FCA – State of the Empire – Part One

A two part examination of FCA’s European operations and the feasibility of Sergio Marchionne’s four-year plan to revive them.

A_Pantone_VersionNow that the captives have escaped, the presentations are complete and fruit and vegetables been thrown, perhaps it is germane to take a look behind the figures and statistics at the state of affairs facing Fiat Chrysler Automobiles in Europe as they painfully inch towards their eventual fate.

alfa romeo

Alfa Romeo’s revival
If Marchionne is to be believed, the world is breathlessly awaiting the revival of Alfa Romeo, and while he’s been trying to cobble together a plan that makes sense to financial institutions while keeping the unions and politicians happy, Alfa’s position has gone from precarious to imperilled.

The world simply doesn’t care about Alfa Romeo any more; it stopped doing so quite some time ago. Put starkly, Alfa’s first and most urgent task is remaining in business. If that can be achieved, there is a the small matter of selling cars: sufficient quantities of cars to prop the business up. However, Alfa Romeo faces a huge issue of credibility. To those for whom Alfa Romeo exists at all, the perception is of a low-quality, poorly finished car that does not live up to expectations and is therefore not worth the premium price.

Unless FCA go to extremes to address this perception, the Alfa Romeo revival will fail. Bear in mind how long and how much money it took Ford to turn perceptions about Jaguar – (and many would say that job remains unfinished) – and it becomes clear that the task FCA face in putting the burnish back on Alfa’s Scudetto is herculean. Even amongst those who are blissfully unaware of Alfa’s chequered recent history, there is little evidence to suggest that a revived Alfa Romeo will mean enough to customers, most of whom now view automotive luxury as coming exclusively from Germany.

So, eight new Alfa Romeo models in four years; €6bn euros and 200 engineers to achieve it. Sorry, did you say 200? Back in the mid-80’s Mercedes-Benz would have that many per model line. How many they utilise now is anyone’s guess, but it’s hardly much less. Can FCA really believe they can produce eight world class models with so few key people? Yes, they claim they will treble this number by 2016 but that puts a mere 75 engineers on each model line.

One thing is certain, they will need to do a much better job than their Maserati counterparts who have lately produced the disappointing Quattroporte and Ghibli. Just about okay is far from good enough when you’re up against well-funded and better versed rivals like the German premium triumvirate. ‘The Plan’ aims to increase sales 440% in four years. Quite.


A two-tier Fiat
Marchionne made a big deal about the popularity of the 500 series and how it has become a family of upmarket, highly desirable cars sold globally. ‘The Plan’ sees Fiat’s European operation leveraging the appeal of the 500 to extend it into as many as five different 500-branded model lines – one of which will replace the Punto in 2015.

Coupled to this will be a more prosaic Fiat line based upon the concept of the Panda, which will fulfil the value side of the equation and potentially give FCA a toehold in the growing ‘austerity’ market, currently dominated by Skoda and Dacia.

However, the 500 is a fashion-led car and fashions have a nasty habit of falling off the sales radar once something shiny and fangled arrives on the scene. The current 500 is now seven years old and will require replacement soon. No word on that. What is the plan for the new model – bigger? Most likely, because the Americans will demand it. Blander? Equally likely because it will be a world car, designed to appeal to a global market.

If the 500 concept falls out of favour with the market, the repercussions will ripple right through the Fiat range – at least 5 of which will follow the same stylistic template, so plenty of risk here too. In addition, there appears to be a false perception that the public will be prepared to pay a premium for a Fiat branded car. This is clearly nonsense.

Fiat has always been seen a low-cost, low quality brand and in several key markets, its badge is irredeemably tarnished. Changing perceptions will take years, swallow vast sums of money and will almost certainly fail.


Maserati as volume producer
Maserati has posted some impressive sales figures since 2013, with deliveries up 148% on the previous year. ‘The Plan’ sees the Trident as a 75,000 a year brand, taking battle directly to brands like Porsche, Jaguar and the upper echelons of Mercedes and BMW.

There are several problems here. Firstly, 75,000 cars is more than Jaguar produces today with a much fuller range of lower priced cars. Secondly, the execution of the current Maserati product plan has been decidedly low-rent. The cars look unattractive, which given the design talent Maserati should be capable of drawing upon, is perplexing. Interior design and perceived quality fall short of class best and lack the kind of effortless Italian high-end style which should have been a given.

While a diesel option will make a huge difference to sales in Europe, the very idea of a DERV-powered Maserati remains a troubling one to many. The current duo of saloons demonstrate the time-honoured Fiat adage of ‘that should just about do’. It won’t. Not when your rivals are bending over backwards to outdo one another, have massively bigger budgets, r&d facilities and experience at the very top of their game.

Even more so than Alfa, Maserati have to be demonstrably better than their rivals in style, appeal, image and quality to be even considered. Perhaps their only current saving grace is the cachet of their brand. Fiat have a lot of prior form in marque debasement, so the risks for Maserati are huge and potentially lethal.

