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.
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| 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.
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| 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.
