Fiat brings Chrysler models to Europe

By Jorn Madslien
Business reporter, BBC News, Geneva motor show

Image caption,
Is it a Dodge or is it a Fiat? The Journey will be redesigned and renamed Freemont in mainland Europe

Fiat Auto will use this week's Geneva motor show to showcase a string of European versions of cars made by its alliance partner Chrysler.

The cars should complement the carmaker's current line-up of Fiat, Lancia and Alfa Romeo models, the company says.

Fiat will unveil a reversioned Dodge Journey, a seven-seater people carrier that has been slightly modified to suit European drivers.

Stiffer suspension and a redesigned interior are among the changes that mean the Fiat Freemont is not simply a Dodge with an Italian label on the bonnet, the company's top brass say.

"We are not rebadging," chief executive Sergio Marchionne insists. "We are utilising our brand names to spread the products globally."

Bigger portfolio

As chief executive of both Fiat and Chrysler, Mr Marchionne is busy bringing the two alliance partners together.

"This year is a transition year for Fiat," he says.

He believes the combination of Fiat, which also owns Lancia and Alfa Romeo as well as stakes in Ferrari and Maserati, with Chrysler and its Jeep and Dodge brands enables both to offer a broader portfolio of cars to the market.

For instance, a small 4x4 rooted in Jeep's history, replacing the Compass and the Patriot, will also be made available as an Alfa Romeo, and it will be built at Fiat's factory in Turin.

Chrysler and Lancia

Image caption,
The Chrysler 300 will be called Lancia Thema in mainland Europe

"We've also merged the Chrysler and Lancia brands into one brand in Europe," Mr Marchionne explains, suggesting that the two marques have got "a significant amount of shared DNA".

"It was a necessary merger due to the limits each had," he says.

However, while Lancias will be sold in mainland Europe - the Lancia Thema will be on display at the Geneva show - the UK will be sold Chrysler models. Its version of the Lancia Thema will be the Chrysler 300.

The logic behind the decision to differentiate between the two markets may not be immediately clear, but Mr Marchionne is eager to explain.

"The Lancia brand has long, historic roots in Europe," he reasons, whereas "we're already in the UK with Chrysler".

Disciplined brand strategy

Such reasoning may be met with a sceptical public that has already shown increasing reluctance to buy cars made by either group.

In Europe, brands owned by Fiat suffered a 17% drop in sales during 2010. Chrysler fared even worse as its sales fell 26.8%. By comparison, there was a 4.9% contraction overall in Europe during the year.

The worry for Mr Marchionne must be that rather than help sales recover, his attempts to cross-sell products from two very different car companies could erode what is left of brand loyalties toward the marques.

"We'll need to be very disciplined in bringing brands across the world," he acknowledges.

Industrial relations

If done in the right way, Mr Marchionne's plan to keep on modifying cars for different markets could be a recipe for success, though high and consistent quality would be a prerequisite for this.

This, in turn, would require the companies' workforces to adapt and to work flexibly, Mr Marchionne believes.

Image caption,
Mr Marchionne is ambitious both in his vision and in his risk taking

"There are large differences between how [the US and Italy] function and how they resolve issues," he says.

In the US, "the majority of auto workers are represented by the UAW, so the dialogue is between two parties", he says.

By contrast, in Italy, where Fiat has most of its factories, Mr Marchionne has to deal with several different unions.

Having found this difficult in the past, Mr Marchionne has recently been using Fiat's stake in Chrysler as a lever in his talks with the unions, tempting workers with massive investment in Fiat plants if they were to agree to new terms and conditions while simultaneously threatening to redirect investment away from Italy if they did not.

"The great thing about the Fiat-Chrysler alliance is that we have plants everywhere," he said last month, ahead of talks with the unions.

Image caption,
Mr Marchionne has clashed with some of Fiat's workers

And earlier this month he was questioned by Italian politicians who wanted a firmer commitment to retaining a strong Fiat in Italy.

"It's not only true that Fiat saved Chrysler but also that Chrysler is determining for the group's future," he told a parliamentary hearing on 15 February.

However, he also stressed that "Fiat is a part of this country. It has no intention of leaving Italy".

Risky strategy

The risks resulting from Mr Marchionne's strategy are many, however.

Falling out with the unions and politicians in Italy could alienate Italian customers.

Offering rebuilt American cars could dilute the company's quintessentially Italian image.

And bringing two companies with inherently different corporate and human cultures closer together could easily go wrong.

But if it works, the flamboyant Italian will find himself in charge of one of the global automotive industry's biggest companies.

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