That Marchionne has already damaged Maserati so soon into ‘The Plan’ demonstrates the risks of brand management. Sergio must tread more warily and preferably at a reduced pace if Maserati is not to go the way of Lancia and Alfa Romeo.

Selling Alfa
As has been pointed out elsewhere, FCA retaining Alfa makes more sense than selling it now. They need it too badly now anyway. After all, what would the €2bn or whatever was on the table actually buy? Without Alfa, ‘The Plan’ is dead, since FCA’s upmarket push into Europe relies utterly upon the Scudetto, and given Marchionne believes reviving Lancia is beyond his skills.

He has stated that Fiat’s volumes will remain flat in Europe for the foreseeable future, (Lancia’s can only fall), so without Alfa, his only prospect is pushing Maserati further downmarket. Something Sergio appears to be (for now) against doing. However, he may ultimately become a hostage to fortune and find himself with little or no choice.

In the next part, We’ll look at the remainder of FCA’s European brand portfolio and sum up Marchionne’s likelihood of success or failure over the coming four years.

Author: Eóin Doyle

Co-Founder. Editor. Content Provider.

7 thoughts on “FCA – State of the Empire – Part One”

  1. What exactly is Alfa’s image? Who are these people who have been waiting patiently and for so long for a decent one to come along?

    Outside the world of enthusiasts, who must be discounted if Alfa is chasing big markets, there is possibly a significant group of people who consider that the name Alfa Romeo still has cachet. But these will be passive opinions; if you ask them why, or ask them to name specific Alfa high points, they will falter.

    Many, many years ago, BMW took over Alfa’s mantle for producing everyday cars for the enthusiastic driver. They are also firmly established as the car that the privately unenthusiastic driver can run, knowing that it gives them instant, bolt-on kudos. They are further, by and large, very good and reliable cars.

    The Alfa 156 succeeded because it was a stylish car but, arguably, it would only have been chosen over a BMW because it was significantly cheaper, just as a Citroen DS3 is the LIDL alternative to a MINI. But if Marchionne wants a brand that can charge BMW prices, that is a much harder wish.

    Everyone likes a discount though, so it might be an easier path to offer Maseratis at BMW prices. But if that is to be Fiat’s plan, would they be shooting themselves in the foot creating a direct competitor if they sold Alfa to VAG which would, fairly or not, immediately remove the populist conception of Alfa build quality.

    Fiat, as a brand, means little to most younger people. The retro 500 succeeds not because of continuity of an engineering culture and understanding and respect for Dante Giacosa’s original, but because people think that the art direction of The Talented Mr Ripley was cool. If it was based on a Proton platform, no-one would care. Some of us might remember what excellent cars the 127, 128, 130, Uno, Multipla, Punto, etc were in their various ways, but no-one else cares, so what about making all tomorrow’s Fiats Alfas instead?

  2. “What exactly is Alfa’s image?”, asks Sean Patrick. “Alfa’s the petrolhead’s favourite! ‘cos Clarkson says so!” is the answer, as shouted by an army of so-called enthusiasts.

    Apart from this I have little to add to Sean’s poignant interpretation, other than a little insight into the Kubrick family’s car history: my dad, whom you could describe as an enthusiastic driver in his Storm and Stress years, found himself presented with the choice of two possible cars once he had a certain amount of dispensable income – the Alfa Giulia Super or the BMW 2002. After a nightmarish ownership experience of a Fiat a few years earlier, my dad opted for the German car. And he certainly wasn’t alone, which is why I’d pinpoint this era as the moment in time when Alfa began losing the battle. The Alfetta may well have been a competitive product (and certainly more interesting than the Bavarian offerings in terms of engineering), but come the eighties BMW had gained a neck-breaking advantage in terms of image. The awkward styling of many of the Cressoni era Alfas also didn’t help overcome certain quality issues.

    Referring back to the present day, I must admit to a naive part of myself wishing project “Alfa Resurrection Mk XIII” the best of luck. I really would welcome a range of Latin-flavoured, competitive, beautiful cars, but, as Eoin pointed out, Fiat’s recent efforts to perform a similar trick with Maserati don’t instil much confidence. Not much confidence at all. Especially when casting one’s mind back to Alfa’s most recent episode of moderate success in the mid to late ’90s. Back then, Fiat actually managed to “do a VAG” and persuade costumers to pay a premium for what was basically very ordinary, run-of-the-mill technology. A few connoisseurs might actually have been tempted by the remaining traces of Alfa engineering (the V6 and twin spark engines), but most costumers only really cared for Walter de’ Silva’s styling of these cars. Under these circumstances, with a healthy cashflow, an upswing in brand perception and some genuine elements of “brand DNA” still in existence, Fiat could have tried to push Alfa upmarket once more. If they had, maybe we’d have Alfa challenge the Germans in a fashion similar to Jaguar’s recent performance (you’re correct to smell more than just a whiff of faint praise in this statement).

