Marchionne's Rebadged Chrysler Models May Fail to Stem Fiat's Sales Slump
Fiat SpA’s integration with Chrysler Group LLC faces its first test with European buyers this week, when Chief Executive Officer Sergio Marchionne introduces Chrysler models with Fiat nameplates at the Geneva auto show.
Marchionne is counting on the rebadged models to keep customers walking into the showrooms as he holds off on new Fiat models until the second half. Marchionne, who boosted Fiat’s stake in Chrysler to 25 percent last month, is withdrawing the Chrysler brand from continental Europe, reported Bloomberg.
“Marchionne is trying to make a virtue out of necessity,” said Marco Santino, an analyst at A.T. Kearney in Rome. “While pure rebadging strategies have never worked well, Lancia and Fiat dealers will at least have some new products to show this year.”
Marchionne said Feb. 15 that Fiat had “repositioned” model launches until the second half because he doesn’t expect Europe’s car market to start recovering before then. Fiat forecasts a 3 percent decline for the European market this year. The company’s European share shrank to 7.6 percent in 2010 from 8.7 percent in 2009, according to industry group statistics.
“Fiat is playing defense in Europe, it has no major product push throughout the year,” said Jochen Gehrke of Deutsche Bank AG, who’s ranked No. 1 among Fiat analysts tracked by Bloomberg. The rebadged Chryslers may only provide “niche” sales, he said. Gehrke expects Turin, Italy-based Fiat to lose market share in Europe this year.
Three of the five cars Fiat will introduce this year are derived from Chrysler models, including the Lancia Thema, which is a European version of the Chrysler 300, and the Fiat Freemont, which is based on the Dodge Journey. Fiat will unveil the cars at the Geneva Motor Show tomorrow. The five-door Lancia Ypsilon is the only all-new car the company will show.
Sales of the Thema and other rebadged Chrysler models in Europe may give the carmaker an “incremental” sales bump without a lot of extra cost, said Jim Hall, an industry analyst with Birmingham, Michigan-based 2953 Analytics.
“It does allow them to firm up Lancia, and Lancia has had a tough time,” Hall said. The strategy is “a ‘win’ in that there’s not a lot of investment.”
Excluding the Ferrari and Maserati luxury brands, the Italian carmaker lost about 380 million euros in Europe last year, Gehrke said. The company had 2010 operating profit of 1 billion euros in Latin America, he estimates.
“Fiat needs to sell at least 10 percent more cars in Europe this year in order just to break even,” said Gehrke, who last month cut his rating to “hold” from “buy.”
The Italian company’s shares have more than doubled over the past 12 months, making them the best performers on the eight-member Bloomberg Europe 500 Autos Index in the period. Fiat spun off its industrial business on Jan. 1. Fiat slumped as much as 0.6 percent to 6.74 euros and was down 0.3 percent as of 9:10 a.m. today in Milan trading.
Fiat doesn’t give specific forecasts for Europe, where it gets 60 percent of its revenue. Marchionne has said he expects the carmaker to break even in Europe by 2013. A company spokesman declined to comment on European targets for this year.
Marchionne on Feb. 15 said Fiat’s product plan for 2011 may “even be too aggressive,” as European demand will remain “structurally weak.” Fiat will offer a total of five new cars this year, compared with nine in 2012 and 11 in 2013, according to a Dec. 17 presentation posted on its website. Those figures exclude light commercial vehicles.
Fiat’s investments will peak this year as the company sustains new product development, the CEO said Feb. 15. The company “will have a much fresher product line in 2012,” Gehrke said.
The revamped Lancia Thema features European touches like Italian leather made by Poltrona Frau SpA. Elisabetta Canalis, the Italian girlfriend of George Clooney, is also appearing in a series of Lancia ads, with the tagline, “Italian character meets American glamour.”
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