TURIN, Italy – As we remind ourselves that FCA is really Fiat Chrysler Automobiles, the first results of the marriage are being launched on markets around the world.
Last March at the Geneva Car Show, Fiat Chrysler’s Jeep launched the new little Renegade SUV. At the Balocco testing grounds close to Turin, Italy this month, Fiat unveiled the 500X, which is made at the same factory in Melfi, central Italy, and shares about 40 per cent of the components with the Renegade. The 500X looks like a muscled up 500 mini car, and the ad campaign in some markets makes use of a well-known and some might say risqué legal drug. The ad shows a Viagra pill somehow bouncing into the fuel tank of a delicate little 500 two-door city car, which then instantly bulks up into a macho, snarling four-door off-roader.
In Europe, the 500X will be powered by engines ranging from a 1.6 liter 110 hp gasoline motor through a 140 hp 2.0 liter diesel to a 170 hp turbo-charged gas power-plant. Fiat is especially proud of its 9-speed automatic gearbox option, inherited from another FCA product, the Chrysler 200. Cheaper versions have front-wheel drive. Pricier ones are all-wheel drive. In Europe, prices start at close to $22,900, after taxes. The 500X is more of a utility, family vehicle with basic off-road ability, while the Renegade offers a hard-core ability to roam the wild.
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“This segment is one of the fastest growing we have seen in years (in Europe) pioneered by Nissan, although Fiat and Jeep are coming to it late. The cars look good and I think they will sell nice volumes – the 500X mostly in Europe, the Renegade will be sold all around the world,” Bellini said.
IHS Auto said the Jeep will reach peak volume of around 160,000 a year by 2017, with North America the biggest market with 65,000. There will be decent sales in China and South America, and some in Europe. The 500X will peak at close to 110,000 a year, with Europe the biggest market at around 80,000, some in North America. Sales start in Europe in the first quarter of 2015, in the U.S. in the following quarter.
FCA excited stock markets with its recent recapitalization plan, which included the spin-off of Ferrari, the storied upmarket sports car maker. Investors have been giving FCA the once-over and like what they see, mainly thanks to the prospects for Jeep’s SUVs, Ram’s pickups, and Maserati’s exotic sports cars. The sagging Italian affordable sports car maker Alfa Romeo might be a lost cause though.
FCA’s long-term plan for 2018 was announced last May to much skepticism and the biggest stumbling block was seen as the huge debt burden. Last month FCA said it would seek to partly address that by raising about $4.7 billion including an estimated around $1 billion from a Ferrari deal, a $2.5 billion convertible bond, and the sale of shares.
FCA’s long-term plan includes raising vehicle sales more than two million by 2018. Alfa Romeo is charged with accounting for 400,000 of the target. Jeep must raise its sales to 1.9 million by 2018 from around 700,000 now. CEO Sergio Marchionne wants earnings before interest and tax (EBIT) to increase from $4.4 billion in 2013 to between $10.8 billion and $12.2 billion) by 2018.
Most analysts think FCA will fail to meet the targets, but that it can make a good stab at getting close, and becoming a formidable player on the global market
Professor Ferdinand Dudenhoeffer from the Center for Automotive Research (CAR) at the University of Duisberg-Essen doesn’t see much hope for FCA long-term though as it seeks to mix it with leaders like Germany’s Volkswagen, GM, Toyota of Japan and Franco-Japanese Renault-Nissan.
“I don’t believe they can turn around all the old products in three to five years to win all the market share necessary to become profitable,” Dudenhoeffer said.
To be able to reach the sales levels of the big four leaders would require finding a strong partner, but the only likely candidates are weak ones like Mitsubishi of Japan, and France’s struggling Peugeot-Citroen, although Honda might be available, he said.
“By 2018, FCA will still be weak in China, America will be stagnating; that (the U.S.) is going to be a saturated market and with a major brand like Chrysler which has no other market, I don’t think FCA will be successful,” Dudenhoeffer said.
IHS Automotive’s Bellini also doesn’t think the targets will be hit, but is unconcerned about it.
“The plan used to be described as really very ambitious, and after the refinancing plan added some credibility and now it is just ambitious, because we don’t think they are going to make the targets in 2018, but if they get something lower than that, they will be good results,” Bellini said.
Bellini said the seven million annual target might be reached three or four years late.
FCA’s stock prices zoomed almost 50 per cent since the recapitalization deal from seven euros to 10.25, but has slipped back under 10 in recent days.
