Idle plants, surly unions and a weak, ageing model line-up - the challenges facing Fiat Chrysler's Italian revival sound a lot like the British car industry's low point in 1982. CEO Sergio Marchionne will be hoping the similarities don't end there as he orders up sporty new Alfa Romeos and sleek Maseratis in a bid to repeat in Italy what British brands like Mini and Jaguar have since achieved under foreign ownership.
After cementing its marriage to Chrysler in January, which will move the group's domicile and main share listing abroad, Fiat is turning back to long-delayed plans to relaunch its Alfa and Maserati marques, with which it has pledged to revive Italian production. Next week's Geneva car show may offer early clues as the company wheels out a cabriolet version of the recently launched Alfa Romeo 4C coupe, along with the first Italian-made Jeep.
Marchionne said last month that Fiat plants have a bright future making "premium segment, high-quality products with reduced competition, more attentive customers and higher margins". Like the British auto industry, which now exports 80 percent of its car production, Fiat aims to tap overseas demand. That could soften the fallout from a six-year meltdown in Fiat's core southern European markets, where a nascent recovery promises to be slow.
But Marchionne faces hurdles including a big investment outlay, difficult Italian business climate and heavy unionisation among the workforce of 62,000. "For a premium brand you need a broad offering of cars, but that's very expensive and takes time," said Commerzbank analyst Sascha Gommel. "I'm not sure Fiat can deliver that." BMW's Mini and Tata Motors-owned Jaguar Land Rover have become cash machines for their parents, helping to propel British car production to a six-year high in 2013, including half a million Nissans made in Sunderland, north-east England.
Carmakers announced 2.5 billion pounds ($4.2 billion) of UK investment last year as national output rose to 1.59 million light vehicles, narrowing the gap with France, Europe's No 3 manufacturer after Germany and Spain. Italian output was below 630,000 vehicles, less than half its total a decade earlier. To halt European losses by 2016, Marchionne is counting on 104-year-old Alfa to combine higher pricing than the mass-market Fiat brand with heavier sales volumes than Maserati. Marchionne has pledged to unveil a new strategy in May - expected to include tough goals for an array of new Maseratis and Alfas built at plants like Cassino, south of Rome.
The 4C coupe is off to a decent start; 1,200 European orders since sales opened in December, with the US launch yet to come. The BBC's Top Gear show called it a "fantastic little gem". Maserati's vital statistics are also encouraging: trading profit tripled last year as deliveries more than doubled to 15,400 cars - though still far short of a 50,000 target for 2015.
Neither brand needs the restoration job that brought Mini and Jaguar back from nationalisation and near-death after UK auto production bottomed out below 900,000 vehicles in 1982. But Fiat will still have to invest many more billions to revive Alfa, turn Maserati into a higher-volume marque and boost the global renown of both brands. "I just wonder if it has the money to really drive a strong interior build-out of Maserati and Alfa," said Arndt Ellinghorst, a London-based analyst at ISI Group.
The group has almost 20 billion euros of cash, but 30 billion in debt. While the tie-up deepened Fiat's pockets, Chrysler needs a costly makeover of its own to keep up with General Motors and Ford, Ellinghorst said. Underlining the strain, Moody's last week cut Fiat's debt rating to four notches below investment grade. Several promised revivals have stalled since Fiat bought Alfa in 1986, leaving behind a weak reputation for quality and just three models, including the 4C. With about 100,000 annual sales, the brand is dwarfed by Audi's 1.57 million deliveries last year, a gap many doubt it can narrow significantly.
Comments
Comments are closed.