    Despite the lacklustre MiTo and uninspiring Giulietta, I actually don’t blame Marchionne for Alfa’s fall from grace. But what he must take full responsibility for is the self-destruction of the Fiat brand. Aston Martin actually happens to be the only brand coming to mind right now that suffered as badly from a lack of post-credit crunch investment. Unlike Aston Martin, Fiat’s image deteriorated from “badly damaged” to “annihilated” in the process. Even Dacia is perceived more clearly and positively than Fiat these days, not to mention the Koreans, who find themselves in an altogether different league.
    As we know, Marchionne is a wizard with numbers – so has anyone yet dared to confront him with a figure for the devaluation of his (former) number one brand, I wonder?

  3. The trajectories of Alfa and BMW are mirror images. Alfa reinvented itself in the 1950s with style and confidence, whilst BMW floundered around with bubble cars. But Alfa’s post war high point was the Giulia Super, launched in 1962, the same year as the first BMW Neue Klasse, the 1500. This was succeed or die time for BMW but, although the Bavarian car was a massive step forward, the twin cam Alfa was still the more exciting drive, with a raft of desirable spin offs.. With the 2002, however, BMW cracked the ultimate driving machine nut, though Alfas still held on. The real cross-over of BMW’s rise and Alfa’s fall was in 1972, when the Alfetta and 5 Series were released. These cars were surprisingly similar and should have gone head-to-head but, whereas BMW had reliable production and an ongoing product strategy, Alfa were floundering and, for over 20 years, the Alfetta floorpan became the basis of most Alfas that weren’t either a Sud, or based on the even older 105.

    But you are correct, Kris, that Fiat management’s biggest shame is what it has done to its own great heritage. Historical comparison of Fiat’s postwar products with their counterparts’ contemporary vehicles (Ford, Opel, etc) shows talented engineers being given their head. Yes, they were still ultimately constrained by cost parameters but, for innovation and style, it was no contest. Of course, not every one was a great car by any means, and the handling characteristics of an 850 Sport were probably grossly irresponsible, but there were enough fine designs along the way to make Fiat one of history’s truly great manufacturers. But after the 1998 Multipla, launched with great confidence, and with honourable mention to the second generation Panda, somehow it all disappeared.

  4. Albeit not quite a household name à la Panda, the utter disregard for the Punto range still baffles me. The Grande (Mk 3) Punto was the car that kept Fiat alive, along with the Panda. It was a competitive, attractive offering when it was still up-to-date. And it sold in healthy numbers before it got ruined by yet another dreadful Fiat facelift effort.

    And I’m not all misty-eyed just because Giugiaro gave Fiat the Grande Punto’s design for free – I’m genuinely astonished at how Fiat could allow a name that used to be up there with the Polo and the Corsa to deteriorate out of neglect. Maybe a Grande Panda will do the trick, but I actually wouldn’t consider Fiat to be in a position where it can afford to just throw away existing assets like that. Particularly as Fiat has a long history of being forced downmarket by the competition. In the Punto’s case, however, Fiat withdrew voluntarily from a sector in which it actually still had a foothold.

  5. On the subject of heritage, the ability to produce awful, shooting-yourself-in-the-foot facelifts is one bit of corporate culture that Fiat has been able to maintain for decades. Bravo! Or is it Brava?

  6. Despite looking as though it was halfheartedly doodled in the meeting that spawned the reorganisation, the FCA logo is by consultants Robilant Associati of Milan.

    “Use of an acronym helps create a transition from the past, without severing the roots, while at the same time reflecting the global scope of the Group’s activities. Easy to understand, pronounce and remember, it is a name well suited to a modern, international marketplace.

    The three letters in the logo are grouped in a geometric configuration inspired by the essential shapes used in automobile design: the F, derived from a square, symbolizes concreteness and solidity; the C, derived from a circle, representing wheels and movement, symbolizes harmony and continuity; and finally, the A, derived from a triangle, indicates energy and a perennial state of evolution.

    The logo’s design lends itself to an extraordinary range of symbolic interpretations. It uses a versatile, modern language capable of expressing continuous change without losing its core identity.”

    Oh yes, and Sergio said don’t spend ages on it because we might not need it that long. We’re roughing up some ideas for ‘Dongfeng Fiat Group’ right now.

  7. Simon A Kearne, Editor of Driven To Write, had this to say about their logo.

    “The three letters in the logo are grouped in a geometric configuration inspired by the essential shapes used in human communication: the D, derived from a semicircle, symbolizes a tongue protruding from a mouth, rotated through 90 degrees; the T, derived from two squares, adjoining, but with two of each of their sides missing, and the remaining unshared side cut in half, representing an upturned middle finger rotated through 180 degrees; and finally, the W, derived from a sharpened and stylised set of buttocks, but rotated through 360 degrees, indicates a robust disregard for convention.

    The logo’s design lends itself to an extraordinary range of symbolic interpretations. It uses a versatile, modern language capable of expressing our ongoing attitude towards the contemporary motor industry.”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: