Fiat Plan for Chrysler is One Letter Away from "Faith"

Last Updated Nov 5, 2009 10:19 AM EST

Under Fiat (FIATY.PK), the latest five-year turnaround plan at Chrysler is preposterous on the face of it.

The Fiat plan for Chrysler relies on a series of miracles, especially with regard to speed. The failure of any one of those miracles could mean the plan goes up in smoke.

The best thing Chrysler has going for it at this point is the track record of Fiat CEO Sergio Marchionne, who pulled off a certifiable miracle earlier this decade in turning around Fiat. Before that, General Motors paid billions of dollars to get out of an alliance with Fiat.

Under Marchionne, Fiat has become profitable overall despite the current downturn. And for what it's worth, Fiat acquired the role of Chrysler's latest savior for no cash.

Having said that, from the outside looking in, the Fiat rescue plan for Chrysler looks like the next thing to impossible.

Just for starters, Chrysler says it will execute a "complete repackaging" of the Dodge brand, including a new mix of options, by the end of this year. Bear in mind it's already November. Next, Chrysler says it will perform a "complete overhaul" of Dodge, including "branding, marketing, positioning and point of sale," by the end of June 2010.

Implicit in the near-term Dodge plan are more miracles: Consumers will have to notice the Dodge product changes, even though it's impossible that exterior styling could be significantly changed in so short a time. That sounds easy, given enough advertising, but it's a chicken-or-egg situation. Advertising is fine, but people like to see visibly new products on the street before they take a chance on something new.

Consumers will have to be more willing to consider the brand than they are now. Sales for Ford (F) and GM showed some modest improvement in October, for instance, but all of Chrysler's brands were down sharply.

Fundamentally, consumers will also have to act on this hypothetical new awareness and consideration of Dodge and the other Chrysler brands, and actually buy Dodge and Jeep and Chrysler products in greater numbers.

Fiat's longer-range plan for Chrysler is no less audacious, including 21 future car models by 2014; entry into two new product segments with Fiat products: sharing three product platforms with Fiat and consolidating four platforms between Fiat and Chrysler.

That would be a tall order for any car company in peaceful, prosperous times, let alone Chrysler, which has gone through bankruptcy earlier this year and two changes in control since 2007, from Daimler (DAI) to privately held Cerberus, to Fiat.

At least that part of Fiat's plan is conventional, except for the accelerated time frame. Like other car companies around the world, the concept is to achieve greater efficiency by focusing on fewer, higher-volume platforms on the inside, which can be dressed up with different bodies and interiors to look like totally different models from the customer's point of view.

It's a pretty slim hope for Chrysler, if the best you can say for their rescue plan is that it's not quite certifiably impossible, but that's the way it looks to me.
  • Jim Henry

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