Can Fiat Really Go Upmarket in Europe?

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Fiat CEO Sergio Marchionne has been considering lots of ways to alleviate the crisis faced by his Italy-based automaker because of the growing problems of the European auto business.

When Fiat accepted the carcass of Chrysler from the U.S. government after the bailout in 2009, Marchionne believed that the investment would be great counterbalance to Fiat’s main dependence on Europe and that, over time, Chrysler could become a solid complement to the leadership of Fiat within the company.

But already, Chrysler’s surprising recovery and Fiat’s unprecedented woes have turned that presumed relationship on its head — or at least on its side. After all, it’s the booming sales and profits provided by Chrysler that are helping keep Fiat afloat these days.[more]

Having played the Chrysler card, Marchionne now must turn to other gambits in his continued efforts to keep the European auto recession from dragging Fiat down with it or even from gutting the company’s traditional manufacturing presence in Italy.

One move has gotten Marchionne nowhere: pleading for joint action on European overcapacity by all the continent’s big powers. He also is holding out hope of turning Fiat’s Italian factories into an export base for production of Chrysler-based models to the U.S. and elsewhere; the problem with that idea is that Fiat is also simultaneously trying to turn Jeep’s U.S. factories into export bases and plans to build vehicles in China.

Marchionne’s latest idea, unveiled earlier this week as part of an expected long-term plan, is to emphasize Italian production of the company’s bigger-vehicle brands, Alfa Romeo and Maserati. He said the company will be rolling out seven new Alfa Romeos, six new Maseratis and a new Jeep that will emphasize upscale design, content and pricing and will be built in Italy.

But skeptics took him to task, some saying that the Fiat brands’ volumes are too thin and its distribution network is too limited for the company to make a successful move up-market. And they’re saying it’s too expensive for a financially pressed Fiat.

Marchionne is used to doubters. He also is used to success.

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