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