas companies like VW, BMW and Daimler are run by engineers, who have all invested in new product through the downturn.”

      That isn’t it. Fiat (now Chrysler) simply doesn’t have enough money to pay for product development.

      Fiat is a byproduct of years of protectionism. While the Germans made concerted efforts to use the auto industry to bolster their exports, Fiat was largely an employment scheme that was propped up via a captive market.

      Now that the captive market is gone, Fiat is suffering from the hangover that comes from having weak branding and minimal demand outside of Italy. Marchionne inherited a company that would have probably failed a long time ago if it hadn’t been protected. The Chrysler deal was an effort to fix this, but while Chrysler provided opportunities for scale, it didn’t come with a whole lot of cash.

      And don’t kid yourself about German engineering. BMW and Mercedes do well in the US because they understand luxury branding and they know how to play the leasing game. The key to their making money is for them to make something that will justify a high price tag, then selling it twice (the first time to the social climber who initially leases it, the second to the buyer of that used lease return.)

      • 0 avatar

        Chrysler is generating substantial cash flow for Fiat now ($500M in the first quarter). Marchionne has the option of monetizing the Ferrari ownership or the Alfa Romeo brand (both capable of generating billions in cash). But he chooses to keep starving Fiat (and the other brands) instead. I do agree with you about the underlying causes, but at this rate the end result of Marchionne’s strategy will be that he’ll basically have just the Chrysler business with maybe some Fiat-branded products in Latin America.

        I wasn’t going to argue about engineering quality or branding: the point was that the German manufacturers have kept investing in new product. Without current product, it’s hard to find customers, even with 30% discounts.

        P.S. Generally that second sale will generate income for the dealer, not for the manufacturer.

  • avatar
    The Doctor

    I’m sure Piech will shed a tear of frozen mercury.

  • avatar

    As long the VW + PSA aren’t being given a boost by their governments, who cares?

    Wah,wah, they are selling at a discount!!!

    Compared to what? You? Sticker?

    There’s an old joke that seems to fit:

    “An old Russian joke tells the story of a peasant with one cow who hates his neighbor because he has two. A sorcerer offers to grant the envious farmer a single wish. “Kill one of my neighbor’s cows!” he demands.”

    Not work better/harder to get 2 cows. If I can’t compete then no one should be able to compete.

  • avatar

    Bloodbath of pricing and bloodbath on margins does really mean dumping?

  • avatar

    Marchionne may have to sell Alfa to VW just to keep the lights on.

    • 0 avatar
      Bela Barenyi

      Marchionne won’t sell Alfa Romeo to Volkswagen. He knows, if he ever does so, he (read: Fiat) can simply forget to have a big market share in Italy, because every Italian will start to buy Alfa Romeos. For proof just look at Skoda. Before Skoda was owned by VW, not many people in Western Europe, especially Germany, did buy Skodas. And since Skoda is owned by VW, people started to buy more and more Skodas, because everybody knows you get VW-tech for less money.
      Beside of that, if Fiat sells Alfa, there will be no way of increasing sales to 5-6 million units/cars. Alfa is Fiats only “worthwile” brand which has “worldwide” appeal (Jeep has not the same potential). Without Alfa there’s not much possibility to gain the expected “economies of scale”.
      In Addition, Fiat Chrysler has enough “liquidity”. Marchionne is known to prefer “liquidity” over new investments. That’s also the reason why the European investments of 7,5 billion Euro was reduced around half a billion Euro, just to invest the necessary and to preserve liquidity. The last time I checked, Fiat Chrysler had an available liquidity of 20,7 billion Euro (without Chrysler, Fiat has available liquidity of 10,1 billion Euro).
      And beside of all that: Selling Alfa would not ease Fiat’s overcapacity problems. VW is not willing to buy an italian
      factory. VW just wants the the badge, so that they can attach
      it on rebodied Audis.

      • 0 avatar

        I never really got why Fiat brand itself is not considered a brand that is worthwhile worldwide. Why can’t Fiat be the Chevy/Ford/Toyota type of volume brand?

      • 0 avatar

        Is it better for Alfas to be rebadged Audis or rebadged Fiats?

      • 0 avatar

        Actually, Fiat does have the Ferrari brand as well — I do think that has some value!

        As for Alfa, it’s persistently stuck at 100K units per year. Even though product development is mostly rebadging of Fiat models (8C notwithstanding), it is surely bleeding significant money at that level. And I do think VW would accept an Italian factory if that’s what it took — they have maintained both the Lamborghini factory and the Bentley factory as well.

  • avatar
    Bela Barenyi

    Sorry to be pedantic, but it’s not only Marchionne who “accuses” VW of dumping. You could read the same “accusations” at automotive news:

    VW gains share in France with deals PSA, Renault can’t match:

    VW Group has rivals by the throat – don’t expect any mercy:

  • avatar

    Marchionne, with hs ailing European brands is simply not competitive, has overcapacity, is afraid of these dire consequences, and simply attempts to cover this up by asking for some EU regulations to hide these facts.

    Given the high prices for cars (not restricted to the VW brands) in Europe, especially in Germany, compared to the US, for example, his dumping argument simply is stupid. Just compare the product offerings from the Fiat group with those from VW. Find out for yourself and tell me in which class of cars Fiat is better.

    But perhaps his strategy will be successful. Why not bail out run-down car manufacturers if you bail out broken banks? What are billions, if you have stupid taxpayers enough to pay for it?

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