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Fiat-Chrysler's bold U.S. vision


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Fiat-Chrysler's bold U.S. vision

Stores will be a ‘World's Fair of auto brands'

Bradford Wernle

and Luca Ciferri

Automotive News -- April 26, 2010 - 12:01 am ET

Travel by time machine to a large Chrysler Group dealership in 2014, and you'll find radical changes.

In one corner is an Alfa Romeo boutique where two U.S.-built crossovers sit next to a sleek new Giulia sedan assembled in Turin, Italy.

Nearby, a Chrysler 300C built in Canada shares space with a midsized Chrysler brand sedan designed in Auburn Hills, Mich., but built on the same Turin line as the Giulia.

In the Dodge brand space, customers browse American rear-drive muscle cars, such as the Hemi-powered Challenger, and a front-drive compact sedan built in Italy.

In the Ram area, a massive 3500 Ram pickup built in Mexico sits alongside a small European-style commercial van developed by Fiat and built in Turkey.

A salesperson shows a Mexico-built Fiat 500 minicar that gets 40 mpg, powered by an engine with advanced breathing technology from Fiat.

If the vision that Sergio Marchionne, CEO of Fiat and Chrysler, laid out last week in Turin comes to pass, the multinational offerings will all be sold under one roof at select Chrysler Group dealerships.

As Chrysler marks the one-year anniversary of its bankruptcy filing, Marchionne is guiding the two carmakers into a far-reaching trans-Atlantic interdependence that Daimler, Chrysler's previous owner, never dreamed of.

“It's going to be kind of a World's Fair of auto brands,” says John Wolkonowicz, analyst for IHS Global Insight.

The plan faces steep challenges:

-- Chrysler must attract young customers who appreciate small cars and imports. Most shoppers consider Chrysler a seller of pickups, minivans, big cars and SUVs.

-- Fiat and Chrysler must overcome cultural differences to combine purchasing, product development and manufacturing.

-- And Marchionne wants to launch more than 40 new and redesigned models from 2011 to 2014, increasing global volumes to 6 million vehicles for the Chrysler and Fiat groups. Last year they sold 3.5 million.

That's a tall order in a brutally competitive industry -- even if Marchionne creates the “inextricably intertwined” Fiat-Chrysler organization that he envisions.

Last week Chrysler posted an operating profit of $143 million in the first quarter, despite lower sales. And Chrysler boosted its cash position by $1.5 billion, to $7.4 billion, by the end of March, giving it more financial leeway to survive until the integration starts to pay off in two years.

Operating factories at full capacity is a key part of Marchionne's plan. Fiat Auto and Chrysler Group vehicles will be made in each other's factories and shipped both ways across the Atlantic.

For instance, a large Alfa Romeo SUV will be built in the United States on the same platform as the Jeep Liberty starting in 2014 for sale in the United States and Europe. Chrysler also will build a compact Alfa SUV starting in 2012.

Fiat now plans to sell four vehicles in North America, all variants on the 500: the hatchback, convertible, sporty Abarth and a four-door hatchback with a high roof.

Marchionne's plan calls for consolidating Chrysler's and Fiat's smaller and mid-sized vehicles onto three main platforms: small, medium and compact. Each platform will account for a million units by 2014. For comparison, Fiat's mini- and small platforms each generated about 500,000 units in 2009.

Other platforms will be used for pickups, minivans, large cars, large SUVs and commercial vans.

The often-delayed revival of Alfa, in which Chrysler would play a significant role, would also help Marchionne fill factories and showroom floors.

Cutting costs is another key to Marchionne's plan. The companies are even saving on executive salaries. Olivier Francois, a native of France, is CEO of both Lancia and Chrysler and runs marketing globally for all Fiat and Chrysler brands. Under his leadership, the two brands will share their entire lineup. Francois' salary, like Marchionne's, is paid entirely by Fiat.

Meanwhile, by combining purchasing, Fiat and Chrysler expect to save about $1.0 billion between now and 2014, according to Marchionne.

Fiat and Chrysler will save another combined $1.1 billion over the period, mainly in the engineering and powertrain areas, Marchionne said.

Chrysler and Fiat want to speed products to market by standardizing more components and subsystems in Chrysler and Fiat vehicles.

Harald Wester, Fiat head of engineering and design, said it took Fiat 26 months to take the Fiat Stilo from design freeze to production in 2001. That time had been slashed to 15 months with the recent introduction of the Alfa Romeo MiTo, a sporty subcompact sold in Europe.

The MiTo shares 65 percent of its parts with other Fiat models, a much higher percent than earlier models.

A lot of things must go right for Marchionne's bold plan to become a reality in Chrysler dealerships by 2014. But he has already shown he can motivate the Chrysler work force. And he's under no illusions the job will get any easier.

As he said during a Detroit auto show interview: “The to-do list for us -- it's enough to choke a horse."

Read more: http://www.autonews.com/article/20100426/RETAIL03/100429899/1193#ixzz0mDjC0kkF

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