Chrysler Dealers: Fiat Brand a Fifth Wheel

Posted by Dale Buss on August 25, 2010 11:30 AM

Look at things from the point of view of a Chrysler dealer, especially if they’ve been in business for a while. They survived the company’s brush with bankruptcy in the late Seventies, the K car, the company’s ill fit under Daimler-Benz, and last year’s bankruptcy, takeover by Fiat, and shakeout of Chrysler’s dealer ranks.

So it’s only natural that some are objecting to Fiat SpA’s plans to establish Fiat as yet a fifth brand in the Chrysler family, joining Chrysler, Jeep, Dodge and Ram trucks. At a time when even General Motors has eliminated some brands, Fiat CEO Sergio Marchionne wants to go the direction of brand proliferation in the U.S. market. Chrysler needs new vehicles but not necessarily a new brand, some analysts believe.

And not only that, it appears Chrysler dealers are going to be asked to invest hundreds of thousands of dollars in separate showrooms – attended by a separate staff — to house the tiny Fiat 500 when the Mexican-made pocket rocket begins appearing in America in December. A convertible version is expected next year and other Fiat vehicles as well under the brand’s re-invasion of the United States.

That whole separate-showroom idea doesn’t have a great recent history. Just ask GM dealers — many of whom are “megadealers” who also own Chrysler-brand outlets – how they feel about their required outlays for distinct Saturn showrooms. Or whether they like having to drive by their separate, shuttered former Hummer dealerships everyday, with the pricey Quonset-hut styling and test tracks.

Marchionne has been trying to sweeten the pot, saying this week in the U.S. that Chrysler dealers who invest in Fiat franchises will also get to sell vehicles from the company’s Alfa Romeo brand, which Fiat has said it plans to freshen. The problem there is that rumors persist about Volkswagen taking Alfa Romeo off Fiat’s hands. And Alfa Romeo stunk up the joint several years ago in the U.S. market when it couldn’t establish mass appeal.

Chrysler dealers are used to uncertainty and stress. And Marchionne is making them feel right at home.

More about: Automotive, Chrysler, Fiat, Daimler-Benz, Jeep, Dodge, Ram, Hummer, Alfa Romeo, Volkswagen

DealershipForum.com says:

Great article and thanks for looking at Marchionne's agenda from the Chrysler dealer's perspective.

If Marchionne was concerned about Chrysler and the viability of his existing dealer network he'd make the Fiat 500 available to all the dealers immediately. The Chrysler dealers need a small car to draw traffic to their showrooms and selling the Fiat 500 wouldn't have any negative impact on their sales of Chrysler, Jeep and Dodge vehicles.

If the creation of a separate dealer network for Fiat/Alfa is such a great idea, why was it never mentioned when the Task Force was crafting the Chrysler/Fiat deal? A hidden agenda, a Trojan Horse?

August 25, 2010 01:37 PM #

Dale Biuss says:

Good observation. It still isn't clear how much Marchionne's agenda is about "saving Chrysler" and how much is simply about creating an American sales and distribution footprint for Fiat.

August 25, 2010 02:26 PM #

Eduardo PIRONTI says:

If all of you remember FIAT went away not because the cars rusted ( all American made car of that period RUSTED } but because mechanics did not fix them properly. They did not fix American made cars PROPERLY I had 24 cars in my life time Most od them American made and most of them were rust buckets. Fiat is right this time MAKE THE DEALERS BE RESPONSIBLE for the proper fixing and selling of Fiat cars

August 25, 2010 02:49 PM #

Life long Chrysler driver says:

Surely "Marchionne's Agenda" is to move product - both Fiat and Chrysler. I don't see evil intent here - just a strategy to revive an ailing brand and to introduce a new and completely different nameplate into the US. You may not agree with the strategy, but at least Fiat is doing something. Would Chrysler and it's dealership network still be here at all if they had not stepped in?

As for the "whole separate-showroom idea doesn’t have a great recent history" remark, you seem to ignore the success BMW has had with Mini - another brand that had a sorry history in the US. And Saturn's problem was not its dealer network - indeed their whole customer proposition required the dealers to be separate and it was the only thing that gave the brand any legs at all.

It strikes me that Fiat's analysis is that selling Fiats through Chrysler dealers is less likely to be successful than creating a different experience. Only time will tell if that's true.

August 26, 2010 09:10 AM #

Perhaps we'll have to agree to disagree.

First, with regards to Chrysler's dealer network without the Fiat deal, the greatest likelihood is GM and Chrysler would have merged and the Chrysler dealers would have continued on much like the AMC dealers continued on when they were merged with Chrysler in 1987.  Eventually only the strong AMC dealers survived but it was the marketplace and not the government that made that decision.

Concerning MINI, while it may be a success from BMW's standpoint it certainly has not been a Home Run for the dealers lately.  Even worse is Smart, their sales are down 61% YTD and they face new competition with the Scion iQ.  I'd love to know what percentage of Smart dealers lose money.

As a final thought, clearly Marchionne knew from day-one that he wanted a separate dealer network for Fiat, why didn't he disclose his agenda when the Task Force was crafting this deal?  Is it possible that the taxpayers would have balked that 90+% of the existing Chrysler dealers will derive ZERO benefits from Marchionne's plan to sell Fiats in the U.S.?

August 26, 2010 03:09 PM #

Chrysler Dealers: Fiat Brand a Fifth Wheel

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