Fiat-Chrysler, Marchionne Will Have to Come Off Year-End High to Address ’14 Challenges


It’s been a pretty good few days for Chrysler. CEO Sergio Marchionne finally managed to bring the last share of the company under the Fiat umbrella. And Chrysler just posted its best December sales in seven years. Happy New Year.

But for Chrysler, the road ahead in 2014 promises to be a lot bumpier, with challenges ranging from the launch of the important new version of the Chrysler 200 sedan to Fiat’s continued weaknesses in Europe to the joint Fiat-Chrysler problem of a lack of a major presence in Asia. Marchionne might want to remember this week’s high for a while.

And it is a high. With a burst of holiday energy and ingenuity, Marchionne managed to wrap up a deal in which Fiat gets full control of Chrysler for $4.35 billion and the United Auto Workers gets the huge chunk of money it had been seeking for worker and retiree health care benefits. The coming full integration of the two companies will allow Marchionne to pursue his dream of creating a single, global automaker with combined sales of six million vehicles, ranking it the world’s seventh-largest.[more]

“It’s a deal that Fiat had to get done,” Harald Hendrikse, an analyst at Nomura in London, told the New York Times. “As usual, Mr. Marchionne’s pulled a rabbit out of a hat.”

Still, one of the most important reasons for the merger also poses one of the biggest immediate obstacles for Fiat-Chrysler. Marchionne has been talking for years about unveiling a new plan for revitalizing the Alfa Romeo near-luxury brand in the US and Europe, and the completely integrated new company will smooth obstacles to that. But it doesn’t mean there’s room to fit Alfa Romeo into either market anymore.

Besides, Marchionne also has to look at emerging markets such as China, where the combined company has only a minimal presence so far. Jeep is gearing up to build utility vehicles in China, but on the whole Fiat and Chrysler remain way behind just about every other major global automaker in that market.

In the United States, Chrysler sales rose by 6 percent in December over a year ago, the company announced today, extending its streak of such monthly gains to 45. And its new Jeep Cherokee is selling very well despite initial supply shortages.

But the product lineup for Chrysler, Jeep, Dodge and Ram remains riddled with holes that Marchionne hasn’t been able to fill as quickly as he would have liked because of the structural separation of parts of his empire and because Chrysler’s surprising comeback in the US market has been financing Fiat through its woes in Europe—rather than the other way around, which was the only way Chrysler would have gotten a substantial flow of worthy new products by now.

Bit by bit, however, Chrysler’s new and overhauled products are catching up with the company’s needs in the North American market. Next case in point will be a new version of the Chrysler 200 sedan that will be unveiled at the Detroit auto show later this month—and which, Chrysler executives have been promising, will be a pleasant surprise to critics and consumers alike.