Tue May 6, 2014 12:13am
(Reuters) – Fiat Chrysler (FIA.MI) will build Jeeps in China and Brazil and is expected to invest billions of euros to revamp its battered Alfa Romeo sports-car brand in a bid to convince investors it can turn the newly merged automaker into a thriving global business.
Chief Executive Sergio Marchionne unveils the group’s long-awaited five-year business plan on Tuesday when he is expected to show how Fiat Chrysler can “go on the attack against the giants” in the industry.
The focus will be on execution. The group has repeatedly missed sales targets as it delayed investments, made some bad design choices and has seen its main European business lose share and plunge into losses during a six-year market slump.
Apart from repeating its overall goal of growing sales by more than a third to over 6 million vehicles by 2018, investors want Marchionne to provide specifics on how and when he plans to compete with much larger rivals such as Toyota Motor Corp (7203.T), General Motors Co (GM.N) and Volkswagen (VOWG_p.DE).
“Fiat Chrysler has got to stop saying they will do it and just do it,” said Stephanie Brinley, a senior analyst at researchers IHS Automotive. “We are waiting for the execution.”
Jeep, with ready products and a globally recognized brand in the fast-growing sport utility vehicle (SUV) segment, is today Marchionne’s best bet to grow sales, boost margins and to gain a global manufacturing footprint in Fiat’s home turf in Europe and in fast-growing markets such as Brazil and China.
A compact Jeep called the Renegade will go into production in Italy later this year – the brand’s first model to be built exclusively outside the United States – and that same model will also be built in Brazil as of next year.
The Renegade is critical for the brand’s overall sales target of 1 million vehicles this year, a jump of 37 percent over 2013.
While most analysts call the target ambitious, they agree Jeep is the only truly global brand currently in Fiat-Chrysler’s portfolio and its best opportunity to expand in Asia, the fastest-growing global car market but also the group’s blind spot.
Fiat Chrysler’s joint venture in China, Jeep’s largest market outside the United States, also plans to manufacture three Jeep models locally, with the first due in late 2015.
While Jeep is solidly a rising star within the Fiat Chrysler family, plans for Alfa Romeo are less clear.
Marchionne plans to revamp the luxury Maserati and upmarket Alfa Romeo marques to follow bigger rivals such as Volkswagen by building global brands and strengthening its position in the fast-growing and high-margin market for premium cars.
He is expected to promise at least six new Alfa models, including premium-priced sedans and SUVs, with the first to hit the market by early 2016. Marchionne is betting on Alfa because he believes it can deliver the global profile that mass market brand Fiat cannot and far greater sales volumes than Maserati.
But analysts said considerable time and billions of euros will be needed to erase the weak quality reputation for a brand that has been kept on life support for years.
Maserati’s performance last year was encouraging, with trading profit tripling and deliveries doubling.
Meanwhile, several attempts at reviving Alfa have stalled, leaving just three models and sales dropping by more than half over the past decade to 74,000 cars last year, far below a 500,000 target Marchionne envisaged for 2014 in a past plan.
The success, or otherwise, of an Alfa Romeo renaissance will be central to whether Fiat survives a difficult European market, allowing the group to fill idled plants in Italy and reinstate thousands of workers placed on temporary layoff schemes.
Marchionne’s challenges are huge, from finding the money to fund the plan to implementing it in a cut-throat industry where demand is still subdued in Europe and is now flagging in some major emerging markets such as Brazil.