This Fiat Thing…

6
2040
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Well, what about this Fiat thing?

The Italian automaker now owns – well, controls – the remnant of Chrysler Corp., formerly the third of America’s Big Three.

Is it a bad thing? A good thing?

Or just an ill-advised thing … for Fiat?

The U.S. car market is still green around the gills three years after the Great Implosion. Yes, sales have increased. But they are still nowhere near what they were.

Chrysler is hoping it will reach the milestone of 2 million vehicles sold by the end of 2011, a solid-sounding uptick of 25 percent over last year, when global sales were 1.6 million.

Except that back in ’07, Chrysler sold 2.08 million vehicles – so even assuming the company reaches its target, it will still not have caught up to where it was.

If you read the company’s news releases, they all tout what sound like solid gains – relative to 2010. Or 2009.

Par has yet to be achieved. Will it ever be achieved?

Two of the reconstituted Chrysler’s best-sellers, the just-updated Jeep Grand Cherokee and the Dodge Durango, are the vehicular equivalents of the WW II-era Yamato Class battleships: The culmination of SUV development and brilliantly executed. The problem is that like the Yamato Class dreadnoughts, whose massive guns could do little against fleets of carrier-based dive bombers, these gas-hungry 4WD SUVs are not built for the times in which they’ve been christened. Gas prices are still high – and worse, unpredictable. They may fall back to $2.50 per gallon. But what if they shoot up to $5 per gallon? If they do shoot up to $5 per gallon, big SUVs like the Durango and Grand Cherokee are toast.

That would make me nervous if I were sitting in the captain’s chair at Fiat.

So also the fact that Fiat hasn’t sold cars in the United States in nearly 30 years. Rebuilding a franchise is probably harder than starting from scratch because at least when you’re starting from scratch, people’s attitudes are neutral and their minds open. But rebuilding a franchise – a brand – that had to leave the market because it couldn’t sell cars successfully – in part because of quality control problems the memory of which still lingers – that’s a tougher nut.

The subcompact Fiat 500 has just been launched, so there’s no data yet, either way.

But I suspect the road ahead will not be smooth for this car given the weak economy and thus a weak market plus the additional difficulty of penetrating that market given the glut of makes/models already on the market.

Is there room for another brand?

One major advantage Toyota and Honda had when they entered the market back in the ’60s (and then seriously in the ’70s) was the market was still not fully exploited (it is now) and also the economy was not a disaster (ditto).

One possibility is for Fiat to significantly undercut other compacts on price while equaling them on quality/desirability. But the Fiat 500 coupe, at $15,500 is priced about $2k above excellent competitors like the  2011 Ford Fiesta $13,200 and about $1,300 higher than a Mazda2 ($14,180). It is also nearly $6,000 more (!) than a Nissan Versa 1.6. Granted, the Versa 1.6 is a stripper… but still. $6k is a lotta coin.

Meanwhile, Uncle Sam will take a $1.3 billion hit on rescuing Chrysler in order to let Fiat take over Chrysler. That is the net loss, post bankruptcy, the government will eat on the deal. Or rather, that taxpayers will eat on the deal. For fun do some math and calculate how much that $1.3 billion works out to divided by the appx. 140 million actual taxpayers ( 305 million total population less the various not-working).

Fiat isn’t getting the bill – though arguably, it ought to have. Why, after all, should American taxpayers help to bankroll the fortunes of a foreign-owned car company?

But don’t sweat that too much. Fiat may have gotten something worse than a bill from Uncle Sam – in the form of an albatross around its neck.

We shall see.

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6 COMMENTS

  1. WRT FIAT’s engineering and quality control, it has varied. I had a 1978 Spider…..fun car when it ran…but there were some design problems that were basic on the engine…overall it was an ass hauler, but tended to overheat because of thermostat design. In any case, the FIAT 500, the new one anyway, was the European car of the year in 2008. If you think it’s small, you should see the original. Small sells well in Europe due to population density and lack of abundant parking in old cities. There is also an Abarth version of the 500, one of which I saw in Padova, Italy in April. Abarth was an Austrian aftermarket manufacturer that also took FIATs, souped them up and put its own scorpion marque on them. The Abarth version of the 500 apparently both runs like a scalded dog and actually gets slightly better gas mileage. As always, YMMV.

  2. After the pigs Chrysler made for a long time, we bailed them out. Now Fiat may get the benefit.
    Will the Italian government bail them out when they find the price of the car was too high, its old reputation has not been forgotten and the competition is very stiff.
    Some years back I had a really great looking Fiat Coupe and it was fun to drive. However, several years of PA salt reduced it’s lovely red paint to a pile of unpleasant red dust.

  3. I rememeber well the Fix It Again Tony days as a youngster and at a point in my life when I didn’t have much cash I purchased a used one with trepidation. Man that thing ran great, and I beat it to hell. I ended up buying another used one that ran a long time, and I beat that one up even worse!! I don’t know if the insults matched reality. However I still go by Found On Road Dead 😉

  4. I still remember the spoof play on words that circulated here in the states, concerning the less than stellar lack of quality of Fiat imports here to our shores, over 30 years ago:

    F.I.A.T. : hey, Fix It Again Tony !

    • I remember that, too!

      In Fiat’s defense, the cars are popular in Europe and appear to be well-made. The problems facing Fiat this time include an already “full” market and the fairly high price ($15k to start) of its cars.

      But, we’ll see!

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