Well, it's summer, and the automakers are gearing up shutdown as dealers sell down last year's models (though with demand this year, it's a good bet shutdowns won't last for long). It’s as good a time as ever to look at Fiat Chrysler Automobiles (FCA), the merged Chrysler and Fiat organization announced in January after Fiat SpA bought the remaining shares of Chrysler LLC from the United Auto Workers.
Pretty recently, Sergio Marchionne, CEO of the umbrella organization based in the Netherlands, announced the company’s second five-year plan under Fiat's stewardship. The first was just after Fiat acquired Chrysler Group when the latter was just out of bankruptcy in 2009.
The Fiat era may be Chrysler’s best. If Chrysler has had nine lives, the last two (or three, or four) were pretty much terminal: Chrysler was kind of dead in the water in the late '90s when Daimler A.G. put a gaff in it and tried to reel it in, an exercise that pretty much ended with Chrysler dead but also underwater, though it did allow former chief designer Ralph Gilles (now CEO of the SRT performance brand) free reign to exercise his yen for retro with cars like the Chrysler 300 and PT Cruiser. Then there was the Cerberus show, starring Jim Press as titular CEO, a short-lived farce in which a Wall Street venture operation did what such firms often do: juice the shit out of a company until there's nothing left but the rind, then look for a compost bin.
And then came Fiat, which nobody thought would be anything but a Daimler redux, and maybe worse. Yet Marchionne's crack marketing team, ironclad leadership, real smart investing, great brand and advertising strategy, a dose of calculated risk, and such re-orgs as cleaving Ram and Dodge, proved everyone wrong. Including me: When Fiat first showed up I thought, "Here's a sinking ship. Oh, and here comes Moby Dick to save it."
Well, let's see. June was the 51st month of consecutive sales gains. Ram trucks are selling again; Chrysler division actually has a mid-sized car that can compete and looks good for the first time since the cab-forward days of the Chrysler Concorde and Dodge Intrepid. Jeep had its best June ever in June and Ram did its best month in 10 years.
Well, okay, back to the Five Year Plan announced in May, which involves doubling FCA's global profit doubling by 2018 with a 61% increase in yearly new-vehicle deliveries. When Marchionne announced it, and said how much it would cost — around €50 billion, investors had big doubts and share prices fell. They had reason to look at it through gimlet lenses: Marchionne wants to grow Chrysler division's sales to 800,000 by 2018 from 350,000 or so today, partly by doubling to six the product lineup, including adding a compact car, Chrysler 100. He wants to make Jeep, Alfa Romeo, and Maserati true global brands. Jeep is a no-brainer; cars like Grand Cherokee are strong sellers around the world and Maserati has icon status worldwide. But for Alfa Romeo to be a global hit (Marchionne wants basically a 400% increase in deliveries by 2018), it has to be a hit in the U.S. That's a big question mark. And it will cost about $7 billion.
Industry consultant Jim Sanfilippo says that if the build quality, technology, and amenities are in order, the cars may well see strong volume in part because of their beautiful design and exotic pedigree.
And he makes the good point that while nobody has ever accused Marchionne of humility, he backs it up. "If he'd said Ram would one day outsell Silverado in a month [in March, for the first time ever], he'd have been laughed at. If he'd said Chrysler's Super Bowl ads would set a standard, he would have been laughed off the stage. If he'd predicted three years ago that Chrysler [Group] would have 51 months in a row of sales gains, he would have been laughed at. And he has made everyone else a little better by pulling off successes, and he's not done yet." Sanfilippo adds that if investors are scoffing now, the competition had better not be doing the same. "If I were his competitors, I wouldn't allow that [attitude] in the boardroom."