Crisis at Fiat-Chrysler

Recently I read an article on Car and Driver about how Fiat-Chrysler CEO Sergio Marchionne is questioning the profitability of Tesla's new Model 3 sedan.  To this I say, Marchionne should worry about his own company's health before offering his two cents on others.  This is just the most recent in a line of news articles that have me really questioning if Fiat-Chrysler is going to survive the long run.  It seems to me that the company has become a house of cards just waiting for the right catastrophe to topple it over for good.

Fiat's return to the US has been less than successful,
with dealers struggling to sell inventory

Looking through monthly sales numbers led to my initial concern.  Jeep and Ram post healthy gains month to month.  This makes sense considering people's ravenous appetite for SUVs, trucks, and crossovers.  For 2015, 39 percent of all new cars that left Fiat-Chrysler showrooms were Jeeps.  However, it must also be noted that Dodge, Chrysler, and Fiat, in the same articles, usually post double digit declines month to month.  For the most part, Dodge, Chrysler, and Fiat don’t offer light trucks.  Exceptions include the Dodge Durango, which is kind of a niche product as the only remaining rear drive, V8 powered, three-row midsize SUV; and the Dodge Journey, which is mediocre in all criteria.  I'm surprised the Fiat 500X hasn't been a bigger sales success.  Its sister car, the Jeep Renegade, is selling like crazy.  Fiat desperately needed this car to ride the wave of sub compact crossover sales, but I'm guessing poor reliability and lack of dealership visibility have hurt sales potential.  Fiat has only 206 showrooms in the US, which is about the same number of Chrysler showrooms in New York and California alone.

For 2016, all five Fiat-Chrysler brands are in the bottom seven Consumer Reports new car predicted reliability positions.  Chrysler's nine speed automatic transmission has been a source of constant headaches, and don't forget the public hacking of a Jeep Cherokee through its infotainment system which led to a recall of 1.4 million Chrysler cars to fix the vulnerability.  Reliability has never been Chrysler's strong suit, and their shoddy reputation is turning away potential new buyers looking for a trouble free motoring experience. 

This leads to the next part of my concern.  I have addressed the past and the present, and now must look to the future.  Here is where I develop serious doubt as to Sergio Marchionne's leadership skills.  It was announced in January that the Dodge Dart and the Chrysler 200 would not be renewed for a second generation.  Instead, Marchionne is going to increase production of  Jeep and Ram vehicles, citing low gas prices as a permanent condition.  My first reaction to this was something along the lines of, "What an idiot."  Gas prices will go up eventually, and Fiat-Chrysler will be up a creek when they do.  Midsize and compact sedans are crucial to any mainstream automaker's lineup to keep fleet fuel economy high.  Even if gas prices stay low, the government will continue to pass increasingly stricter fuel economy regulations.

Once the next big thing, the Dodge Dart will
not be renewed for a second generation

The Dart was released to great fanfare in 2012 as a breakthrough for Dodge.  It was the same story with the 200 in 2014.  That car was supposed to end the nightmare that was the Sebring.  But, as Marchionne states, the Dart's and the 200's disappearance will not significantly hurt Chrysler's profits, which indicates that they can't be selling that many or making a profit off of those they do sell.  Nevertheless, announcing a car is to be discontinued while it's still got a few years left in production could really hurt consumer confidence and stifle whatever sales potential the cars have left.



I could ramble on forever about Marchionne's crazy schemes.  He expects Alfa Romeo to be selling 400,000 vehicles globally in 2020.  Alfa could launch an entire lineup tomorrow and it will still take years to reach those kinds of numbers, if they ever reach them at all.  The brand is positioning itself as an Italian alternative to Audi, and it took Audi the better part of a decade to shed its old image as a purveyor of slightly nicer Volkswagens to that of a legitimate luxury car maker in its own right.  Considering Alfa Romeo is starting from scratch, with a history of notorious reliability behind it, Marchionne's statements are hopelessly optimistic.  Marchionne also keeps looking for business partners; in particular he is constantly courting General Motors CEO Mary Barra about a merger.  Smartly, she isn't biting.  If Marchionne had confidence in his own business, he wouldn't keep asking others to join him.  Furthermore, Fiat-Chrysler has nothing valuable to offer GM.  GM has made tremendous progress following its bankruptcy.  There is no need for them to stoop back down to Chrysler's level.

A big part of GM's resurgence has to do with a significantly improved product lineup.  Chrysler's lineup is mostly the same since before its partnership with Fiat, and the company has remained quiet on the future of several key models.  The Dodge Charger, Chrysler 300, and Dodge Challenger desperately need a top to bottom update, and the current Durango should be nearing the end of its product cycle.  However, no test mules have been spotted and no announcements have been given regarding replacements.  There's still time, and I would expect there to be some announcement by the end of this year about some unveilings at the 2017 Detroit Auto Show.

So, all in all, things look pretty gloomy for Fiat-Chrysler.  A dearth of competitive products, poor reliability, and corporate mismanagement are appearing to stifle the group.  Then again, for Chrysler, that might just be business as usual.